Survey shows supply chain leaders navigate complex demand patterns, increased volatility in 2023

Supply chain leaders said complex customer demand patterns and increased volatility are their top challenges this year, according to a recent survey. Revenue growth is a top priority.

In a new report on the survey by Blue Ridge and SmartBrief, supply industry leaders highlighted their challenges, possible solutions and how technology advancement has affected operations. Supply chain companies have sought new solutions to address post-pandemic challenges, including complex customer demand patterns, increased market volatility and management of new products.

Still, the industry posted year-over-year sales growth of 9% in 2023, down from 13% in 2022 but up from 8% in 2020.

According to the report, macroeconomic trends and inbound cost pressures are affecting the companies’ ability to manage disruptions. The companies are struggling to address the issues using existing systems and processes.

However, respondents achieved most of their business goals. More than one-third achieved or exceeded their goals last year, and 26% met or exceeded their sales goals, “most likely attributed to price inflation,” the report shows. “The most significant areas of concern were related to financial efficiency, with inventory goals reported at a meager 12%.”

The percentage of respondents that achieved their sales goals fell to 62% in 2023 from 95% in 2022. The report attributed this to “increased expectations from post-pandemic headwinds and adjustments to higher interest rates and other risk factors in the global economies.”

As in past surveys, revenue growth remains a top priority for the industry, the report shows. Nearly half of respondents said it was their top priority. Other priorities included improving internal collaboration (12%) and aligning supply chain planning with business strategy (12%).

Following are key findings from the 2023 survey:

• “Companies are shifting their attention and priorities to align more with consumer demand and customer service – revenue growth, demand predictability and demand complexity.”
• Supplier challenges, including extended lead times caused by supply, transportation and capacity constraints, remain a concern but aren’t worsening compared to previous years.
• Inventory has grown at a slower rate than sales.
• Technology and advanced analytics, such as machine learning, are becoming more prevalent in the industry. However, some companies don’t see the macroeconomic value to justify the cost.

According to the report, distributors can use tools, scenario evaluation and forecast reconciliation to gain a competitive advantage amid economic volatility and consumer unpredictability. Nearly one-third of respondents said they’ve yet to use machine learning for forecasting and supply chain planning. However, 13% of respondents have benefited from the tools, while 14% were unsure of their value.

Meanwhile, respondents said the rising cost of items and the ability to pass on higher costs to customers are the key challenges affecting margins. Nearly three-quarters of respondents reported rising front-end goods costs as a business trend in their supply chain over the past year. That’s down from 90% in 2022 but higher than 55% in 2020 or 63% in 2019. Manufacturing/light assembly and wholesale distributors continue to see rising costs. Respectively, 71% and 73% reported more significant increases compared to recent year-over-year gains.

And, inventory levels have risen since the pandemic, with 62% of companies keeping more than one month of inventory on hand this year, up from 59% in 2022. However, the higher inventory level did not improve product availability or customer service. The report noted that this might be because of “misplaced assortment or product location.”

About one-third of manufacturing/light assembly companies have more than 61 days of inventory, while 45% of wholesale distributors have this amount on hand. Even so, the report shows that 40% of respondents could not meet consumer demand more than 4% of the time with existing inventory levels. The percentage is down from 50% in 2022 but higher than 25% in 2020 and 26% in 2019.