2023 Supply Chain Management: Five Key Trends Worth Watching

Under the three-year impact of the COVID‑19 pandemic, global supply chains have been directly affected: mobility in certain regions has been restricted, freight transport has been disrupted, raw material supplies have been interrupted, and both production and delivery have faced numerous challenges. At the same time, vulnerabilities and shortcomings in supply chain management systems were laid bare during the pandemic. For this very reason, supply chain management has now become a key focus for corporate executives.

At present, global supply chains are recovering and are no longer as fragile as they were three years ago; they have become more diversified and resilient. According to data released by the Federal Reserve Bank of New York, the global supply-chain stress index has now eased from its peak, though it remains above Levels seen prior to 2019; in December 2022, the logistics managers’ index reached 54.6, marking a rebound after eight months of decline—though the increase was only one percentage point, indicating that supply chains have yet to fully normalize. Moreover, survey data show that most supply-chain executives expect operations to return to normal only in the first half of 2024 or later, with fewer than 22% of respondents forecasting normalization by the second half of 2023.

In the author’s view, due to factors such as technological innovation, market shifts, and global instability, 2023 may well prove to be a year of revolutionary and innovative breakthroughs in the field of logistics and supply chain management. In particular, the evolving trends in supply chain management are increasingly oriented toward building resilient supply chains.

Trend One   Reasonably reduce supply chain costs.

Since Since the beginning of 2022, signs of an economic downturn have loomed over the global economy. Many economists predict that by mid-2023, the world will experience some form of recession. With the exception of a few countries or regions such as China, global trade demand has weakened, and in its latest Global Economic Prospects report, the World Bank has lowered its 2023 global growth forecast to 1.7 percent.
Under the three-year impact of the COVID‑19 pandemic, both supply and demand have weakened, posing significant challenges to businesses. These challenges include disruptions to logistics and transportation, rising freight costs, shortages of raw materials and components, constrained production capacity, declining order volumes, and weakening consumer demand. Adding to these pressures are sluggish demand recovery, weak supply‑side momentum, and heightened external uncertainties. “Multiple pressures” pose significant challenges for companies seeking to sustain steady business growth. Moreover, 50% to 75% of operating costs are directly influenced by supply-chain expenses—making it clear that excessively high supply-chain costs can erode profitability. Consequently, supply-chain cost management has become critically important for businesses, and cost control will be their top priority in 2023.
Data from S&P Global Market Intelligence’s 2022 Supply Chain Survey reveal that “cost management”—that is, controlling supply-chain costs related to raw materials, commodities, and logistics—is the top priority for surveyed companies, accounting for 32% of responses—far ahead of all other considerations. Cost management has now been the leading priority for the second consecutive year. Additionally, a separate survey indicates that 71% of respondents identify raw-material costs as the number-one supply-chain threat in 2023, suggesting that managing supply-chain costs will remain a top priority for businesses throughout the year.

2022 Supply Chain Management Priorities (Data from S&P)

However, given the interconnected nature of supply chains, all parties should consider supply chain costs from a total‑cost perspective rather than focusing solely on a single link. This is because, in most cases, the various stages of the supply chain are… The “press one gourd and another pops up” dynamic means that cost reductions in one area may lead to cost increases in another. Moreover, when pursuing cost‑reduction initiatives across the supply chain, it is essential to holistically balance competing priorities, such as supply‑chain efficiency and resilience.

