This year, focus on supply chain staffing

This is an excerpt of the original article. It was written for the March-April 2023 edition of Supply Chain Management Review. The full article is available to current subscribers.

March-April 2023

In June 2013, Frank Quinn stepped down as the only editorial director Supply Chain Management Review had ever known. “In thinking about those whom I’m indebted to for the success of SCMR over 16 years, there is one constituency that must rank first on the list—you, the reader,” Frank wrote, as he handed over the reins to Bob Trebilcock. Now, Bob has done the same, handing over the reins to the next generation. I am very proud to be that next generation. In a farewell letter of sorts, Bob wrote that he was the “old” and I as the “new.” Nothing could be further from the truth. There is no old or new, only continuity. That continuity is…

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Supply chains have gained visibility over the last few years as key to ensuring the smooth continuation of manufacturing and timely delivery of products and services for both businesses and consumers. A positive result of this circumstance has been that the supply chain now has influence among senior leaders. Yet with this recognition as a strategic function comes more scrutiny. Supply chain managers need to think strategically to ensure that they address obstacles and select priorities that retain (and enhance) their standing.

In late 2022, APQC conducted its annual supply chain management priorities and trends research. Each year, this survey asks supply chain professionals representing a diverse set of roles, industries, and geographic locations to indicate their organizations’ challenges and priorities for the coming year. The latest survey results show that many organizations’ supply chains are stabilizing, reflecting a broader trend in the field.

The human element is having a larger influence on supply chains as businesses feel the squeeze of staffing shortages. Organizations can address obstacles tied to communication and collaboration by addressing hiring, retention and employee development.

Obstacles and trends

Each year, APQC asks the participants in its priorities research to indicate the biggest obstacles to improving supply chain processes. The results reveal some overlap between the top obstacles named in late 2021 and those named in late 2022. As shown in Figure 1, staffing shortages took the top spot, bumping other factors down the list.

Another key difference is that limited workforce engagement no longer appears in this year’s list of top obstacles. Instead, it has been replaced by staffing shortages. This may indicate that the dissatisfaction organizations observed among employees last year has since translated into departures. If this is the case, it mirrors the larger workforce challenges observed across industries.

Another factor contributing to supply chain labor shortages is an aging workforce that is retiring. As long-time employees depart, organizations face the loss of institutional knowledge that can help newer employees avoid quality, safety and productivity issues. Organizations can preempt this by using proven approaches like knowledge management to capture information from tenured employees and then transfer it to those newer to their roles.

In its research, APQC also asks respondents to indicate the top trends, innovations and developments they anticipate having a major impact on the supply chain over the next three years. As shown in Figure 2, the trends seen as making the largest impact have changed over the last year.

This year’s survey results indicate organizations are prioritizing technologies with more cognitive capabilities, with artificial intelligence now on the list of top trends anticipated to make a major impact on supply chains. Last year, organizations focused on standardizing processes to improve consistency and take control of operations. Now that supply chains have passed many of the crises that arose during the pandemic and ideally improved their flexibility, they can focus on ways to improve upon their established processes.

Strategies and budgets

Additional results from APQC’s research indicate that organizations have used the lessons they learned during the pandemic to make long-term fixes to their supply chains. When asked whether their organizations have re-evaluated or modified their supply chain strategies to head off obstacles, 81% of survey respondents indicated they had. This is a slight increase over the previous year, when 79% of respondents said their organizations had taken this step.

Despite changes to their supply chain strategies, fewer organizations are increasing their supply chain budgets. In APQC’s most recent survey, 41% of respondents said they expect their budgets to increase, compared with 66% the previous year. Accordingly, a larger number of organizations are keeping their supply chain budgets the same, with 49% indicating this in the most recent survey compared with 25% the previous year.

These results indicate that organizations’ circumstances are settling down following the extreme uncertainty of the pandemic years. During the previous year organizations anticipated needing to invest more in their supply chains but spending now appears to have stabilized. It should be noted that organizations are not reducing their budgets to pre-pandemic levels; rather, they are accepting the need to budget at a higher ongoing level for supply chain management tools, technology, innovation, and initiatives.

