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The world is facing a paradox as the economic cycle enters a recession. Statistically, we see a very high employment rate, but there is one skills and labor shortages. In the UK, these problems are mainly due to Brexit, which has curbed the influx of skilled workers into the country. As a result, economic growth is stifled, exacerbating the problem of inflation and the rising cost of living. A transition to the 2023 economy will consistently satisfy these closely interrelated components.
The lasting impact of inflation
The combination of inflation and a shortage of skilled labor led to a deep economic shock with sharp increases in the cost of utilities, fuel and food. Fortunately, the price increases have started to level off. For example, while the cost of shipping a container from China peaked at $20,000 during the pandemic, it has bounced back to a comfortable $3,000.
When consumers hear news of these price corrections, it is reasonable for them to assume that a reduction in the cost of goods will soon follow. Unfortunately, as procurement experts know all too well, movements have already set the dominoes in motion. Businesses were still tasked with moving goods when prices were at an all-time high, meaning the supply chain and economy continue to feel the impact; however, this is expected to disappear by the end of 2023.
Related: 5 ways to effectively deal with supply chain disruptions
Invest in security
Historically, we have seen periods of rigorous negotiation before. The problem is that this time it’s not just a matter of cost. We are dealing with shortages of critical supplies – such as the semiconductors that automakers need to build vehicles – which completely changes the game.
Unlike in years past, entering the new year with a focus on purchasing items at the lowest cost will not be an effective strategy. Supply chain issues and logistics costs exacerbate budgeting problems for buyers.
After all, a low price means nothing if your purchase orders are not fulfilled consistently – instead, the people who carefully weigh price against security and safety will come out on top.
Related: 5 reasons to consider procurement for your startup
In 2019, there was a lot of pressure to prioritize sustainability in the supply chain. From making environmentally conscious decisions to incorporating social access and inclusion goals, companies have taken huge strides to uphold criticism Environment, Social and Governance (ESG) obligations. Unfortunately, necessity has put many sustainability issues on the backburner during the height of the pandemic.
When Covid-19 broke out, entrepreneurs made huge sacrifices, including specific goals such as ESG commitments. Even now, many companies are struggling with the challenges of an unstable economy, but we cannot continue to see sustainability as an option.
A recent research shows that today’s customers care more about the social awareness of a brand than the cost of a product or service. The findings clearly illustrate a willingness of several generations to spend more on sustainable products.
In addition, this generation of shoppers prefer brands that represent their values, making ESG efforts imperative for today’s businesses.
Organizations need to find ways to respond meaningfully to these macro issues despite everything else that is happening. While it may not seem like a pressing issue to some, a commitment to ESG is an investment worth making over the next year.
Utilize and automate
When it comes to efficiency and production, the skills shortage will continue to affect our economies in different ways. However, it is up to companies to find ways to lighten the burden, which will likely involve the adoption of additional technology. Businesses will continue to automate tasks, but at an accelerated pace, allowing them to shift the human labor they have to areas where their time and talent can be put to better use.
We are already seeing these changes on a large scale. For example, at the airport you no longer have several staff members who have to check long queues of passengers and passports; now there is a designated location to scan them yourself.
Meanwhile, administrators moved those workers to other critical work areas that could not be automated. Likewise, more supermarkets are adopting self-checkout, allowing employees to transition from checkouts to warehouses. This shift has already started in all sectors.
Related: Using technology to build supply chain resilience in a changing world
Retrain and develop
As more companies reallocate available human labor, we’re also seeing greater investment in that workforce. For example, if a company has hired a reliable team for one task and now needs to do another, it will need training to develop the necessary skills to perform well in its new role.
More companies are expected to retrain their existing workforce in the coming year, which may have a small impact on the current skills shortage. However, European countries with shrinking populations will not solve the labor shortage with corporate training alone.
Takeaway meals at the end of the year
For entrepreneurs tired and frustrated after two difficult years, 2023 offers more opportunities than dangers. In this market, you need to be on the offensive and plan to make “no regrets” decisions that move your business forward.
Make sure to anchor 2023 in an ambitious agenda phase to manage any downsizing risks. If you can do that, your team can indeed come out on top.