Sourcing Strategies and Supply Chain Management 2023

After three turbulent years, global supply chains have eased considerably, freight rates are falling, and the flow of goods is more reliable again. Nevertheless, companies will continue to face challenges in 2023 that need to be mastered strategically. Resilience, agility and transparency remain significant goals. So does reconciling cost efficiency, performance, safeguarding and sustainability. We discuss six trends to show which strategies are gaining importance in sourcing, what is fueling their implementation, and what synergies digital solutions promise. 

1. Risk management and transparency
2. Digitization and technology
3. Cooperation, collaboration and supplier management
4. Sustainability and the environment
5. Diversification of the supply chain
6. In-Sourcing

1. Risk management and transparency

The targeted management of sourcing risks remains the superior objective. These risks include anew supply chain disruptions, severe weather events in the local region, and human rights violations by suppliers. But they also include economic losses due to inefficient logistical handling or miscalculations in warehousing, such as the bullwhip effect. Strategically, procurement and supply chain management have evolved from the pure pursuit of high-performance supply chains towards secured processes and the ability to react quickly to disruptive events.

In a nutshell: These disciplines should be as efficient as possible, as secure as necessary. The most important prerequisites for successful risk management in the supply chain (SCRM – Supply Chain Risk Management) are therefore flexibility and transparency in the supply chain network, for which a good cooperation between all players is also becoming increasingly important.

Related articles:

• SC Risk Management: Here’s why a holistic approach pays off
• SCRM: “Ensuring delivery capability even in times of global crisis”

2. Digitization and technology

A high degree of digitization within the supply chain is the best way to achieve end-to-end transparency. The better companies, suppliers and logistics partners are linked technologically, the more detailed each individual stage of the value chain can be managed, from raw materials and goods production to sales and disposal or recycling. In this way, companies not only reduce their risk potential, they also increase efficiency and effectively monitor their sustainability goals – a clear synergy of a successfully digitized supply chain. Cloud and platform technologies offer great potential for cross-company collaboration. Medium-sized companies in particular benefit from these resource-saving solutions.

Related articles:

• Optimizing freight management with SCM software
• Future of logistics: “Taking supply chain management to a new level”
• Procurement and logistics: Greater efficiency through the use of technology
• Flexible, secure, efficient: Key advantages of cloud use in scm

3. Cooperation, collaboration and supplier management

Intelligent supplier management is gaining in importance. By selecting, qualifying and developing their suppliers, companies lay the foundation for efficiency, transparency and progress. For example, the digitization projects necessary for improved control can only be implemented if companies, suppliers and logistics service providers participate. Good cooperation in implementing technologies and a willingness to share data are essential. If this succeeds, the way is paved for increased collaboration. The fact that collaborative cooperation has a positive impact on efficiency in the supply chain is confirmed by the majority of companies surveyed for the 17th Hermes Barometer “Collaboration in the Supply Chain”.

Related articles:

• ISO 9001 supplier evaluation: Benefits of certification
• Collaboration in the supply chain: Great potential versus numerous obstacles

4. Sustainability and the environment

The implementation of ESG criteria in the corporate strategy as well as their monitoring and documentation are becoming increasingly important. This includes respecting human rights, controlling CO2 emissions in manufacturing and logistics processes, and reducing the risk of production stoppages and transport barriers caused by floods, heat events, or storms. Here, too, digital transformation promises synergies: Digital risk mapping and intelligent CO2 tracking are successful methods for keeping track of the environmental impact on the supply chain on the one hand and the sustainability of production and transport on the other. Modern production methods such as 3D printing processes or circular economy approaches can also contribute to greater sustainability.

Related articles:

• German Supply Chain Act 2023: “SMEs and suppliers are also affected”
• How can companies reduce their CO2 emissions in the supply chain?
• Sustainability in supply chain: “Don’t be afraid to ask”

5. Diversification of the supply chain

When it comes to their global production and procurement, companies are striving to become more independent from individual regions, countries and their risk potentials. For this reason, the diversification of the supply network is increasingly being considered, in the course of which manufacturing processes are being relocated and a higher geographical spread and/or an increase in the number of suppliers is being sought. Triggered by recurring lockdowns in China, for example, a shift in procurement to India and Pakistan was observed in 2022. Vietnam is also noteworthy among the emerging regions in Asia. However, re-shoring and near-shoring efforts – the shift back to geographically closer regions in the European region – were also clearly evident in 2022. In this context, the primary choices were the Eastern European production sites, which are cost-efficient by European standards, and Portugal.

Related articles:

• Diversification of the supply chain as a procurement strategy
• Dual Sourcing: Advantages and disadvantages of diversified procurement
• Quality production in southern India: The up-and-coming Chennai site

6. In-Sourcing

Further, one of the important strategic considerations is to reintegrate previously outsourced manufacturing steps into the company’s own operations. In addition to vertical integration of suppliers, in-sourcing enables the highest level of control over all steps of production. The vertical integration of manufacturing also makes it possible to strengthen the innovative power of one’s own company, implement digital strategies and sustainability goals more quickly, and monitor risks in a more targeted manner. As with re-shoring, this is countered by increased costs. Accelerated digital transformation can provide more transparency, flexibility and controllability – and thus increase efficiency and reduce costs.

Conclusion: Cooperation, transparency & digitization are gaining in importance

Risk control, efficiency and the implementation of sustainability goals require increased transparency and intensive cooperation between all actors in a supply chain, from purchasing to production to goods transport. Sustainable relationships and communication are gaining importance as they improve exchange and contribute to transparency. At the same time, in a loopback effect, the increased visibility enables the improvement of cooperation by allowing shared access to data and thus a cross-company view of the supply chain. Therefore, driving digital transformation should be seen as a key success factor for further innovation in the supply chain – technologies enable collaboration, efficiency gains and risk reduction.

As an innovative logistics service provider with smart supply chain solutions, Hermes International intends to increasingly respond to this development and optimally support its customers as a tech-driven forwarder.

More information about the next level of digital transformation:

• Future of logistics “Taking supply chain management to a new level”
• “My focus for the future lies on digital transformation”