Priorities and capabilities

APQC also asked research participants to identify their organizations’ top areas of focus for the coming year. As shown in Figure 3, the top four focus areas have been consistent for 2022 and 2023. Slightly more organizations plan to focus on innovation in 2023 than did in 2022.

As in the past several years, supply chain planning is the top area of focus for 2023, followed by sourcing and procurement. Given that many organizations are adjusting their supply chain strategies this year in the face of a growing need for greater transparency and better forecasting, it is not surprising that supply chain planning remains the top area of focus. Procurement will also be important in this effort as organizations identify key suppliers and adjust their procurement processes as needed.

For each of the top focus areas, survey respondents indicated the top priorities and actionable strategies that their organizations will work on in 2023. Within supply chain planning, demand planning and forecasting is the top priority for the second year in a row. Organizations are also seeking to improve collaboration and communication. This actionable strategy moved up from 4th among respondents last year, showing that companies recognize the importance of having all the stakeholders within supply chain planning aligned and working closely together to ensure success.

Within sourcing and procurement, the top priority for both 2022 and 2023 has remained supplier relationship management. Improving key supplier relationships jumped from the 9th actionable strategy for 2022 to first place for 2023. From a sustainability perspective, with increasing regulation in many countries, what was voluntary disclosure in the past is now required. Many businesses must disclose and verify their suppliers’ sustainability data or face the threat of financial penalties or disrupted shipments. Therefore, strengthening both internal and external relationships are a top priority for supply chains this year. Companies see that there is strength in sharing capabilities both among internal functions and with suppliers and vendors/providers.

Relationships are also a top priority for innovation. Improving collaboration is the top priority for 2023–a significant jump from the 4th place that it held in 2022. When it comes to actionable strategies, organizations intend to adopt a structured approach to innovation. Companies realize that a more disciplined, strategic approach to their innovation efforts is needed to ensure stability following the disruptions
of the last few years.

Within logistics, organizations plan to retain their focus on inventory in 2023. Inventory management is the top priority in 2023, as it was for 2022. Companies plan to focus on optimizing inventory as their top strategy for this year. The shortage of components and products during the pandemic has made inventory a key aspect of supply chain continuity. And in some industries, organizations are facing an excess of inventory to handle in the wake of waning demand. Organizations can take the lessons they learned during the pandemic and apply them toward new approaches to inventory management.

Focus on people

The results of APQC’s annual research on supply chain priorities and trends reveal that there are some trends carrying over from the prior year, as well as new directions identified by organizations. What is clear from this year’s results is that companies are prioritizing collaboration and sustainability in their supply chains.

Although technology has been the focus of supply chains for years and remains essential for operations, in the end, the success of supply chains relies on people who are enabled by technology. Building relationships across internal functions and with key suppliers is essential to the collaboration that is needed to create stability and address uncertainty. Further, the outputs of predictive technology such as artificial intelligence and cognitive computing must still be considered by staff. Technology coupled with human insights and decision-making drives the success
of supply chains.

Within multiple areas, respondents to APQC’s survey indicated that staffing shortages are one of the biggest obstacles they face. Yet talent acquisition was not named a top priority within any of the supply chain areas of focus for 2023. Overall, about 20% of survey respondents indicated this was a priority area for their organizations. These results may be due to a combination of factors. Middle managers may recognize that talent is a problem, but they may not have the authority to address it. Leadership may consider other issues to be a higher priority and be unwilling to dedicate resources to address talent shortages.

Organizations must take the supply chain talent shortages seriously. Filling roles, retaining talent, and helping existing employees develop new skills are essential steps in addressing some of the other obstacles organizations anticipate facing this year. Adequate staff can make possible the process improvement, relationship building, and communication organizations need to meet their supply chain goals in 2023.

About APQC APQC helps organizations work smarter, faster and with greater confidence. It is the world’s foremost authority in benchmarking, best practices, process and performance improvement, and knowledge management. APQC’s unique structure as a member-based nonprofit makes it a differentiator in the marketplace. APQC partners with more than 500 member organizations worldwide in all industries. With more than 40 years of experience, APQC remains the world’s leader in transforming organizations. Visit us at apqc.org and learn how you can make best practices your practices.

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