The wind has changed since the peak revenue days of 2022. In 2023, money is no longer ‘free,’ market demand is falling, and investors are returning to the textbook principles of profit and loss. The time has come to stop the burn and focus on efficiency and profitability.
Manufacturers and wholesale’s typical balance sheet spend on supply chain lie between 50–90% of total costs. So what is the best way forward for Supply Chain intensive businesses in 2023? We've rounded up the top trends and strategic opportunities that CEOs and supply chain leaders should factor into their strategy to weather the storm in 2023 and beyond.
Supply Chain Investments > Sales and Marketing Investments
A common approach to a negative P&L forecast is to shift the attention to top-line growth, increasing focus and investment in sales and marketing. Sadly, that is not going to fly in 2023. To pass into a storm at the same speed (or faster) as clear days, you must consider fuel consumption versus output.
So what’s the more intelligent approach? A recent study we’ve completed showed that a 3-5% reduction in the right Supply Chain costs outcompetes top-line growth by 5x EBITDA impact.
As a result, companies have been spending more on sales and marketing without paying attention to the impact a well-managed supply chain can have on the bottom line. A recent study we completed with Norway’s leader in road safety equipment demonstrated that a well-executed supply chain project could result in a 9-11 MNOK rise in EBITDA annually, with a year’s costs of less than 4MNOK.
This shift increases enterprise value by 60-70 MNOK, which is much more significant than a 20 MNOK increase in sales for the same dollar-for-dollar investment, which would only result in a 2 MNOK increase in the bottom line and a 12-15 MNOK increase in enterprise value, a 4-5x impact by comparison.
Everyone Automatizes and Digitizes, But Why?
Supply Chain and goods transport have witnessed a significant rise in automation and digitization. Early investments in these technologies have looked to replace blue-collar labor, enhance safety and productivity, and optimize tracking and inventory management. Now that these baselines have been established, the focus has shifted towards taking control of data to get the visibility needed to optimize costs correctly in 2023.
Whether operating regionally or globally, businesses with a complex carrier footprint, high transportation costs, and a focus on customer service and speed should prioritize this. Your organization can stay on top by consolidating cost drivers, automating cost control, and establishing a system that guides teams to strategically and tactically reduce costs.
When it Comes to Industry Impact, Size Matters
As leaders in the manufacturing, wholesaling and retail space, your impact on the value chain is immense. With this impact comes an opportunity and a responsibility to lead the way in digital innovation and sustainability.
Examining the responsibilities placed on key suppliers and other stakeholders in the value chain is essential to achieve organizational goals. Increasing transparency, establishing data-sharing infrastructure, and implementing CO2 reporting requirements are some of the most significant areas of focus in 2023 for organizations with critical mass in the supply chain.
Sustainable Practices: Green is Good
By prioritizing sustainability and digital innovation, you can improve your business's bottom line and inspire others in your industry to follow suit. As leaders, you have the power to drive change and positively impact the environment and society as a whole.
Companies are increasingly looking for ways to reduce their environmental impact and promote sustainable practices in their supply chain and transportation operations. Measures can include using electric vehicles, implementing recycling programs, and investing in clean energy technologies.
Measuring the ROI from a long-term efficiency lens is vital when investing in sustainability, not dollar-for-dollar setup costs of the standard vs. 'sustainable' solution. Ensure your procurement and finance teams have the infrastructure to simulate project deliveries and investments on cost, time, and CO2 impact in a balanced and fair representation across factors so you can make the right decision for your business.
Challenge your Business Model
2023 may be the year to benefit from exploring new measures that can improve your supply chain operations and increase your competitive edge. Accessing new markets, expanding your supplier base, and tapping into resources you may not have otherwise could be one.
Looking into outbound transportation optimization can be another useful measure to reduce supply chain costs and improve delivery times, ultimately improving customer satisfaction and loyalty. In addition to challenging your supply chain model, improving it through team investments is an effective measure to position your company for long-term success in a competitive market.
Explore collaborations and partnerships
Collaboration and partnerships are becoming more critical in supply chain and transportation as companies seek ways to share resources and reduce costs. For example, many companies are forming alliances with other businesses to share transportation and logistics resources, such as trucks and warehouses.
Collaborating with others can help companies lower their transportation spend and improve the utilization of resources.
Optimize your outbound transportation
Outbound transportation is becoming a key area of focus for many companies in 2023, with transport representing as much as 30% of supply chain costs on average. With e-commerce sales continuing to grow, companies are looking for ways to optimize their outbound transportation operations to reduce costs, improve delivery times and minimize their CO2 impact.
Outbound transportation can include using advanced analytics and automation tools to consolidate cost drivers across carriers, streamline cost control and generate critical insights to increase financial and customer performance.
Invest in your Supply Chain Team
Investing in the development of your supply chain team is also critical. Supply chain management requires leadership, charisma, practical knowledge, and a good dose of quantitative skills.
By providing the right tools and expertise, you can empower your team to achieve your supply chain goals and drive significant improvements to your bottom line.
Supply Chain is the Key Differentiator of 2023
At Kinver, we provide businesses with the tools and expertise to achieve their supply chain goals. However, we recognize that the real heroes are the people who work tirelessly within your business every day to make it a success. Investing in their development and supporting infrastructure can build a great company, create a positive work environment and keep your shareholders happy.
In conclusion, supply chain management is a critical component of any successful business and the trends for 2023 focus on scalability and investment in the right skills and technology. By looking to your supply chain to cut costs more brilliantly, rather than just focusing on top-line growth, you can weather the storm of uncertain times and achieve your business's full potential.
At Kinver, we're here to help you achieve your supply chain goals and drive significant improvements to your bottom line. Want to read more about how you can elevate your Supply Chain Management to meet the challenges of tomorrow?