2023 in review—and where to focus in 2024

After a turbulent few years, 2023 wasn’t too bad, actually. But we’ve still got work to do in 2024…

Was 2020 a ‘normal’ year, in the world of supply chain management? No, of course not. There was the small matter of that global pandemic, you’ll recall. Was 2021 ‘normal’? No. Lockdowns and supply disruption rumbled on, and price inflation began to stalk the global economy—although not as frighteningly as it would go on to do in 2022 and 2023.

So was 2022 ‘normal’? Er, no. Russia invaded Ukraine, bringing that country’s exports to a halt, and triggering global shortages of agricultural commodities such as wheat, maize, barley, sunflower oil, and rapeseed oil. Nor was the disruption limited solely to agriculture: Ukraine turned out—who knew?—to be something of a global hub for automotive wiring harnesses.

One other unwelcome side effect: soaring energy prices, right across the energy spectrum—gas, oil, electricity. Supply chains, which move goods by road, rail, air and sea, were hit hard.

So one year on, and against this backdrop, was 2023 ‘normal’, then? Remarkably, perhaps, probably yes. Mostly, anyway. And certainly by the standards of the last few years, making it the first reasonably normal year since 2019—a year which seems an awfully long time ago, now.

What 2023 got right

Let’s start with 2023’s positives. Energy prices have fallen. That’s not the only reason why freight rates—especially air and sea rates—are generally lower than a year ago, but it’s certainly a large part of the picture.         European gas prices, for instance, are 70% lower.

General levels of price inflation have fallen, too—more in some countries than others, granted, but the trend is undeniably downwards. That eases the pain on both businesses and consumers—and it is spending by consumers, don’t forget, that triggers the bulk of the demand that moves goods through supply chains. And with price inflation reducing, interest rates—ratcheted up by central banks in order to bring inflation under control—will fall, putting even more money in consumers’ pockets.

The geopolitical landscape has been reasonably quiet, too—or at least, it was right up until the October 7th attacks on Israel. China didn’t invade Taiwan, although tensions in the South China Sea remain high. And tensions around North Korea appear to have eased.

There were no new trade wars, either, and no new major impediments to global trade flows—although, at the time of writing, the attacks by Yemeni Houthi rebels on shipping in the Red Sea is causing some disruption to global shipping: around 12% of global trade goes through the Red Sea, and going around southern Africa’s Cape of Good Hope adds time, cost, and builds inventory.

Speaking of which, the other global trade bottleneck, the Panama Canal, is also under pressure, and is rationing movements. But that’s down to low water levels brought about by drought, and not trade wars or conflict. Even so, around 5% of global trade passes through the canal each year, so the impact of a slowdown is not exactly inconsequential.

2024’s ‘to-do’ list

All in all, then, 2023 was a cause for quiet celebration—certainly by the standards of the three years preceding it. But that doesn’t mean that everything in the garden is rosy. We in the world of supply chain management still have much to do.

Here’s where I think our priorities lie—or at least, three of the largest priorities.

Firstly, protecting supply chains from supply chain disruption remains very much a work in progress. Significant strides have been made in recent years, but there is much, much more to do. As we saw when the container vessel Ever Given blocked the Suez Canal in 2021, individual sources of disruption are difficult—if not impossible—to predict, but broad areas of vulnerability are easier to get a handle on.

My guess is that most supply chain functions now have far more data on where they are vulnerable than they did four or five years ago, and what’s called for now is action to put in place more remedial actions. Climate change, geopolitical risk, and natural disasters aren’t going away any time soon.

Secondly—and linked to this general question of resilience—is the question of sourcing, and in particular sourcing for resilience. Again, there’s still plenty of room for further work. Near-shoring, reshoring, ‘friend-shoring’: as either dual-sourcing strategies, or complete shifts of production, these are far from fully tapped. The elephant in the room, of course, remains China—where else has the scale, the infrastructure, the industrial breadth and depth, and the workforce?

India, potentially. So it’s interesting to see Taiwan’s Foxconn—Apple’s iPhone subcontract manufacturing partner—establishing several factories in India, complete with worker dormitories, as part of an explicit ‘China plus one’ strategy. India isn’t the only ‘China plus one’ option, but it does have both the scale and a large (and still largely untapped) labour force. For supply chain functions reluctantly conceding that reshoring and near-shoring don’t really cut it for them, ‘China plus one’ is a resilience strategy worth examining.

Thirdly, sustainability. Whatever you made of COP28, all the evidence that I’ve seen suggests that global warming is accelerating, not decelerating. Greenhouse emissions aren’t the only sustainability challenge on the table, but they remain one of the most worrying. Supply chain functions are (by and large) in the business of moving goods around the globe: greenhouse emissions are something that all of us can usefully impact.

It shouldn’t be difficult: the easiest way of reducing emissions is to improve energy efficiency—thereby cutting costs. With energy prices still high, that should be a no-brainer. But compliance and legislative coercion are important drivers, too. Reporting of Scope 3 emissions isn’t yet compulsory, but activists are increasingly thinking along those lines. Getting ahead of the curve looks like a smart move.

Here’s to 2024

Finally, then, I’d just like to wish all the best to you and yours for 2024. The world is a diverse place, full of different cultures, religions, traditions, and values.

But all of us, surely, can hope for a happy and prosperous 2024.