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Home » Top 5 supply chain threats to impact supply chains in 2023 Part 5

Top 5 supply chain threats to impact supply chains in 2023 Part 5

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Going into the New Year, there’s a lot of uncertainty with what’s going to happen with the global economy. <a href="">Image by tawatchai07</a> on Freepik
Going into the New Year, there’s a lot of uncertainty with what’s going to happen with the global economy. Image by tawatchai07 on Freepik

Supply chain threats come in a number of formats and target various sectors of the supply chain. This is part five of a five-part series by Marina Meyer of Food Logistics.

“Since the inception of Covid, the idea of a stable supply chain is completely foreign, and the next 2-3 years will not be a turnaround scenario but will be focused on creating as much stability as possible despite the global instability,” according to Glenn Koepke, GM of network collaboration at FourKites. “I suspect that the supply chain landscape of mid-to-late next year will be our new normal for a while.”

In an outline of the Top 5 threats set to impact supply chains in 2023, here’s no.5:

Possible recession

A possible recession doesn’t just impact retailers, homeowners and consumers alike.

Looking back at 2020 when Covid-19 hit, the US experienced a spike in food spending due to the increase in stay-at-home environments. During lockdown, the GDP rose to almost 6%, according to Wells Fargo data.

But what does this mean for an impending recession in 2023 in relation to the cold food chain? Well, it’s all relative.

Food manufacturers could expect an improvement in labour availability and slowing wage growth, according to Wells Fargo, and the quit rate of employees would fall. Freight rates from factory to retail would decrease, helping margins as well. Less demand from other sectors and lower crude oil prices would certainly lower pressure on freight rates for a while.

Additionally, surging inflation remains one of the overarching themes in ACT Research’s latest State of the Industry report.

“The prospect of a US recession has grown materially since Russia’s invasion of Ukraine, and as of the July issue of ACT’s NA OUTLOOK report, a 2023 recession is now the base-case expectation, with freight volumes beginning to contract in Q3’22,” says Kenny Vieth, ACT Research’s president and senior analyst. “Meanwhile, supply chain disruptions remain a wild card, as the war in Ukraine continues and China announced fresh lockdowns following another surge in Covid infections.”

Economists say there’s a 35% probability that the United States tips into recession over the next year, which is below the median of 65% among forecasters in a Wall Street Journal survey. But data on economic activity is nowhere close to recessionary, mainly because the GDP grew 2.6% (annualised) in the third quarter and despite the ongoing labour shortage, the country added 261 000 jobs in October.

In fact, there’s a roughly one-in-three risk of a US recession over the next year, according to Bloomberg.

Morgan Stanley Research reports food prices, which have been up 65% globally over the last two years, will have peaked end of 2022 and begin to drop in early 2023. Morgan Stanley also predicts the increases will be lower than expected, presenting some relief in 2023 to companies that benefit from lower food-input costs, such as retailers, restaurants and packaged food companies.

Now well into the New Year, there’s a lot of uncertainty with what’s going to happen with the global economy. Other threats entail port and labour negotiations, trade relationships, the ongoing Russia–Ukraine war, achieving compliance in food safety (with regards to the updated Food Safety Modernisation Act) and environmental, social, governance (ESG) regulations and more.

“We have inflation that continues to rise. We have ongoing surges of COVID both here and overseas. And then labour uncertainty. The biggest challenge is the West Coast ports and the labour negotiations are ongoing. The overall trade relationship between US and China. China 301 tariffs remain place. Would like to see these come off. Just figuring out a way to better address the issues with China, both on the trade front, on the human rights front, as well as the other competition issues. And national security. There’s the ‘what-if’ scenario with regards to Taiwan that we should be taking a look at and planning for. People need to gameplan and be ready if something does occur. The ongoing challenge with the war in Ukraine as well,” according to Jonathan Gold, VP of supply chain and customs policy for the National Retail Federation, as expressed in Food Logistics’ SCN Summit: Future of Supply Chain webcast.

“But this is a time for everyone to take a look at continuing to improve their supply chains, continuing to improve the resiliency of their supply chains. For example, just because we don’t have port congestion issues right now doesn’t mean there aren’t issues we need to be working through. Because to be honest, even before the pandemic, we knew there were challenges we were facing in the supply chain. I think the pandemic further highlighted and exacerbated the challenges that were already there. Let’s now take the time to work through those issues and prepare for whatever’s next because there’s always something,” Gold adds.

Even though many of today’s US and global cold food chains continue to face the same disruptions, bottlenecks, challenges and threats they’ve been facing the past 2-3 years, understanding and overcoming such threats will help companies achieve some stability.

Click below to see the other parts: