Supply chain stability improved in 2023 despite ongoing challenges, but a complete return to pre-pandemic normalcy remains unlikely in 2024, according to a study from the Association for Supply Chain Management (ASCM) and KPMG LLP.
Factors that have contributed to recent instability include cross-border patrol closures between U.S. and Mexico trade corridors and rising conflicts leading to commercial ship attacks in the Red Sea. However, there are also positive signs including greater nearshoring efforts in Mexico and Canada, which reduce reliance on other regions, according to the study, the “KPMG Supply Chain Stability Index.”
“Even though the Supply Chain Stability Index shows a reduction in operations instability throughout the year, there are still challenges such as cross-border patrol closures and conflicts leading to commercial ship attacks,” Jim Lee, Supply Chain AI Leader at KPMG LLP, said in a release. “While a complete return to pre-pandemic normalcy in 2024 is unlikely, there are positive developments such as the comeback of just-in-time inventory strategies and a slight easing of competition for talent in the labor market. However, the logistics sector still faces significant challenges due to geopolitical factors and volume fluctuations. It is important for supply chains to remain vigilant and adopt resilient strategies for continued progress.”
The study called out three specific areas where leading companies are paying special attention as they strive to overcome present challenges:
- Inventory optimization: Inventory levels, inflated during the pandemic, are now strategically decreasing throughout the supply chain, indicating a shift toward optimized inventory management. Purposeful efforts across all nodes in the supply chain are leading to improvements in inventory.
- Automation and the future of labor: The competition for talent, notably for entry-level roles across the entire supply chain, persists, albeit with a slight alleviation from previous intensity. Lower unemployment rates and increased automation adoption are key factors contributing to this evolving trend.
- Ongoing logistics challenges: Geopolitical tensions persist, disrupting the global movement of goods, notably impacting ocean freight, especially between Asia and the European Union, and to a lesser degree, the United States. These factors underscore ongoing residual risks within the sector.
