Oliver Chapman, CEO of the UK’s No1 fastest-growing company 2022, and supply chain specialist OCI, outlines ten supply-chain trends to look out for in 2023 and for the rest of this decade.
Shifting manufacturing away from single regions
The supply-chain crisis of 2022 taught us the dangers of over-reliance on specific regions. In particular, continued lockdowns in China created supply-chain vulnerabilities. As a result, companies in 2023 will look at additional sources of supply, not necessarily to replace China in the supply chain but to act as supplementary options.
The importance of India
2023 is likely to see India’s population overtake China’s.
Indian companies will make up an ever-growing proportion of the supply chain. (See age distribution in India and China.)
Threat to dollar hegemony
As an alliance of countries opposed to Western dominance, such as Russia, China and Iran, emerges, we will see the emergence of alternatives to dollar valuations of commodities.
But it is unclear how this trend will develop and whether any alternative to the dollar will be an existing currency, such as the yuan, a basket of currencies or a cryptocurrency. China’s reluctance to adopt Bitcoin means it is unlikely this particular cryptocurrency currency will threaten dollar hegemony in the short run.
Falling dollar
At the same time, rising interest rates in Japan could lead to a rapid reversal in the flow of money between Japan and the US, putting the dollar under pressure.
The US Federal Reserve may react by increasing interest rates – precipitating a further economic shock. But a falling dollar will be good for global inflation, and as long as commodities are traded in dollars, weakness in the currency will ease supply-chain pressures across the world.
Clean steel – relocates to where conditions favour renewables
2023 will mark a further acceleration in a shift towards clean steel – but the key energy source will be hydrogen. The cost of transporting hydrogen over long distances is such that steel manufacturing will shift towards areas where green hydrogen can be produced economically. This means steel manufacturing will shift to areas with ample renewable resources, such as regions where it is frequently sunny, windy or has ample hydropower resources.
The golden age of copper
Copper demand is likely to soar, especially as electricity transmission infrastructure expands. There is a degree of irony in this – the use of copper as a major resource is as old as civilisation or at least dates back to the beginning of the Bronze Age. But it is the ancient importance of copper which demonstrates why the supply chain may struggle to meet demand. The industries for mining lithium or rare earth minerals are still quite small, and there is plenty of potential to increase output. The opportunity to increase the output of copper is less obvious – this is where supply-chain bottlenecks are likely to be most pronounced.
Retirement of the baby boomers
The ageing of populations in China and Russia will dampen the economic strength of these regions and weaken the new alliance that is emerging. But ageing in Europe and North America will be significant too.
The retirement of the baby boomer population may exert new inflationary pressures and could lead to interest rates being permanently higher than in the first two decades of this century.
Auditing of the supply chain and digital transformation
The supply chain crisis of 2021 taught the world the importance of auditing the supply chain. Organisations must know their supply chains inside out, not just their supplies, but suppliers to suppliers, etcetera.
A supply chain audit will illuminate areas of supply chain vulnerability— and digital technologies will be a very important part of maintaining an up to date supply chain understanding. The supply chain needs to become more agile and less reliant on things going just right.
Digital transformation will be an important part of supporting an agile supply chain.
End of just in time and greater resilience
The supply chain audit will reveal insights into the supply chain and its vulnerabilities. As a result, organisations will look to build greater resilience and redundancy into the supply chain.
Just in time, manufacturing will come under scrutiny
We will see greater use of more local delivery, partly because this will support more agile supply-chain operations.
ESG and the supply chain
More organisations will join the Norwegian sovereign wealth fund pushing for wider adoption of net zero – and soon, supply chains will come under scrutiny for their C02 emissions. Likewise, organisations will be forced to examine their supply chains in the context of social policies, including anti-slavery and child labour.
Find out more about OCI.
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