Can it still be called “disruption” if it’s a seemingly perpetual state? Three years after the onset of the COVID-19 pandemic, retail supply chains continue to tackle issues ranging from disjointed inventory to labor uncertainty to inflation mixed with ongoing consumer concerns. In a word: unpredictability will continue to be the top supply chain challenge in 2023. But the tools and skills that retailers have employed to navigate this ongoing unpredictability are prepared.
Even before the pandemic, leading retailers were strengthening their supply chain networks to be more flexible and responsive, as customers’ desire to get what they want, when and where they want it, has long been e-commerce table stakes. This flexibility has served retailers well in the past few years, and retail supply chains have largely absorbed the bumps and shocks of ongoing production uncertainty, port congestion, workforce shortages, transportation rate and capacity instability, parcel market inefficiencies, increasing costs, inventory variability … and on and on.
This volatility makes it difficult to confidently plan anything — not least demand planning, which guides the flow of a retail supply chain. Supply interruptions and long transit delays motivated a pandemic-driven trend to favor “just-in-case” inventory levels over historic “just-in-time” strategies. As a result, many retailers now find themselves with inventory surpluses. Most have already been right-sizing inventory levels, and this will continue into 2023. Unpredictability has fueled the need for continued advancements (and investments) in AI and machine learning to help retailers harness mountains of data for making all manner of decisions — including how much inventory to hold, and perhaps more importantly, where and how to deploy it to best respond to customer needs.
While the most acute port congestion and delays that made headlines in 2021 has subsided for the moment, underlying operational issues remain — and many ports seem to hover unpredictably on the edge of congestion. Resolving these issues necessitates investment in modernizing ports’ physical infrastructure, but also data infrastructure — the need for interoperable data standards to facilitate end-to-end visibility has never been greater. As more federal investment begins to flow into the country’s infrastructure from sources such as the Infrastructure Investment and Jobs Act and the Inflation Reduction Act, it remains essential that large shippers and users of infrastructure have a prominent voice in helping target funds for maximum impact.
Mitigating unpredictability in the supply chain will also help retailers and partners make progress on their commitments to decarbonize supply chains and reduce emissions footprints. RILA will convene a summit dedicated to multi-stakeholder conversations on transportation emissions in Orlando this February.
Supply chains are global, so many of the factors affecting them are global in nature. In 2023, retailers will increasingly need to navigate inflationary pressures at home and abroad. With the ocean shipping market now correcting, large retailers are re-evaluating contracts negotiated at the height of soaring rates and scarce capacity. Accordingly, the Ocean Shipping Reform Act passed in an environment of ocean shipping upheaval is now being implemented against today’s very different market backdrop, but it includes important protections for shippers against future congestion-imposed outlays.
Globally, workforce uncertainty and labor actions have affected production as well as port operations on almost every continent. The uncertainty surrounding stalled labor negotiations for all 29 US West Coast seaports, and the ongoing saga of rail labor leave unresolved questions for all industries. These unknowns have been affecting supply chain decisions for over a year, and will continue to influence choices about networks, modes, ports, and more, until they are resolved.
Although the growth of digital retail will slow a bit in 2023, it is still expected to grow at a healthy 16% according to Forrester. Large retailers will continue to optimize their networks to increase speed and flexibility. Forward-deployed distribution and fulfillment, located closer to the customer, will be enabled by more automation and cutting-edge analytics. Retailers have shown great resiliency in 2022, and will have many topics to tackle when the retail supply chain community assembles this February at RILA’s LINK2023 Retail Supply Chain Conference, to share knowledge and solve problems that require the involvement of the entire ecosystem.
The pervasive unpredictability will continue as a global trait in 2023, but retail supply chains will continue to deliver for customers and communities across the US and around the world.