The global supply chain, having weathered the immense impact of the COVID-19 pandemic, now stands at a complex and critical juncture of transformation. The crisis exposed systemic vulnerabilities in existing supply networks, prompting profound reassessment of traditional models. A joint report by the Association for Supply Chain Management (ASCM) and KPMG provides valuable insights into emerging trends, persistent challenges, and future directions for supply chain management.
Supply Chain Stability Index: Elevated Volatility and Recovery Challenges
The KPMG Supply Chain Stability Index, which evaluates freight, labor, and inventory metrics, reveals continued turbulence despite gradual market normalization. The index registered 1.7 in Q1 2023—only slightly below Q4 2022's 1.88 (where 1 indicates complete stability). This follows mid-2022's peak near 2.9, reflecting unprecedented strain.
Douglas Kent, ASCM's Executive Vice President of Strategy and Alliances, observes that current supply chain volatility remains nearly double pre-pandemic levels. He emphasizes that beyond numerical indicators, organizations must account for increasing disruptive events—from cyberattacks and port labor disputes to climate-related disruptions like Quebec wildfires affecting transportation networks.
Freight Markets: Asian Route Price Collapse and Nearshoring Trends
Maritime shipping rates from Asia plunged 27% this quarter, while airfreight costs halved—returning to pre-pandemic levels. This reflects both post-pandemic demand normalization and strategic supply chain diversification through "China+1" policies. Notably, Mexico now accounts for 15% more U.S. imports than China, with Canada exceeding Chinese imports by 5%. Correspondingly, outbound shipments to Europe and Asia declined 26% and 6% respectively.
While nearshoring reduces certain risks, Kent warns of unintended consequences in labor markets as production shifts to North America. Domestic U.S. trucking rates fell 13% this quarter, with intermodal transport dropping 12%—signaling broader logistical realignments.
Labor Markets: Persistent Talent Shortages Amid Reshoring
Transportation sector job vacancies demonstrate volatility twice pre-pandemic levels, with unemployment gradually rising from 3.7% in October 2022 to 5%. Manufacturing vacancies have decreased 30% since Q2 2022, though employment remains 42% above pre-COVID levels.
Geopolitical factors and legislation like the CHIPS Act are accelerating reshoring, yet Kent questions whether sufficient skilled labor exists to support semiconductor manufacturing repatriation—highlighting critical workforce development needs.
Inventory Management: From Just-in-Time to Strategic Buffers
The pandemic's supply shocks have driven fundamental reevaluation of lean inventory strategies. Wholesale inventory-to-shipment ratios approach pre-pandemic norms, while manufacturers increasingly maintain buffer stocks—with some ratios doubling historical levels. Unfilled manufacturing orders grew 8% this quarter as production schedules stabilize.
Retailers balance existing inventory sales against order cancellations and delivery delays, with resulting margin pressures prompting cost-cutting measures including workforce reductions and store closures.
Future Outlook: Sustained Uncertainty Demands Resilience
Kent anticipates prolonged supply chain instability, noting surprising Q1 data showing historic import shifts from China to North American partners. While current freight capacity appears adequate, he cautions that singular events—port closures, canal blockages, extreme weather, or geopolitical incidents—could rapidly escalate volatility.
Cyber risks and climate-related disruptions present particular concerns, with wildfires exemplifying growing climate threats. This complex risk landscape demands comprehensive mitigation strategies.
Building Resilient Supply Chains: Strategic Recommendations
Key resilience-building measures include:
Network Diversification: Reduce single-source dependencies through multi-regional supplier networks and production footprints.
Risk Management Frameworks: Implement systematic identification, assessment, and mitigation processes for supply, demand, operational, and compliance risks.
Digital Transformation: Leverage IoT, blockchain, and AI-driven analytics for enhanced visibility, predictive capabilities, and operational efficiency.
Workforce Development: Invest in specialized supply chain education and training programs to address talent gaps.
Sustainability Integration: Incorporate environmental and social responsibility metrics into supply chain decision-making.
The path forward requires continuous adaptation as supply chains evolve toward greater adaptability, intelligence, collaboration, and sustainability. Organizations that proactively strengthen these dimensions will be best positioned to navigate ongoing disruptions and capitalize on emerging opportunities.