In recent years, supply chains have faced increased scrutiny due to global shutdowns, international conflicts, and severe weather events. In today’s competitive eCommerce landscape, customers demand reliable delivery of high-quality goods. To meet these expectations, businesses must adopt efficient and cost-effective supply chain management processes. However, to tackle these challenges, companies must first identify their biggest offenders in terms of not meeting expectations on either the customer-facing or vendor-management sides of the spectrum.
With this, we’d like to explore the key supply chain challenges facing organizations today and identify strategies to help overcome these obstacles.
The Effect of Supply Chain Disruptions
Supply chain disruptions are a significant concern for many C-suite members and boards of directors, as they can severely limit manufacturing capacity. According to a survey by the Federal Reserve, 23% of companies reported that their supply chains were a significant constraint on manufacturing in the fourth quarter of 2022.
To grasp the full extent of supply chain disruptions, consider a worst-case scenario. In March 2021, a massive cargo ship blocked the Suez Canal, a critical trade route that typically handled $9.6 billion worth of shipments daily. This obstruction led to delays and rerouted cargo, affecting industries ranging from restaurants to auto repair shops. The ship and its cargo were then impounded for three months due to legal issues, causing global supply chain repercussions for companies more than a year later.
Supply chain disruptions have far-reaching effects, including increased costs, canceled orders, reduced profitability, and diminished company valuation. For instance, a major auto manufacturer’s share price plummeted after it warned of chip shorted that would impact production targets.
In short, through global pandemics, natural disasters, or overall poor planning on an organizational level, supply chain disruptions can cause an enormous ripple effect that impacts everyone from the manufacturer to the end customer—and everyone in between.
How to Overcome Top Supply Chain Challenges
Company leaders, particularly those assigned with the management of supply chain logistics, need to be constantly aware of possible challenges they might face so they can proactively mitigate issues and minimize damage should disruptions and bottlenecks occur. If this falls into your realm, here are a few key supply chain issues you should be aware of—and best practices for confronting them head-on.
1. Enhance Visibility
To effectively tackle supply chain challenges, it’s crucial to detect them early on—a task made difficult without a clear view of operations. Businesses that possess comprehensive end-to-end (E2E) visibility can monitor the movement of supplies, components, finished goods, and information across the supply chain. This capability empowers decision makers to swiftly pinpoint bottlenecks and rectify problematic areas, which is particularly vital for companies with a fragmented supply chain reliant on external partners.
Any slowdowns within the supply chain, whether from internal or external processes, can reverberate throughout an organization, leading to frustrating and costly delays. By adopting new technologies like automated data collection and reporting, businesses can enhance their visibility and gain real-time insights into their supply chain workflows.
In Short: Implementing technology like IoT sensors, RFID tags, and blockchain can provide real-time data on inventory levels, production status, and delivery timelines. This visibility helps in identifying bottlenecks and addressing them promptly.
2. Diversify Suppliers
A scarcity of raw materials, including glass, plastics, lumber, and metals, can result in production delays, as manufacturers are unable to sustain operations without a consistent supply of these essential resources.
According to the 2023 Hubs Supply Chain Resilience report, raw materials shortages were the most commonly cited supply chain challenge, with 61% of the 334 respondents identifying it as a primary disruption.
These shortages can inflate supply costs, eating into profits and often necessitating higher prices for consumers. To confront this issue, many businesses opt to diversify their supplier bases and enhance communication and collaboration with vendors, thus reducing the risk of unforeseen shortages caused by regional factors like weather events. Additionally, companies can leverage business technology solutions, such as ERP systems, to monitor supply levels and maintain minimum stock, gaining a competitive advantage over rivals who procure supplies on as as-needed bases.
In Short: Dependence on a sole supplier can pose risks. Expanding your supplier network, even if it means slightly higher costs, can protect your supply chain from disruptions like natural disasters, geopolitical conflicts, or economic downturns.
