Mitigating supply chain challenges in 2023

By Denys Hobson, Investec for Business, Head of Logistics. As we enter a new year, many businesses look to set new strategies that not only ensure that they are able to risk mitigate; but ones that enable them to grow, capitalise and perform better year on year. Of course, coming off the back of some hard years, makes getting this strategy critical and when it comes to the retail and import sector. While things continue to change, the fundamentals have stayed the same: working capital, stock at the right time, positive returns, customer experience and exceptional service.

Retailers have struggled to ensure consistent supply of products, and to make matters worse, rising interest rates and inflation, geopolitical and local socioeconomic factors have not only hindered the import and exports of goods, but have certainly made matters more complicated. Market analysts are forecasting a challenging year ahead which will place pressure on consumers’ disposable income. This will drive a change in consumer spending patterns and they will be far more price sensitive. Competition within the industry will be strong.

The past year served up some hard lessons, but at the same time these lessons have been valuable in driving innovation and resilience. Businesses will need to build on the lessons from 2022 in 2023, to not only ensure they retain existing customers and profitability, but also to grow their customer base in a responsible manner. Business disciplines and priorities will be key to achieving sound growth and returns.

Focus on building resiliency

Operating in a challenging economic climate often means finding ways to reduce operational costs while maximising cash flow, especially when stock flows slow down. Inventory planning goes hand in hand with the finance and supply chain elements of managing a business. Given that a significant amount of funds are used to procure stock, and often well in advance of shipping or receiving stock, which places pressure on cash flows. As a result, it becomes crucial to understand how to unlock the broader value chain and the associated finance components.

Identify methods and opportunities that provide greater visibility for the strategic management of your import supply chain and invest in relationships with key stakeholders to ensure costs are contained; capital is correctly allocated; and have availability of products at the right time. This will not only help drive decisive decision making, but will also go a long way to executing on strategic objectives and business growth and remaining resilient during uncertain times.

Be prepared for disruptions

South Africa is not the only country that experiences labour challenges. Strikes and labour shortages across Europe, Far East and the USA, have impacted supply chains. Additionally, uncertainty around COVID-19 policies and restrictions in China, has continued to create disruptions to manufacturing, trade routes, ports and sailing schedules. Given the increase in volatility, inflation and rising economic and social challenges, there is no doubt that we are likely to see labour disruptions this year. Additionally, security continues to remain a concern. Having clear visibility of supply chain processes, implications and alternative strategies to minimise the impacts, and strengthen security, including cybersecurity, will be a critical element.

Create agility through the supply chain

Market changes are vast and intertwined, so it’s important to become more agile where possible. Look for ways to increase inventory accuracy and reduce shrink; utilise technology to innovate; create synergies where you can; and consider alternative sources of supply. Businesses which are able to deploy the right funding at optimal points in their business cycle can generate better turnover and, in turn, boost profitability. This will create agility, support growth and sustain and create jobs – and that, at the end of the day, benefits everyone.

Some tough lessons from 2022, but what has transpired in the last two years can be used to help navigate possible future challenges. Planning, rather that reacting, is key to achieving strategic goals for the year. Every business decision involves some level of risk, especially when working in such an interconnected sector. Risk is unavoidable but can be carefully managed. Plan ahead, and partner with the right partners to be with you every step of the way.

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