Trend Two   Accelerating the Digital Transformation of the Supply Chain

Digitalization is one of the key development trends in the logistics supply chain over the next few years. Gartner’s survey data show that 61% of supply chain managers believe technology is a source of competitive advantage. By leveraging digital technologies, stakeholders can access real-time and dynamic analytics across the entire end-to-end supply chain, enabling them to make timely, data-driven decisions. Integrating digital and innovative technologies also helps companies transform their logistics and supply chain workflows, enhance operational efficiency and customer satisfaction, and ultimately boost profitability.
Data shows that although Ninety-five percent of supply chains need to respond swiftly to evolving conditions, yet only 7% are capable of executing decisions in real time. Meanwhile, 34% of supply chain managers identify adapting to emerging technologies as the most critical strategic shift that logistics companies will face over the next five years. As a result, many organizations are investing heavily in digital transformation to enhance their supply chains.
Although innovation in the logistics supply chain is accelerating, many companies are still at an early stage in their digital transformation journeys, particularly when it comes to adopting advanced computing technologies such as machine learning. Moreover, data indicate that, amid a sluggish market and mounting pressure on revenue and profits, some firms have scaled back their investments in digital transformation and postponed large-scale automation initiatives. Take Amazon, for example, In 2022, its investment in warehouse automation decreased by 30%, and it is expected to decline by an additional 20% in 2023.
After all, this endeavor requires substantial investment and a lengthy timeline, and its success is far from guaranteed. In a study by Descartes, respondents identified their attitudes toward risk and reward as the primary barriers to innovation in their logistics supply chains. 26%), lack of organizational readiness (17%), insufficient resources (16%), unclear returns (14%), and lack of alignment with the management team’s priorities (14%); two of these factors are related to the input–output dynamics of digital initiatives. This suggests that when it is difficult to demonstrate how digital investments will drive incremental improvements in corporate performance or profitability, some organizations show limited enthusiasm for such efforts.

Trend Three   Accelerate the restructuring of global supply chains

Amid the wave of economic globalization, global supply networks have continued to expand, with business leaders consistently relocating manufacturing to regions with the lowest costs in an effort to build long-term, efficient supply chains. However, numerous disruptions have highlighted the vulnerabilities of international supply chains, prompting supply chain managers to reassess the advantages and disadvantages of globalization. Research indicates that, Seventy percent of executives believe that supply chains will become increasingly localized rather than globalized.
Globalization is undergoing a profound transformation, with the primary drivers of this change being… The years 2020–2022 were marked by the COVID‑19 pandemic and emerging technologies, while 2023 saw geopolitical conflicts. More than 60% of companies anticipate that geopolitical instability could negatively impact their supply chains over the next three years.
Today, companies are placing greater emphasis on diversifying their supply chains—establishing parallel supply networks in key global markets to produce where they sell, thereby aligning production capacity more closely with consumer demand and fostering diversified global sourcing. This approach enhances supply-chain resilience and mitigates risks associated with single-source dependencies and concentrated procurement. According to IMF analysis, such diversification significantly reduces economic losses stemming from supply disruptions.
In recent years, the United States has continuously imposed technological restrictions and industrial suppression on China. It has not only enacted legislation and provided fiscal subsidies to encourage the reshoring of critical industries such as semiconductors, but has also joined forces with the European Union, Japan, South Korea, and other partners. Seventeen countries have convened a ministerial-level meeting on supply chains, seeking to decouple China from the global supply‑chain system. In recent years, many companies have adopted a “China + 1” strategy, establishing parallel supply chains in countries such as Vietnam and India. Meanwhile, China accounts for roughly 30 percent of global manufacturing output; among the 22 industrial categories monitored, it ranks first worldwide in 16. Furthermore, the raw materials and intermediate goods used by manufacturers in Vietnam, Thailand, India, and other nations remain heavily reliant on Chinese supplies. As such, China’s manufacturing sector continues to be a pivotal pillar of the global supply‑chain network.
In short, Strategies such as “localization of production” and “China + 1” will remain key business priorities for multinational enterprises, and these approaches will continue to reshape global supply chains. At the same time, adjustments to global supply chains will unfold in increasingly complex and diversified ways.

Trend Four   Labor shortages are driving the adoption of automation.

