Key Takeaways

Supply chain capacity will loosen in 2023
Consumer demand will weaken this year
Reindustrialization takes center stage
Supply chain flexibility remains critical for shippers

After two years of continual supply chain upheaval, 2022 was similar. Disruption was the norm.

Yet, 2022 looked a little different from years’ past. Instead of shortages, shippers often had too much product on hand.

That stretched warehouse capacity to its limits and increased costs for those that couldn’t right size their inventories.

The next twelve months will bring new challenges and opportunities. Here are three trends to watch in 2023.

More supply chain capacity #

Capacity shortages have dominated the supply chain news cycle since 2020. First, it was in freight. Then, warehousing.

Both sectors had more demand than ever but have since cooled due to weaker consumer spending figures. The pandemic’s initial phase boosted freight to highs not previously seen, lasting six consecutive quarters before slowing. In 2022, freight demand fell off as new orders plummeted.

Warehousing also felt a similar demand explosion. After weaker-than-anticipated consumer demand in 2022, retailers and brands had too much product. Bloated inventories ate through warehousing space at a record clip, and the sector was tighter than ever. The industrial vacancy rate hovered at 2.9% throughout the year.

But that tightness will come to an end in 2023. Beleaguered by high inventories, retailers and brands cleared excess stock with promotions this summer and fall. As a result, some of the country’s most coveted warehousing space opened gradually.

In 2023, brands will continue clearing excess stock accelerating capacity easing. Instead of trying to find space at any cost, shippers aim to avoid long-term capacity deals that lock them in at high rates.

Bloated inventories ate through warehousing space at a record clip, and the sector was tighter than ever. The industrial vacancy rate hovered at 2.9% throughout the year.

Consumption deteriorates in 2023 #

The driving force behind the supply chain demand explosion was consumer behavior. During the pandemic, shoppers spent in record amounts.

However, as inflation and recessionary concerns materialize, this trend will revert.

Despite historic Black Friday numbers, November’s retail spending data was weaker than anticipated. The massive boosts from holiday shopping didn’t carry the month’s purchasing numbers, and inflationary concerns did deter shoppers from spending.

These figures are not the first to show signs of a retail slowdown. They are the latest to confirm that even the year’s busiest shopping season isn’t enough to overcome economic headwinds. In 2023, consumers will spend even less.

But there is still some good news for shippers. While consumer spending will slide, it will not fully revert to the pre-pandemic mean. Consumer spending will remain elevated over 2019 levels.

Despite historic Black Friday numbers, November’s retail spending data was weaker than anticipated.

Reindustrialization takes center stage #

After emphasis on near and reshoring during Covid, the trend will take further shape this year. Brands burned by supply chain faults are committed to bringing production-critical parts of their business to North and Central America.

Intel’s US facility investment and Ford’s manufacturing relocation are a few prominent examples of the trend. It will become a more tangible strategy in 2023.

Shippers will bring additional parts of their supply chain closer to their headquarters, reducing lead times and potential for disruptions.

The government will bolster this effort through infrastructure improvement projects. Recently passed legislation will reauthorize surface transportation programs for five years and invest $110B to repair roads, bridges and transformational projects.

Look for more domestic investment to come in 2023.

Shippers embrace supply chain flexibility #

Although more unseen forces could disrupt the supply chain, these predictions show some of the factors shaping the sector in 2023.

After two years of continual disruption, an uneventful four quarters in the supply chain is unlikely. Economic headwinds could force businesses to rethink their operations. They will undoubtedly affect consumer spending.

Instead of trying to predict where and how consumers will spend, leading brands invest in supply chain flexibility.

A flexible logistics model extends the reach of eCommerce fulfillment networks, rapidly replenishes retail locations and responds to supply chain disruptions and changing market dynamics.

Leading organizations develop flexible and scalable supply chain strategies, allowing them to react when uncertainty arises. After years of unpredictability, the only sure thing in 2023 is that there will be more.