As we look ahead to 2023, it is worth reviewing 2022 briefly. 2022 was a challenging year for all of us! Getting back to normal was issue number one for last year, many businesses struggled due to many unexpected events worldwide and planning and risk mitigation were extremely complicated. Will it be the same in 2023? Are we going to get back to normal business-wise? What are the trends that are going to shape the business this year? And what challenges should we be aware of? These were some of the questions we had the pleasure to discuss with the procurement guru Dr. Marcell Vollmer at the beginning of 2023!
Look at the podcast and enjoy the insightful discussion of Dr. Marcell Vollmer and Andreas Zimmermann, Founder & CEO of mysupply.
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2022 was meant to be the year businesses got back to normal after the disruption caused by Covid-19. Companies were planning to mitigate supply chain shortages and were feeling optimistic. Unfortunately, shortly after the year started, the Russia-Ukraine war began resulting in more problems for businesses. Energy shortages increased, coupled with high inflation, making it difficult for businesses to plan ahead. The pandemic has pushed us to our limits, and now this war adds another layer of complexity. Despite the obstacles, businesses must remain resilient and resourceful to navigate through these difficult times.
Marcell believes that the outlook is difficult to predict, but fortunately, the price of energy is going down again. He hopes the mid-to-long-term impact on energy costs will not be too severe in Europe. We must continue to leverage globalization and get our logistics and supply chains under control. On the procurement side, we must find a way to manage the high inflation experienced at the end of last year, so that price increases don't affect our business too heavily. “Technology can help us get more market insights, overcome shortages, and collaborate with suppliers to ensure our supply chain is secure.”, shares Marcell.
Despite the unexpected disruption, Andreas believes that procurement still has a very clear focus on ensuring sustainable practices. Business security remains a key concern, and there are ongoing changes to ensure the best possible outcomes. Are companies now more willing to invest in sustainability initiatives, even if it involves greater costs? We recognize the importance of sustainability and understand that it cannot be achieved for free. Therefore, we believe that companies are increasingly recognizing the need to allocate resources to sustainability initiatives, to remain competitive and to meet customer demand, comments Andreas.
Marcell elaborates that ‘we only have one planet, and we need to take care of it.’ At the beginning of the year, he would have supported its prioritization, but the Russian-Ukraine war has changed that, and now energy shortages caused by the Russian gas and oil reduction are the higher priority. However, he hopes that will change and we will focus on the United Nations' 17 Sustainable Development Goals. In procurement, businesses need to ensure sustainability standards and the Supply Chain Act as well (especially in Germany, where companies with more than 3000 employees must comply to this rule, or 1000 in the near future). While the focus has temporarily shifted, sustainability should remain a priority to ensure sustainability in business. Enterprises are becoming increasingly aware of the importance of sustainability and the liability that comes with it. To keep up with the pending European CO2 price and comply with the regulations, businesses must prioritize sustainability this year. By leveraging global and local aspects, they'll be able to assess their pricing and sustainability better. However, they must also consider the economic implications of pricing and globalization benefits and be willing to pay more for sustainability. This shift of mindset towards sustainability is not only encouraged by European regulation but also has economic implications, making it more than just greenwashing. Businesses need to take sustainability seriously if they want to remain competitive in today's market. As an example, the plastic package of Argentina-grown pears being shipped and packaged in Thailand illustrates the power of global logistics and the importance of considering transport costs when making decisions. The COVID-19 pandemic has had an immense impact, with container costs jumping from 2000 US dollars to 20,000 US dollars at its peak. Enterprises must factor in these costs when planning their operations, or risk paying more. Additionally, when deciding on transportation, enterprises should factor in the additional cost of CO2 emissions and weigh it against the cost of shipping a product across the globe. To make the most cost-effective decision, a more in-depth assessment of local suppliers should be performed to compare all costs, including emissions. Taking sustainability into account can help enterprises remain competitive and cost-effective in the long run. Marcell believes that by doing so, companies will be able to make informed decisions and use their resources more efficiently.
Andreas mentions the significant difference between SMEs and large corporations when it comes to adopting sustainability and digitalization standards in procurement. It seems that, in SMEs, everyone who can walk is responsible for carrying a bucket of water and taking care of the supply chain. This means that there is very little room for advancement and progression in terms of procuring digital solutions to drive their business forward, says Andreas.
Marcell believes that large enterprises must prioritize customer service and meet expectations of price and standards for success. Transparency in production and packaging is now expected. Smaller companies have an advantage due to simpler supply chains and quicker decision-making. Enterprises must differentiate customer demands and focus their business on success.
To summarize, sustainability will be a key focus this year again. In business, the differentiation between corporate and medium-sized companies is an important consideration.
What other topics or trends should we be aware of?
As far as Marcell’s expertise is concerned, he points out 6 important topics for 2023:
1. Economy returning to pre-crisis levels.
2. Change in interest rates impacting capitalization and liquidity.
3. Need to secure business and keep the supply chain running.
4. Seeking new ways to save energy and manage the current energy situation.
5. Sustainability is driven by regulation, e.g., German supply chain act.
6. EU regulations and customer demand driving sustainability.
Talking about trends and predictions, it is important to mention the procurement startups. The startup world is always looking for what is trending in the market and digital solutions. Autonomous sourcing, data-driven CO2 emissions, sustainability scoring, and certificates are all hot topics for businesses, mentions Andreas. Enterprises should stay up to date on what is new, innovative, and trending in the market.
Marcell considers that businesses could embrace digital transformation in procurement and tap into innovative tools to improve sourcing, P2P and risk management, as well as sustainability. With six major software solution providers and 33B invested in startups, investments in strategic sourcing solutions are increasing - allowing for early alerts and market insights to better manage supply chain disruptions. For example, by connecting a warehouse management system to a procurement system, companies can automate tedious tasks associated with inventory management, says Marcell. Leveraging these insights from the market enables them to better plan for risk mitigation, drive sustainability initiatives, and support better decision-making - ultimately leading to increased profitability and a more resilient supply chain.
We all hope 2023 will be a good one! The market environment is constantly shifting, and if companies are to remain competitive, it is essential to continually review and revise the organization’s objectives and strategy. Embracing digital solutions is a key factor in staying up to date with these changes and allowing businesses to stay ahead of the curve. By leveraging the latest technologies, companies can make sure that they are taking advantage of opportunities in the market, assessing new trends and evolving existing strategies. Digital solutions help businesses to become more efficient and productive, allowing them to save time, resources, and money, while better-mitigating risk with the help of data-driven decision-making.
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