Opinions expressed by Entrepreneur contributors are their own.
The world faces a paradox as the economic cycle moves into a recession. Statistically, we’re seeing a very high employment rate, yet there’s a shortage of skills and labor. In the U.K., these issues are particularly prevalent due to Brexit, as it’s curbed the influx of skilled laborers into the country. As a result, economic growth is stifled, compounding the problem of inflation and the rising cost of living. A transition to 2023’s economy will consistently fulfill these intricately connected components.
The lasting impact of inflation
The combination of inflation and a shortage of skilled labor led to a profound economic shock with sharp increases in the cost of utilities, fuel and food. Fortunately, price hikes have begun to settle. For instance, while the cost of shipping a container from China reached a peak of $20,000 during the pandemic, it’s returned to a comfortable $3,000.
When consumers hear news of these price corrections, it’s reasonable for them to assume a reduction in the cost of goods will soon follow. Unfortunately, as procurement experts know all too well, moves have already set the dominoes in motion. Businesses were still tasked with transporting goods when prices were at an all-time high, meaning the supply chain and the economy continue to feel the impact; however, this is expected to dissipate toward the end of 2023.
Related: 5 Ways of Effectively Navigating Supply Chain Disruptions
Investing in certainty
Historically, we’ve seen periods of rigorous negotiation before. The trouble is, it’s not simply an issue of cost this time. We face shortages of critical supplies — like the semiconductors needed by car manufacturers to build vehicles — which changes the game entirely.
Unlike in years past, entering the new year with a focus on procuring items for the lowest cost isn’t going to be an effective strategy. Supply chain issues and logistical costs compound budgeting issues for procurers.
After all, a low price means nothing if your purchase orders aren’t consistently fulfilled — instead, the people who thoughtfully balance price with surety and security will come out on top.
Related: 5 Reasons Procurement Should Be In Consideration For Your Startup
Back in 2019, there was a significant push to prioritize sustainability in the supply chain. From making environmentally-conscious decisions to incorporating social access and inclusion goals, companies took tremendous strides to uphold critical Environmental, Social and Governance (ESG) commitments. Unfortunately, necessity placed many sustainability themes on the back burner during the height of the pandemic.
When Covid-19 emerged, business owners made great sacrifices, including specific goals like ESG commitments. Even now, many businesses grapple with the challenges of an unstable economy, but we can’t continue to treat sustainability as an option.
A recent study shows that today’s customers care more about a brand’s social consciousness than the cost of a product or service. The findings clearly illustrate a multi-generational willingness to spend more for sustainable products.
Furthermore, this generation of shoppers favors brands that represent their values, making ESG efforts imperative for today’s businesses.
Organizations must find ways to respond meaningfully to these macro themes, despite all else that is happening. While it might not seem like a pressing issue to some, committing to ESG is an investment worth making in the coming year.
Leveraging and automating
When it comes to efficiency and production, the skills shortage will continue to impact our economies in various ways. However, it’s up to businesses to find ways to ease the burden, which will likely entail the adoption of additional technology. Companies will continue to automate tasks, but at an accelerated rate, allowing them to shift the human labor they do have into areas where their time and talent are better leveraged.
We already see these changes at scale. For instance, at the airport, you no longer have multiple personnel standing around to check long lines of passengers and passports; now, there’s a designated location to scan them yourself.
Meanwhile, administrators moved those employees to other critical areas of operation that couldn’t automate. Likewise, more grocery stores are adopting self-checkout so workers can shift from registers to stock rooms. Across industries, this shift is already in motion.
Related: Using Tech to Build Supply Chain Resilience in a Changing World
Retraining and developing
As more businesses reallocate the human labor available, we also see more significant investment in that workforce. For instance, if a company has a reliable team hired for one job and is now needed to do another, it will require training to develop the necessary skills to perform well in its new role.
It’s expected that more businesses will retrain their existing workforces 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 sessions alone.
For business owners who are tired and frustrated after two trying years, 2023 holds more opportunities than dangers. In this market, you need to be on the offensive and plan for making “no-regrets” decisions that will push your company forward.
Ensure you anchor 2023 in an ambitious agenda phase to manage any potential downsizing risk. If you can do that, your team can indeed come out on top.