DispatchTrack report finds operational costs, inflation, inventory continue to vex supply chain

The supply chain is getting better. Except for those that work in the supply chain.

A new survey conducted by DispatchTrack and released exclusively to Supply Chain Management Review ahead of its public release found that 72% of supply chain professionals said they are still facing significant challenges in their operations, with high fuel costs, inflation and various delays beyond their control topping the list.

And there is no end in sight, at least in the near term, respondents said.

“The current economy is definitely having an impact on businesses and creating a wide range of supply chain challenges. That’s why it’s never been more important for businesses to deliver an excellent customer experience and preserve customer loyalty. Compromising service just isn’t worth it,” said Satish Natarajan, DispatchTrack co-founder and CEO. “Investing in the right systems and technology is absolutely key to being more cost-efficient while staying customer-centric. Ultimately, that’s key to weathering supply chain challenges.”

The Supply Chain Perspective Report was conducted online via SurveyMonkey from April 11 through May 2, and features responses from 101 logistics professionals representing a variety of industries, including furniture and appliances, 3PLs, medical, and auto parts. Employee size ranged from some of the smallest to some of the largest firms. The report explores supply chain challenges organizations are facing today and how supply chain leaders are thinking about the year ahead.

DispatchTrack provides last-mile delivery solutions through a software-as-a-service platform.

What the DispatchTrack respondents are describing is being seen in other data points. On Tuesday, the New York Federal Reserve said its Global Supply Chain Pressure Index decreased in May, falling to negative 1.71 from negative 1.32 in April, representing a significant drop for the index. Meanwhile, China reported exports dropped 7.5% in May versus analyst estimates of 1.8%, suggesting global demand remains extremely muted.

Some of that demand could be due to bloated inventories that remain a problem for some businesses. The DispatchTrack survey found that one in four businesses (26%) are still dealing with an oversupply of goods. On the flip side, about one in three (30%) say that they are still dealing with inventory shortages.

While U.S. consumers are seeing inflation cool a bit, with the Consumer Price Index falling to 4.9% at the May 10 release (the May number is scheduled to be released on Tuesday), supply chain professionals still see inflation as a challenge.

Even with a relatively strong labor market, with unemployment in the 4% range in May, rising only slightly from 3.7% in April, the vast majority (62%) of respondents expect operating costs to rise to between 10% and 20% higher this year than in past years. Another 17% expect costs to rise between 25% and 50%. To keep up, 4 in 10 businesses plan to increase fees and 12% are limiting warehouse space due to rising interest rates.

Yes, the majority of businesses remain positive about the future. Sixty-one percent of respondents reported a positive business outlook for 2023, and 57% expect to accelerate technology adoption. More than half (55%) plan to hire more drivers and increase delivery capacity. Those findings track with a previous Boston Consulting Group survey of CEOs across all businesses. That survey found that while 73% of CEOs expect macroeconomic uncertainties to be a key challenge this year, 79% maintained an optimistic outlook for their company’s performance.

Supply chain challenges

Among the top challenges supply chain pros are facing at fuel costs, cited by 59% of respondents, and inflation, noted by 46%. Delays outside of their control (41%), unpredictability (38%), driver shortages (32%), and losing business due to the economy (30%) are also areas of concern.

The average U.S. price for a gallon of diesel fuel was $3.79 the week of June 5, down just 1.9 cents from a year ago according to the U.S. Energy Information Administration. Gasoline is performing even worse, with a national average of $3.51, down only 1.3 cents from a year ago. Over the next six months, 51% of DispatchTrack survey respondents remain concerned about the price of fuel continuing to impact their business.

Leaders also cited losing business due to the economy (48%), inflation (44%), unpredictability (33%), driver shortages (32%), and delays outside of their control (31%) as near-term concerns.

For those businesses that rely on delivery, 53% remain concerned about missing delivery windows.

Supply chain positives

Despite some of the pessimism among respondents, there are some positive developments from the survey. Supply chain organizations plan to increase technology usage or adopt new solutions (57%), hire more drivers and increase delivery capacity (55%), add additional warehouse space (31%), and invest more in sustainability initiatives (23%).

Moreover, while 61% have a positive business outlook for 2023, another 30% remain uncertain while just 9% have a negative outlook, so there remains a healthy outlook overall.

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