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Amid a backdrop of rising inflation, establishing a resilient supply chain is key to weathering the storm.

The cost of living is rapidly rising in Australia and around the world. With the price of household goods, energy and materials soaring, how can supply chains navigate the current financial pressures and mitigate risk in such a disruptive environment?


Inflation in developed economies has been on the rise for the last two years, fuelled by strong demand, disrupted supply chains and geopolitical crises. Prices for food, housing and goods have risen sharply, while shipping costs have hit unprecedented levels.


The latest data from the Australian Bureau of Statistics confirms that Consumer Price Index (CPI) inflation reached 7.3% in September – the highest figure since 1990[i]. The quarterly and annual increases are the largest since the introduction of the Goods and Services Tax (GST) more than 20 years ago.


For, supply chain and logistics professionals, inflation has severely affected their operation. Impacts include capacity constraints as well as rate and price increases, supply chain instability, longer lead times and delayed orders. Many have attributed recent price increases to the rise in the cost of energy, the cost and shortage of labour, food inflation, port congestion, an increase in the cost of fuel and Russia’s invasion of Ukraine.


On top of all of that, the extreme weather in Australia has affected internal supplies adding further upward pressure on prices. This turmoil has led to huge supply chain disruptions - forcing everything to become significantly more expensive.


The big boardroom buzzword


Throughout the pandemic, resilience became the big boardroom buzzword. While it may cost businesses more to promote supply chain resilience in the short term, the long-term benefits are exponential. Research has shown that during the last financial crisis in 2008, companies that managed to stay resilient through that time outperformed their peers for the next decade[ii].


Covid-19 demonstrated the importance of our supply chains being resilient – not just in terms of speeding up the supply chain as demand increases, but also having a wide range of transportation options when faced with disruption.




People and planning: the perfect pair


Planning ahead intelligently is a big part of supply chain resilience, but economic uncertainty is making this even more of a challenge. There has been a lot of policy discussion on infrastructure and equipment upgrades but investing in digital infrastructure and by hiring digitally engaged people is key to the future success of our supply chains.

The combination of an upskilled workforce and data-driven technology will underpin a more resilient supply chain for years to come. The perfect pair of people and technology will not only help companies manage the inflation rates we are facing today, but also support future innovations to drive supply chain growth.


But where are the workers?


With businesses struggling to get back to pre-Covid profitability, wages in the sector have failed to rise in line with inflation, and people are looking elsewhere for work. Today’s labour shortages have played a big role in causing disruptions within the supply chain.


The number of people working within our warehouses and the number of truck drivers on our roads has declined at an alarming rate. Many of these jobs were previously filled by temporary or seasonal workers, and the absence of local or migrant workers continues to impact the supply chain. Persistent problems with port congestion and import containers have been exacerbated by a lack of labour availability and we must begin to find ways to  attract, train and retain a new generation of supply chain professionals.




You can’t improve what you can’t measure


One way companies can mitigate risk is by using data analytics and artificial intelligence to uncover possible disruptions caused by rising inflation. Digitising your logistics operations allows you to monitor the performance of your supply chain and identify areas of concern before they get out of hand. Supply chain managers will be able to improve their stock visibility, logistics planning and cut production costs in order to remain competitive.


Many businesses are adapting their strategies to the changing operating landscape. Technology allows a business to map and measure its supply chain more accurately. Accurate and in-depth data can more clearly identify problem points along the chain, allowing businesses to mitigate that risk and make their chain more resilient.


A shift to nearshoring


The pandemic created a push to support local businesses and that sentiment has stuck around. Today, Australians better understand the value in spending their money at smaller, more localised businesses and there’s a sense of pride in doing so. Research shows that almost one in four businesses are purchasing more from Australian companies to overcome supply chain problems rather than importing from overseas[i].


Despite the major challenges of continuing supply chain issues and rising costs, most businesses that we work with maintain a positive outlook regarding purchasing plans and a lot of that is because of the interconnected nature of Australian supply chains.


Weather the storm


The reality is that inflationary markets are here to stay through the first half of 2023, and it is time for the supply chain industry to act. Inflation has led to higher costs across a whole range of resources. It’s impacting labour, energy, production and logistics services.


However, inflation has been just one of several contributing factors behind supply chain disruption over the course of the year. Ever since Covid-19, a number of issues have come together from every direction to pose challenges to our supply chains.


As we witnessed through the pandemic, businesses were able to think creatively and shift their offerings to ensure they stayed afloat through an intensely dark period. We’ve experienced bushfires, floods, a global pandemic and war. To say it’s been a tumultuous period would be underplaying the chaos of it all.


More of the same uncertainty is expected in 2023, and amid a backdrop of economic uncertainty, promoting flexible and resilient supply chains will be key to weathering the storm. In the wake of increasing disruption from port closures, inventory issues, and labour shortages, only businesses willing to embrace big-data, digitisation and future technologies will succeed. For those still unprepared, the transition to supply chain resilience must start today.



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