The world braced itself when covid-19 hit everyone hard in 2020, especially global supply chains. The hope at the start of 2022 was that the worst is over, and we can begin building what has been disrupted, postponed, and broken again. The reality is far from it. We had to painfully learn that our supply chains will once again be tested at their limits. Today, two and a half years after the pandemic, companies are facing new challenges and risks that make navigating these supply chains seem impossible at times. Here we show you the top 6 supply chain risks remaining in 2022.
1. Reporting on new ESG legislations
New regulations driving reporting around environmental, social, and governance (ESG). While individual countries in the EU have taken the lead with Germany being the latest to enforce the ‘Supply Chain Act’ starting in January 2023, the EU has released a draft of a new legislation that digs deep into the upstream supply chain of organisations. For most supply chains compliance will need to be built from scratch. Luckily, technology can support organisations in establishing effective risk management and ESG reporting. This also offers benefits to internal operational efficiency.
2. Supply chain disruptions
Past and current adverse impacts on global supply chains have uncovered an unpleasant truth. We were not equipped for everything. And while we still try to fight through the current challenges further risks will come in the future – we don’t know when, but they will. It has become apparent that supply chains will have to adapt to more reliable sources and those with a lower risk profile, including from an ethical and sustainable standpoint. Digitalisation of the supply chain to meet these challenges will play a major role in 2022.
3. Inflation
Prices have been steadily increasing as not seen for more than 40 years. Inflation has taken a hold of the modern world and greatly impacts supply chains on a global scale. Companies are faced with significant price increases and struggle to sustain their margins which leads to higher market prices for customers. It will be critical in 2022 to lower procurement and inventory costs. The biggest opportunity lies with new technology. The time has come for investment into new technologies for better data collection, deeper insights, and cost savings.
4. Supply shortages
The pandemic has resulted in an unprecedented peak in consumer demand. However, globally suppliers struggle to meet the demand, and lead times have become so long due to material shortages of basic materials resulting in rising commodity prices. For organisations having the capital available to bridge these lead-time gaps will be highly critical.
5. Rising freight prices
With the larger demand for products driven by the covid-19 pandemic shipping capacities were not able to adapt fast enough. The results are skyrocketing freight prices further driven by increasing oil prices, labour shortages, and port congestion. Organisations must focus on their shipping partnerships and find ways to ensure on-time delivery. Most likely, however, this will come at a cost.
6. Digital transformation
A new age of digital supply chains has begun and while there are solutions for nearly all challenges the task will be to integrate these solutions effectively into the operational landscape of the supply chain. Onboarding suppliers will be an important task for supply chain leaders to ensure data availability and thus the benefits and effectiveness of new technology. The thought behind is ‘dig deep to win big’.
2022s challenges harbour new opportunities to emerge stronger and more competitive. Today is the time to take action on building a more resilient and sustainable supply chain, invest and actively introduce new solutions, and keep an eye on the financial impact of procurement.
If you are struggling with such kinds of risks in your supply chain and you have further questions, reach out to our experts. They will be happy to help you out.