June 2023
Thought Logic’s quarterly report, Supply Chain Insiders, offers supply chain leaders key takeaways and considerations based on the latest macroeconomic and supply chain indicators.
This is a refresh of the Supply Chain Insiders Q1 report, with the latest data from April and May. Notations have been provided to confirmed predictions, supplemental insights,
and updated figures.
June 2023 Overview
The key macroeconomic and supply chain indicators in April and May aligned with our assessment.
Global supply chain pressure has continued to decrease to all time lows. Labor availability and costs continue to be challenges with slight unemployment increases contributing.
Consumers have seen inflation continue to rise but at lower rates than last year. Consumer confidence rose higher than expected in June1 and may continue spending patterns due to the outlook of the economy.
Meanwhile, businesses who began communicating “no more price hikes” in Q1 have likely begun to see reduced costs for materials and transportation.
Ongoing cost reduction efforts must be balanced with preparing for future disruption, upskilling and retaining employees, improving supplier relationships, and increasing working capital for the business. These are necessary investments to secure competitive advantage and create
agility for handling disruptions.
Themes to Consider
- Shifting focus from managing disruption to building an agile, adaptable, and aligned supply chain, as overall Supply Chain pressure continued to decrease after quarter one
- Easing inflation and improved consumer confidence may reflect a normalization of transportation demand into the second half of the year
- Take the opportunity to rethink strategies as carrier and supplier leverage is reduced while the consumer market changes and prices recover to pre-pandemic levels
- Consider investing in employee upskilling to improve satisfaction and address potential labor disruptions
Key
Supplemental Insights based on updated figures
Confirmed predictions based on updated figures
Supply Chain Key Indicators
Consumers continue to face increased costs for goods and services, but with inflation raising at lower rates relative to recent periods. Supply chain pressures have decreased from highs in 2020 and 2021 to an all time low in May of 2023 (since being measured 1997). Labor availability and costs continue to be challenges for businesses. Costs of transportation services continued to drop in May, a trend that we expect to continue in 2023 while inflation is high, and global supply chain pressure is low.
MACROECONOMIC
SUPPLY CHAIN SPECIFIC
Global Supply Chain Pressure Index (GSCPI)
June Summary …
The GSCPI continued to trend downward in April and May of 2023. The overall GSCPI value (-1.71) is currently the lowest in the dataset which begins in 1997. Readings for all regions tracked by the index are below their historical averages.
Q1 Considerations:
Shift focus from managing disruption to
managing cost and risk mitigation.
Increase investments in supply chain resiliency, and visibility to prepare for future disruption.
Consumer Price Index Monthly Percentage Change
Source: U.S. Bureau of Labor Statistics
1 Reuters
June Summary …
Inflation continues to rise and has not reached the federal reserve’s target. Higher interest rates appear to be slowing the pace of inflation and easing the burden on consumers.
Q1 Considerations:
Inflation highs may reflect shifts in, or reduction in, demand that affects transportation channels.
Revisit demand planning processes and results to ensure accurate forecasts.
Analyze procurement spend to identify savings opportunities as customers are likely to begin pushing back on further price hikes. processes and results to ensure accurate forecasts.
Supplemental Insight:
The latest consumer confidence index (CCI) data reached the highest level in 1.5 years.1 Consumers are optimistic about the economy and may continue their spending patterns.
Unemployment Rate
Source: U.S. Bureau of Labor Statistics
June Summary …
The labor market remains tight despite the unemployment rate increasing slightly in May. Businesses are still facing increased competition for labor and higher wages.
Q1 Considerations:
Invest in employee upskilling to improve satisfaction and address potential labor disruptions.
Diesel Fuel Monthly Percentage Change
Source: U.S. Bureau of Labor Statistics
June Summary …
The price of diesel remains unstable. After an increase in January of this year, the price has decreased for four months in a row.
Q1 Considerations:
Evaluate transportation networks for consolidation and route optimization opportunities now that capacity has increased.
Increase supply chain visibility to understand exposure to fuel prices and manage risk
accordingly.
As prices continue to fall from the peak, consider challenging surcharges implemented in 2022.
Deep Sea Freight Monthly Percentage Change
June Summary …
Prices of deep sea freight reached all-time highs in 2022 but have decreased each month except for February since September of 2022.
Q1 Considerations:
Work with key international suppliers to develop contingency plan and increase visibility into the supply chain.
Review sourcing/category strategies for opportunities to diversify supplier networks, reduce geographical risk, and build supply chain resiliency.
Truck Transportation Monthly Percentage Change
Source: U.S. Bureau of Labor Statistics
June Summary …
Prices of truck transportation rose significantly in the second half of 2020 through Q2 of 2022. Truck transportation prices have fallen in every month in 2023 and costs have declined in 11 out of 12 months from June of 2022 to May of 2023.
Q1 Considerations:
Review contracts with carriers and look for opportunities to negotiate rates as prices decrease.
Evaluate transportation networks for consolidation and route optimization opportunities now that capacity has increased.
Transportation & Warehousing Services Monthly Percentage Change
Source: U.S. Bureau of Labor Statistics
June Summary …
Prices of transportation and warehousing services rose significantly in 2021 and early in 2022 with some relief in the second half of 2022 and so far in 2023.
Considerations:
Revisit Sales, Inventory & Operations Planning (SI&OP) processes to optimize inventory to further reduce holding costs.
Evaluate distribution networks and strategies for opportunities such as shipment consolidation.
Supply Chain Insiders Authors
David McNeill
Principal Consultant
Atlanta, GA
davidm@thought-logic.com
336-406-7564
Thomas Sobeck
Solution Manager
Atlanta, GA
tsobeck@thought-logic.com
404-884-4971
Spencer Baker
Managing Director, Capabilities
Atlanta, GA
SpencerB@thought-logic.com
470-383-7213
About Strategy + Transformation
Thought Logic’s Strategy + Transformation smartSolution helps businesses navigate organizational transformation through periods of growth and change.
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