Right now, the world is experiencing a significant economic slowdown as a result of the war in Ukraine, skyrocketing energy prices, high inflation, and interest rate hikes. But in many ways, a looming global recession means a boom for supply chain development.
Yes, I understand that the economic slowdown has both reduced the supply of many goods and may reduce both market demand and corporate profit margins. But after several years of growth and high profits, many companies have well-stocked coffers that give them the freedom to invest in the technologies and developments that can boost their operations in the short, medium, and long term. Investing in efficiency, technology, and expertise—that is, in future competitiveness—is a classic strategy for emerging from a downturn in an even stronger position when the tide turns.
Right now, we see that all kinds of logistics technology—”logtech” in the broad sense—are highly attractive areas for investment, including: software/cloud services, warehouse automation, autonomous vehicles, IoT, robotics, digitalization, electrification, and services that drive efficiency, sustainability, quality, agility, and resilience. The economic slowdown also creates better conditions for reviewing, strengthening, and redesigning existing processes and partner networks in the supply chain.
Time for Change
When market conditions become more challenging, there is both a greater need and more opportunity to take action and make changes that reduce costs in the short term while increasing the business’s productivity, efficiency, customer service, and flexibility in the long term. Many of the aforementioned technology areas also help mitigate the effects of the widespread labor shortage in logistics and supply chain management—a shortage that is not expected to decrease dramatically even as the economy slows down.
Grow While Reducing Staffing Needs
In October of last year, the research firm Gartner released a report estimating that IT spending in 2023 will increase by an average of 5.1 percent. The areas expected to see the greatest growth are software (11.3 percent) and IT services (7.9 percent). In the report, Gartner’s renowned analyst John-David Lovelock notes that the biggest shift in investment is that it is expected to be directed specifically toward technologies that help companies grow without having to hire more staff.
Sweden's flagship sport
Swedish companies have a long tradition of early adoption of various technological opportunities that drive productivity, counteract high labor costs, and ensure global competitiveness. Here, the ongoing slowdown in the global economy will hopefully create increased demand for further technology and development initiatives in the supply chain—initiatives that will give companies a head start when the economy turns upward. Because beyond the threatening clouds, blue skies always await. That is why it’s important not to drop anchor and remain stationary, but rather to adjust the sails, set a course, and navigate toward the high pressure ahead.
In the latest issue of SCE (No. 1/2023), the theme is Sustainability, Risk, and Resilience in the Supply Chain – a highly relevant area where investments of the type described above are absolutely crucial to successfully building agile, sustainable, and resilient supply chains that meet the demands of both today and tomorrow.
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Stefan Karlöf, Editor-in-Chief of Supply Chain Effect
