There’s no doubt global supply chains continue to face a multitude of challenges that demand innovative solutions. As we head into 2024, continuing disruptions caused by the COVID-19 pandemic, ongoing global tensions, inflationary pressures, supply uncertainty and environmental concerns are all forcing companies to re-evaluate their traditional supply chain models.
So, what are the future supply chain issues facing Australian businesses and their global trading partners? We explore the complex challenges confronting supply chains into 2024 and beyond, and touch on strategies to help organisations adapt and thrive.
6 global supply chain issues and trends in 2024
Many global issues have highlighted the vulnerabilities in supply chains over the past few years, says Octet’s Supply Chain Finance Manager, Joe Donnachie. So, what are the major supply chain challenges and trends as we move into 2024 and beyond? Here are our top six.
1. More circular supply chains
Manufacturers continue to move towards a circular supply chain model as we enter 2024. Gartner reports that in 2023, 20% of tech hardware vendors’ products were associated with circular initiatives. By 2030, that figure will increase to 80%. As businesses in various industries look to re-use and re-manufacture end-of-life products, vendors in the tech hardware industry will be particularly aware of mitigating the environmental impact of their products.
Every business has a different focus on creating a more sustainable supply chain. For some, it’s about making packaging more sustainable. Others will concentrate on the product and incorporate recycled materials into their manufacturing processes. While some businesses will repair, refurbish and recycle their goods to increase product lifetimes.
“Consumer demands have definitely changed,” says Joe. “While inflationary pressures mean most people have less cash to spend on disposable goods, there’s a lot more focus on where the goods come from and the sustainability of those end products.”
2. Ongoing skills shortages
Those in the distribution industry continue to experience talent shortages, affecting production and service delivery. Companies are having to employ technology to help workers access systems easily and securely, while automating routine tasks and creating a positive work culture to attract and retain employees.
As the skills shortage and increasing labour costs continue to affect output, margins are being reduced, and businesses will have to look to AI, digital transactions, robotics and automation to remain competitive.
Joe says an increase in automation and digital documentation requires workers along the supply chain to adapt and gain new skills to incorporate this new technology into their work routines.
3. Increased consumer pressures
While traditional supply chains were a relationship between a business and its suppliers, a recent, more active addition has complicated that relationship — the consumer. According to Forbes, thanks to digitisation, consumers are now more aware of how products are made, where they come from, and other options available to them. This new relationship adds further complexity to supply chain management, and that will only increase in the future.
“There’s a lot more pressure from the consumer,” says Joe. “They’re substantially more conscious of the source of products. I see it in items such as clothing, food and alcohol. For example, there’s now a big shift towards low- or non-alcoholic drinks, and that industry has just boomed over the last three years. All driven by consumer demand and using social media and other tech-driven forums to amplify word of mouth.”
4. Rising inflation and economic instability
The Reserve Bank’s efforts to ease inflation through numerous steady rate hikes have led to economic uncertainty for consumers and a reduction in spending, which will no doubt continue into 2024. Adapting to a changing economy is vital for businesses to stay competitive in the years ahead. All businesses will need to be flexible and prepared to change their services, products and marketing plans to meet consumer demand.
It’s a pressure felt around the globe as other central banks’ efforts to tame inflation continue to dampen economic growth. The IMF reports the factors that could potentially hinder economic growth in the future include the risk of inflation staying high or rising further, the chance of further extreme weather events, China’s economic recovery slowing and an escalation in the Ukraine war, which could lead to even more restrictive economic policies.
The global financial pressures causing supply chain disruptions will not likely ease in 2024, particularly when we consider the current Israel/Palestine conflict in the Middle East.
5. Ongoing supplies shortages
From minerals to medicine, building supplies and grocery staples — supplies of materials around the world failed to meet consumer demand during COVID-19 and in the years that followed.
While the semiconductor supply to the automotive industry is finally improving, chip shortages could still affect manufacturers in 2024 as demand outstrips supply.
