Ways to Sustain Supply Chains in a Future Economic Downturn

What’s in an economic downturn, and how can businesses maneuver through this recession to stabilize their supply chain? These are some ideas for what to do in a future economic downturn.

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What’s in an economic downturn, and how can businesses maneuver through this recession to stabilize their supply chain?

After a costly pandemic, businesses were ready to come back in 2022. But companies may be looking at a brutal economic downturn yet again in 2023.

That means decreased demand, lower revenues, the risk of unplanned downtime, material shortages, capacity and labor shortages. Manufacturers are finding risks and uncertainties abound, and the pressure is high to reduce wasted working capital.

On top of that come the equations from the C-suite. Are we in a recession or not? Do we need to reduce headcount to stay profitable? Again, clarity to these questions must come from government heads, industry analysts, and C-suite data. 

Interest rate increases expected to hit global economies in the coming months could once again rock the economy and supply chain balances. As a result, manufacturers may find more excess inventory arising from unstable product availability. This could pressure manufacturers already trying to manage energy and utility costs, raw materials prices, freight and transportation costs and other supply chain elements.

The answer lies in businesses getting smarter about the tools they use to assess risk, manage inventories and deliver results. Manufacturers must seek new answers in new technologies to analyze and stabilize their inventory availability.  

How did the pandemic impact the supply chain?

During the pandemic, consumers made more purchases via e-commerce and found more methods for shopping than previously available. As a result, manufacturers limited their range of products and focused on achieving higher profitability on current inventory levels.

Many enterprises have had to become more agile and flexible with their products and inventory. This especially applies to manufacturers still focusing on resiliency in the supply chain. Lead times are still extended, with some categories showing months-long delays and high variabilities in those supply chains.

Taming both inflation and recession

Today’s business world is mired in an inflationary environment, impacted by higher interest rates, rising costs of goods and labor, and the need to reduce capital spending where possible. The outlook is a tough one. A recent KPMG report found that 91% of CEOs see the United States heading into a stricter recession, with over half of the CEOs considering layoffs over the next six months.

But there are multiple ways to reduce costs in an organization other than headcount. Because businesses can now access data from anywhere and anytime, they can use data efficiency to remove waste in indirect materials and find operational efficiency. The big challenge for businesses is how to make sense of it all.

Strategies to stabilize supply chains

Throughout the pandemic, transportation challenges were acute in supply chains. Unexpected and sudden changes in shipping capacity forced many executives to seek new and better ways to move products across regions.  This anxiety brought the supply chain to the forefront of efficiency and budget discussions. Discussions on strategies to stabilize supply chains became more frequent. That was a necessary escalation. Today, these discussions have evolved into learning how to use new tools to minimize significant software costs.

Because of the impact of the Software-as-a-Service (SaaS) economy, manufacturers can now roll out smaller and more agile projects rather than undertaking giant projects with substantial upfront fees.  New AI applications are built for these faster and more flexible projects that can boost supply chain efficiency.

Data optimization with AI

Manufacturers can avoid layoffs and headcount reductions with artificial intelligence (AI) applications and software tools. By investing in supply chain intelligence software and systems, businesses can maximize value for their overall maintenance, repair and operating (MRO) supplies.

New AI tools can help accelerate the digital transformation of supply chains enabling enterprises to gather their data from various systems and sources and harmonize that data into a process that can bring immediate impact to inventory optimization.

To meet the twists and turns of an inflationary environment, today’s businesses can gather the intelligence they need to provide deep insights into MRO levels to help ensure stabilization in an economic downturn.