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These are the Blockers and Bottlenecks in Supply Chains in 2023

The National Federation of Independent Businesses (NFIB) notes that 32% of small business leaders are reporting supply chain disruptions. Another report by Gartner reveals that 95% of senior business leaders are evaluating or executing plans to shift their China sourcing partners, thanks to the increased supply chain bottlenecks in the region.

What Are the Most Common Blockers and Bottlenecks in Today’s Supply Chains?

Supply chain upheavals aren’t abating anytime soon. Researchers at McKinsey & Company cite a prolonged shock to production as the biggest supply chain bottleneck and can wipe out up to 50% of a year’s earnings. Other common supply chain blockers that businesses are facing today include clogged ports, expensive cargo capacity, and a spike in inflation. 

Description of the Latest Market Situation in China 

Logistics partners all over the globe are bracing for delayed or missed deliveries from China after manufacturers halted operations 14 days earlier than usual, ahead of the Chinese New Year celebrations. Consequently, US manufacturing orders to the country have fallen by 40%. The diagram below highlights shortage of products in the last quarter of 2022. This downward trend is still persisting early 2023 and might even worsen in the next quarter.

At the same time, Asian-based shipping firm HLS has warned its global clients about a “bad” ocean transport business climate. The firm’s analysts predict that container volumes will decrease by 2.5%, as capacity increases by up to 6%, in 2023, negatively impacting future freight rates. 

What Is Causing These Bottlenecks?

Supply chain blockers have existed for a while now, and the ongoing Russia-Ukraine war has only exacerbated the situation. Forbes describes the causes of these bottlenecks in 4Ps:

  • Product availability: product availability is still a challenge, especially in items that require semiconductors as components.  
  • Prices of raw materials: high supplier prices are prompting businesses to increase prices for their products. And according to professor Sridhar Tayur of Carnegie Mellon University’s Tepper School of Business, this problem isn’t going away anytime soon. 
  • People shortage: acute talent shortages across various industries and high employee attrition rates are taking a toll on global supply chain resilience. 
  • Politics: the ongoing political standoff between Russia and Ukraine influences multinational trade policies and contributes to high global inflation rates.  

How Can I Remove Them?

Maintaining an optimal supply chain translates to increased revenues and greater levels of customer satisfaction. 22% of companies have adopted a successful proactive supply chain management system to address dynamic demands or supplies before they get out of hand. 

In other words, the best way to tackle and remove supply chain bottlenecks is by upgrading and adopting new technologies, such as AI-powered supply chain management software. This approach gives you greater visibility and transparency, which are invaluable tools for managing unpredictable supply chains. 

Is There Any Type of Digital Technology or Procurement Study That Can Help Me Identify, Manage, and Resolve These Bottlenecks?

A recent report by McKinsey & Company describes AI-driven digital tools as potent instruments that can help businesses spot and address short-term bottlenecks. AI-powered solutions integrate the supply chain directly into the manufacturing line for greater end-to-end visibility. With AI-driven needs, businesses can meet their elevated needs for agility and flexibility and generate up to 15% more ROI

Similarly, switching to digital procurements can help manage and resolve supply chain bottlenecks and build resilience in the process. Automation elevates your procurement function with real-time analyses of sourcing expenses and supplier performance. 

Outlook: When Will These Blockers Disappear? 

The supply chain blockers won't disappear anytime soon, and businesses should brace for worst-case scenarios in the near future. Scott Gravelle, the founder, and president of robotics supply chain company Attabotics, notes that an overreaction to the ongoing supply chain crisis could potentially worsen the situation. For instance, giant retailers will continue to place bulk orders with the fear of not having enough inventory in the future. 

Stu Bradley, the senior vice president of fraud and security intelligence firm Analytics Company says that most organizations have de-emphasized risk management in supply chains and shifted focus to survival and continuity. In the meantime, cybercriminals are banking on this moment to exploit supply chains. 

Tips for Dealing with Blockers

Audit and advisory firm Grant Thornton principal—Jonathan Eaton—recommends the following tips to business leaders when dealing with supply chain blockers: 

  • Quantify the cost of the supply chain to optimize order fulfillment 
  • Analyze the market and augment operations with the external capacity
  • Address labor shortages proactively 
  • Integrate automation tools, such as supply chain and inventory management software
  • Build an elaborate business continuity plan

Know How to Identify the Bottlenecks

Supply chain bottlenecks vary from one business to another but are inevitable altogether. Knowing how to circumvent them as they arise will give you ample time to build a highly resilient supply chain. And with a resilient supply chain, your business will overcome any bottlenecks in the future.

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