Report: Supply chain challenges aren’t over yet

The supply chain challenges of the past few years are far from over, according to an SAP survey of 400 U.S.-based senior decision makers, released this week. More than half of the survey respondents (52%) said their supply chains still need “much improvement” and nearly half (49%) said they expect supply chain issues that began during the pandemic to last through the end of this year—with a third saying they expect issues to linger until the summer of 2023.

Respondents listed global political unrest (58%), a lack of raw materials (44%), and rising fuel and energy costs (40%) as the top reasons supply chain challenges will continue this year. A third of respondents (31%) cited inflation as a major contributor. Looking ahead, respondents said the top three supply chain challenges in 2023 will be: reduced availability of raw materials in the United States (50%); a slowdown in construction of new homes (44%); and disruption to public transportation due to a lack of drivers (44%).

Making matters worse, many supply chain leaders say the recent supply chain problems have had a negative effect on their finances. Nearly 60% said they’ve seen a decrease in revenue; 54% said they’ve had to take new financing measures, including business loans; half said they’ve been unable to pay employees; and 42% said they’ve missed rental payments. To cover the extra costs, business leaders say they’ve had to freeze wages or recruitment efforts (61%) and cut jobs (50%). Just over 40% said they have increased prices of their products or services to cover costs.

The continued supply chain challenges, combined with economic woes, are likely to impact peak season, although it’s still unclear how that will play out, according to SAP. A separate SAP study of 1,000 U.S.-based consumers earlier this year found that nearly half (45%) said price is the top factor they weigh in purchasing decisions, and nearly three-quarters (73%) listed price as a top-three factor in that process. Sixty-five percent of survey respondents said they plan to decrease their holiday spending budget as a result, and 54% said they expect inflation to impact how they shop for holiday gifts, with 39% saying they will shop online more.

Anticipating those trends, business leaders say they expect e-commerce volumes to increase this season compared to last year (73%), and that they are prepared to focus on six strategies for selling their products: speed of delivery (64%); customer service excellence (57%); product availability (52%); sustainability credentials (47%); price reductions (42%); and “made in the U.S.” status (38%).

Business leaders say they are also busy fortifying their supply chains to prepare for future problems. Nearly two-thirds (64%) say they are moving from a “just in time” supply chain to a “just in case” supply chain by increasing the amount of inventory they store. More than 60% of respondents said they think the United States should adopt the same approach to overcome potential supply chain crises. SAP researchers said the move to a “just in case” supply chain will lead to higher costs.