Supply chain disruptions are likely to continue into the first quarter of 2024. While some severe pressures from the pandemic are starting to ease, there are still many global supply chain obstacles business owners should keep their eyes on. As we all know from the last 3 years, we need to be proactive and not reactive. Prepare your business for growth with a strategy in your purchasing practices.
Various outside forces have disrupted supply chains since the pandemic. High demand and bottlenecks have slowed international trade, the pandemic has transformed the workforce and exacerbated labor shortages, and new policies and regulations have changed the landscape for logistics companies along with companies that work in the home services trades.
There are some positive signs. The New York Federal Reserve's Global Supply Chain Pressure Index, a global measure designed to identify supply chain disruptions using a range of indicators, is at 1.0 as of December 2022, down from a pandemic high of more than 4.0 in 2021. Additionally, freight rates and shipping container rates are in decline, a sign of slowing demand and an easing of port congestion.
Still, there are many major disruptions to supply chain operations expected for 2023 weather, climate change and regulation changes just to name three. Here's what to look out for and how you may plan.
Use technology to help with infrastructure issues.
Infrastructure challenges continue to be a massive problem for supply chains. The government passing a infrastructure plan, which passed in November 2021 and aims to refurbish the nation's ports, rail networks, roadways, and bridges, will take years to come to fruition. Labor experts and economists say there are simply not enough skilled workers to complete the agenda any time soon.
In the meantime, existing issues are worsening. Global infrastructure and technology incidents, like power outages, rose 111 percent from 2020 to 2021. New data also found infrastructure failures continued to climb last year and were up over 200 percent in the first ten months of 2022 in the Midwest.
In this environment, businesses will need to rely on technology more than ever -- specifically, predictive analytics, A.I., and other forecasting software can help businesses determine when shifts will occur. As the ServiceTitan platform expands you will be in the driver’s seat with AI and being able to use the analytics that will be available. Just think of having the data on over seven thousand contractors and what the trends tell you.
When disaster strikes, businesses that have these processes in place will be better positioned to react to whatever comes their way. Remember though do not pigeonhole yourself to one brand or one distributor. Develop those relationships so that your business is the least affected.
Make sure you understand your climate impacts.
New regulations and consumer demands are pressuring many companies, especially heating and air and plumbing companies, to measure and disclose their sustainability practices.
The U.S. Securities and Exchange Commission now requires public companies to include climate-related disclosures, including risks associated with climate change, in their annual reports. As part of the issuer rule, companies must disclose emissions they are responsible for, as well as emissions from their supply chains and products. For all the trades this means additional expense in training your trades people along with increase cost of equipment
The SEC currently indicates "final action" on climate disclosure will be made in April 2023, although smaller companies will have until 2025 before they need to comply. While most private companies won't be required to report on climate-related information, they will need to do so if they fall within a larger company's value chain. This means all franchised concepts in the trades will have to come into compliance whether they are owned by the parent or an individual.
Pay attention to duties and tariffs.
During the pandemic, the U.S. government lifted duties and tariffs on internationally manufactured products that could not be produced domestically. Those duties and tariffs are now back in play, and companies must account for the additional cost. This can affect your final retail pricing. This also will affect your profitability if you are not watching these.
Prepare yourself and be proactive to keep growing and delivering the customer service ALL your clients deserve. Remember even though you are in the trades the real business you are in is bringing an every person's life back to normal.