Closer to home, medicine shortages are still affecting Australians. The TGA reports that hundreds of medications are in ‘short supply’, with the nation’s pharmacists forced to offer substitutes to their customers.
6. Easing of shipping pressures
Shipping delays, bottlenecks, container shortages and Russia’s war on Ukraine have heavily affected shipping in the past few years, but the outlook is more positive for 2024. International Cargo Express predicts the industry will return to normal in 2024 with new capacity coming into the market, while carriers will balance their supply with new procedures, and ships will become more reliable. There will also be a steadying of freight rates.
DHL predicts a steadying of rates later in 2024, and reports that as new containers enter the market, the industry will enjoy more capacity and an improvement in the reliability of schedules.
Allianz reports the world’s container fleet grew by 6.3% in 2023 and will continue to grow by 8.1% in 2024. Considering congestion at ports is also easing, supply will likely rise.
How to overcome supply chain challenges
As we head into 2024, geopolitical uncertainty, economic pressures and ESG demands are forcing a rethink of conventional supply chain models, which will need to better balance sustainability, speed, responsiveness and cost. So what can businesses do to alleviate supply chain issues, protect their supplier relationships and ensure longevity?
Relying on limited suppliers left businesses vulnerable in the years during and after COVID-19. “A solution is to diversify that risk to multiple supply chain sources, and that’s what has really happened over the last few years,” Joe says.
Diversifying a business’ supply base is, in theory, a great idea, but Joe warns it’s not as simple as it sounds. “It comes back to how dependent businesses are on a particular product or component coming into the country and whether or not they have the ability to, say, start setting up a workforce in another country, which obviously has its own tax implications and regulations. What is the competition in that area as well? These factors make it very challenging, but necessary, to diversify your supply chain.”
All businesses should be looking to implement a digital supply chain that takes advantage of analytics and uses consumer data to inform decision-making. By aligning supply with real-time demand, businesses can ensure more products are delivered on time while offering exceptional customer service and minimising costs, such as warehousing and storage.
AI and Robotics
Forecasting has always played a role in supply chain management, as it enables businesses to plan for increases in demand, supply shortages and unforeseen events. Now, AI is allowing predictions to be made from massive amounts of data faster and more accurately than ever before. The pandemic showed just how important it is to plan for unexpected circumstances. AI has the potential to become an essential risk management tool.
As the world’s businesses continue to grapple with worker shortages and inflation, they are turning to automation and robotics. Prices of robotics are dropping, and when coupled with AI, can become a powerful and viable business tool.
New technologies are being embraced along the supply chain. 3D printing is allowing businesses to print parts or whole products and reduce reliance on overseas suppliers or vulnerable supply chains. Blockchain solutions are also providing increased accountability and responsiveness along complicated networks. Blockchain technology could centralise and streamline processes in an industry such as shipping, which requires considerable documentation and complex procedures.
Maximise your supply chain performance with Octet
Octet’s supply chain finance solutions power your business to thrive, no matter what supply chain issues you’re facing. With our secure supply chain platform, you can use your credit or debit cards to ride fluctuations in commodity prices and exchange rates and make cross-border payments easily.
With our Debtor Finance facility, you can access up to 85% of your unpaid invoices to boost cash flow in your business and capitalise on opportunities. Need to increase your purchasing power? Our Trade Finance facility is a convenient line of credit that allows you to pay both local and global suppliers with up to 60 days interest-free and 120-day repayment terms. Contact our team of working capital specialists to discover how Octet can help accelerate your cash flow and improve supply chain dynamics today.
Disclaimer: The following comments are only our views and should not be construed as advice. You should act using your own information and judgment. Although information has been obtained from and is based upon multiple sources the author believes to be reliable, we do not guarantee its accuracy and it may be incomplete or condensed. All opinions and estimates constitute the author’s own judgment as at the date of publication and are subject to change without notice.