According to surveys conducted by the European Commission in the industrial and construction sectors, labor shortages remain one of the most significant constraints on production, particularly in the service sector. Meanwhile, in our country, In 2022, the net population growth rate turned negative for the first time, with the national population declining by 850,000 people, marking the official end of the demographic dividend. Going forward, many sectors in China will also confront labor shortages. A secondary consequence of these shortages is rising labor costs. Data show that China’s labor costs have been steadily increasing; today, wages for production workers and machine operators in China exceed those in countries such as Brazil, Thailand, Malaysia, Vietnam, Mexico, and India, placing manufacturing labor costs at a mid-range level globally.
The trends of population aging and declining birth rates are unlikely to reverse in the short term, and labor costs will continue to rise. This will prompt more companies to invest in warehouse automation and intelligent robotics to reduce their reliance on human labor. Automated facilities can cut down on time spent on picking, storage, and order fulfillment, significantly reducing physical effort and minimizing errors, thereby serving as a means to lower labor costs. Research indicates that corporate investment in warehouse automation is linearly related to regional labor costs: the higher the labor costs in a given area, the greater the willingness to invest in warehouse automation.
Savills The 2022 European Logistics Tenant Survey reveals that 80% of respondents view warehouse robots as the primary technological disruptor in the logistics supply chain, a figure that has risen by 20% compared to 2021. According to data from Interact Analysis, shipments of mobile robots grew by 53% in 2022, and the firm forecasts that cumulative installations will exceed 4 million units by the end of 2027, with as many as 1.5 million units installed in 2027 alone.
Recently, The ChatGPT concept has exploded in popularity worldwide. Behind this surge lies a powerful wave of artificial intelligence. According to the Global Times, following the meteoric rise of ChatGPT, the AI-powered chatbot developed by the U.S. startup OpenAI, major U.S. tech giants have been making frequent moves in the AI space, and in 2023, these industry leaders are likely to launch a new round of intense competition in the field.

Trend Five   A price war in the logistics sector may be unavoidable.

In the global container shipping sector, overall capacity is on a steady upward trajectory, and… In 2023, 2.34 million TEUs of new vessels are scheduled to enter the market, injecting substantial additional capacity. At the same time, port congestion and vessel waiting times have eased, and on-time performance has improved. The container shortages, capacity constraints, and port bottlenecks that characterized the pandemic era have largely dissipated, giving way to a buildup of empty containers at ports. The primary driver is that major trading economies such as Europe and the United States are experiencing high inflation, elevated inventory levels, and subdued consumer demand, with rising risks of recession and declining maritime freight volumes. With supply expanding while demand contracts, shipping rates have continued to decline; HSBC Global Research forecasts that container freight rates will bottom out by mid-2023.

Global container shipping market capacity (data sourced from) Alphaliner)

In global air freight, the contraction of world trade has already led to a decline in air cargo volumes, while the smooth flow of maritime shipping has prompted a shift of cargo from air to sea, further exacerbating the downward trend in air freight. The International Air Transport Association forecasts… In 2023, air cargo volume is expected to decline to 577,000 tonnes, a drop of 4.3%, while air cargo revenue is projected to fall by approximately 25% as freight rates have fallen even more sharply. Accordingly, with the exception of routes from Europe to East Asia, airfreight rates on January 15, 2023, were lower year-on-year across all major routes; in particular, the rate from East Asia to the United States dropped from $13.3 per kilogram to $8.39 per kilogram, a decrease of 37%.

General air freight rate changes (data sourced from Xeneta)

Meanwhile, in the domestic express delivery sector, according to estimates by the Zhejiang Securities Research Institute, In 2017, the average value of goods per express parcel was RMB 136.82; by October 2022, this had fallen to RMB 105.16, a decline of roughly 23%. Moreover, the average value per parcel is expected to continue trending downward. This sustained decline in the value of goods carried per parcel will make shippers more price‑sensitive, generating strong endogenous demand for cost reductions in express delivery fees.
The disruptions to logistics caused by the pandemic have largely subsided, with sea, air, and land transportation all back to normal. However, freight rates are under downward pressure, and in the race to secure cargo volumes, logistics companies inevitably resort to… “The price war” — a trump card. (The author is the head of Yilian Consulting Service Center and the author of “Supply Chain Reconfiguration” and “Digital Intelligent Logistics.”)