Inflation, Ukraine Most Problematic, Say Supply Chain Managers
Uncertainty and disruptive consequences are driving decision-making.
Repercussions from the Russian war in Ukraine – notably energy shortages and exports from Ukraine – are potentially the most prominent cause of supply chain disruptions this year, according to JLL and Reuter Events’ The State of European Supply Chains 2023 report.
More than two-thirds of the 171 occupiers surveyed in Europe flagged the two factors, while 54.5% cited inflation as an issue. Higher operational costs, inventory planning, warehousing needs, and sustainability are further key concerns for 2023.
Lisa Graham, head of industrial & logistics research for EMEA at JLL, said in prepared remarks that “potentially disruptive consequences of sanctions and the war in Ukraine are driving occupiers’ decision making, according to the new report.
Logistics occupiers remain wary of disruption, and inflation continues to be a concern for logistics occupiers.
After peaking at 10.6% last October, Eurozone inflation declined to 8.5% in January due to falling gas prices and will continue to decline throughout 2023, according to Oxford Economics.
“Along with what economists are predicting will be a short and shallow economic slowdown, moderating inflation could explain why the majority of survey respondents expect to have to pass only some costs onto customers this year,” Graham said.
Slashing inventory by as much as 20% isn’t helping the sector and “additional interest rate hikes in the first half of this year, and a drop in household savings would mean less liquidity for spending,” according to the report.
Additionally, many (44%) there is currently an undersupply of suitable space and 46% of respondents said that they are upgrading their warehouses to be more energy efficient.