Global supply chains were exposed to an unprecedented cascade of stress caused by the Covid-19 pandemic. As China opens up and the world returns to a new normal, which supply chain issues can we expect to encounter in 2023?

1. Material shortages

There may be some material shortages as manufacturing resumes after almost three years. Key components and parts may be limited or have extended waiting times, impacting the entire supply chain. This potential disruption could cause commodities shortages and price inflation, factory closures, unloaded shipping containers, and negative effects on the economy.

Some commodities that may fluctuate in price or be limited in quantity are plastic for packaging and fuel for expensive goods like cars and electronics. Therefore, managing these risks will require building resilient supply chains to withstand disruptions in the future and adapt quickly to new changes.

2. Raw material costs

In a recent study, 71% of international companies cited raw material costs as the number one threat to the supply chain in 2023. As material shortages (see above) and global inflation have jumped, businesses must be prepared for cost increases related to the procurement of raw materials, finished products, and more. Consequently, product-based brands may experience excess inventory, higher storage fees, shrinking margins, and decreased revenue due to rising costs.

3. High shipping costs

The pandemic saw a surge in e-commerce, and with thousands of people in lockdown, there simply were not enough workers to handle container shipments. This led to a huge backlog of containers and shipping costs spiked as a result. The cost of a shipping container is up 80% since November 2020 and has almost tripled over the past year. The price surge affects nearly 80% of the world’s commercial trade via sea, air, and truck transportation.

4. Rising energy prices

From warehouses and production lines to offices and computer systems, every part of the supply chain needs some form of energy to function. Energy prices increased by an average of 50% in 2022, and rising energy costs mean that maintaining the supply chain is more expensive than ever. These rising energy prices are reflected in higher raw material costs and product costs, and are not expected to change any time soon. In fact, the average price of energy commodities in 2023 is predicted to be 46% higher than in January 2022.

5. Regaining trust

Globalization is great until something unexpected closes down the whole world overnight. Many companies are still reeling from the effects of Covid-19. Lockdowns, supply chain instability, fluctuating costs, and travel restrictions have impacted businesses worldwide in different ways. After the past few years, it will take managers some time to restore their faith in international supply chains. And when they do, they will still remember that everything can fall apart in the blink of an eye. Companies must find a balance between doing business and protecting themselves from unanticipated occurrences.

To navigate these risks, supply chains will need to be resilient to future disruptions and adapt to new changes quickly. 2023 is the year to be believed in which supply chain trends are key to taking control of what lies ahead. Therefore, having sophisticated planning capabilities and agility and improving the visibility of supply chain ecosystems is the key to mitigating risks and harnessing opportunities otherwise difficult to convert into benefits.

Why choose Lone Star?

Despite the supply chain issues in 2023, Lone Star’s professional and experienced team on the ground with knowledge of local markets and regulations understands and knows how to connect multiple suppliers. If you’re interested in manufacturing in Asia but don’t know where to start, let us be an extension of your company. We work on your behalf to overcome challenges and seek out the best opportunities for you. Choose Lone Star, and don’t leave anything to chance.

Check out our previous posts to learn more about What Issues do Companies Face When Manufacturing Goods in China or Taiwan? and How Lone Star Can Help You Outsource Production to Taiwan