3. Strengthen Relationships
Suppliers should not only be seen as potential sources of risk but also as valuable allies in preventing disruptions. It’s imperative to consistently nurture these relationships in order to maintain ongoing growth.
These days, a lot of chief supply chain officers are actively working to enhance collaborative relationships with key customers and suppliers. For instance, some firms are devising shared inventory-hedging strategies to secure supplies, reduce lead times, and mitigate risks. Others have found strength in diversifying their supplier pool, including minority- and women-owned businesses, which often bring innovative approaches to agility and resilience against disruptions. Despite progress in managing supply chain disruptions, there’s still much to be accomplished.
In Short: Building strong relationships with suppliers, customers, and logistics partners can improve communication and collaboration. This can lead to better forecasting, reduced lead times, and more flexibility in responding to changes.
4. Train and Educate Staff
Every year, companies adopt new technologies to enhance their supply chains, such as automated data collection and Internet of Things (IoT) devices, which provide real-time updates on goods’ statuses as they move through the supply chain.
According to the 2022 Interos Annual Global Supply Chain Report, 99% of respondents agreed that investing in software solutions for supply chain risk management offers clear benefits. However, this transformation can be challenging, particularly for larger companies replacing intricate operations with new systems.
It’s crucial for businesses to establish effective training programs to prepare staff for new technology and procedures. Failing to do so could result in the loss of institutional knowledge and experience as seasoned employees struggle to adapt. By striking a balance between cutting-edge technology and proven best practices, businesses can replicate past successes and prepare for future challenges.
In Short: Equip your team with the necessary skills and knowledge to manage supply chain challenges effectively. This includes training in risk management, technology usage, and communication skills.
5. Implement Risk Management Strategies
Implementing risk management strategies involves several key steps. First, identify potential risks such as the natural disasters, geopolitical conflicts, and supplier failures we talked about earlier. Next, assess the impact of these risks on your supply chain, considering factors like likelihood and severity. Then, develop specific plans to mitigate each risk, such as diversifying your supplier base and maintaining safety stock. Continuously monitor your supply chain for potential risks and regularly review and update your risk management plans.
Remember, part of this process will also include ensuring your team is well-trained in risk management practices and that clear communication channels are available between your organization, your suppliers, and your stakeholders. Regular, ongoing testing of your risk management plans is essential to ensure future success, so be sure your teams stay informed stay informed about external factors that could impact your supply chain.
When you build a resilient supply chain that can quickly adapt to changes and recover from disruptions, you can effectively manage risks and ensure the stability and success of your supply chain.
In Short: Identify potential risks and develop contingency plans to mitigate them. This could include maintaining safety stock, having alternative transportation routes, or securing backup suppliers.
Learn How MIBAR Can Help You Overcome Your Supply Chain Challenges
Modern supply chains have created unique challenges as they become more complex and far-reaching, and managers need a solution to give them more visibility than ever to meet these challenges.
For example, with NetSuite Supply Chain Management, businesses can identify risks to effectively plan contingencies and address weaknesses before they become major issues for customers. And with sophisticated demand forecasting and scenario planning, NetSuite gives businesses the tools they need to prepare for tomorrow’s supply chain obstacles.
Another example, Acumatica provides a holistic and modern ERP platform for small and growing inventory-centric businesses to mitigate supply chain disruption. The robust distribution suite includes embedded warehouse management capabilities, flexible replenishment features, and powerful purchasing tools like purchase order requisitions with vendor bidding.
MIBAR is here to help you overcome your supply chain challenges. With our expertise and tailored solutions, we can help you navigate disruptions and optimize your supply chain for success. Contact us today to learn more about how we can assist you.
Additional Resources
Leveraging Business Intelligence for Optimal Supply Chain Management
Solving Supply Chain Disruptions
Mitigate Supply Chain Challenges with Cloud ERP Software
How Supply Chain Visibility Can Help Manage Price Fluctuations in the Food & Beverage Industry
