Originally published 9/13/2022, updated 2/7/2024 by A.Wolfe
Your business's success hinges on a well-functioning supply chain – yet supply chain issues and challenges are all too common. This is where robust supply chain management proves its worth. By implementing effective supply chain management practices, businesses can mitigate risks, optimize operations and ensure seamless flow of goods and services. With a proactive approach to supply chain management, organizations can navigate problems, maintain resilience and ultimately drive sustainable growth. Embracing a strategic approach to supply chain management is essential for today’s omnichannel fulfillment and an enhanced customer experience.
What is supply chain management?
Supply chain management includes the planning and execution of the whole flow of a good or service. Essentially, supply chain management oversees the end-to-end processes involved in the production and distribution of goods or services, from raw material sourcing to delivery to the end customer. It encompasses various activities such as procurement, manufacturing, logistics and inventory management, with the goal of optimizing efficiency, reducing costs and meeting customer demand.
Businesses rely on a network of suppliers and supporting services to move their products from raw materials to final “last-mile” delivery to customers. These suppliers form “links” in your supply chain. Effective supply chain management involves strategic planning, coordination, and collaboration with suppliers, partners and stakeholders to ensure seamless operations and customer satisfaction.
Traditional supply chain management breaks down into five key elements:
- Planning: Supply chain planning involves strategically mapping out the processes and activities involved in sourcing, producing and delivering goods or services. It aims to optimize resource allocation, minimize risks and meet customer demand efficiently across the entire supply chain network.
- Sourcing: Sourcing entails the process of identifying, evaluating and selecting suppliers to provide goods or services needed for production. Ecommerce businesses assess factors such as quality, cost, reliability and sustainability to ensure optimal supplier relationships and secure the best value for the organization.
- Manufacturing: Manufacturing transforms raw materials or components into finished products through various production processes. It encompasses activities such as assembly, fabrication and quality control to ensure the efficient and timely production of goods.
- Logistics: Supply chain logistics refers to the management of the flow of goods, information and resources from the point of origin to the point of consumption. Logistics include transportation, warehousing, inventory management and distribution to ensure timely delivery and optimize efficiency throughout the supply chain network.
- Returns: Returns management is the process of handling product returns efficiently and effectively, from customer initiation to final disposition. It involves managing reverse logistics, assessing product condition and implementing strategies to minimize returns and maximize recovery value.
With a strong strategy for handling and optimizing each piece of supply chain management, your business can save time and money in the operational flow.
Common supply chain issues and corresponding solutions
Several factors create issues in supply chain management, but here are the 10 most common, along with corresponding integrated supply chain solutions.
1. Difficulty predicting consumer demand
Consumer demand changed significantly during the pandemic and continues to evolve, with constant shifts in behaviors, preferences and trends. The rise of social influence and social commerce has affected things as well. Combined, these factors have led to shifts that create a significant supply chain concern for businesses: Increased difficulty in accurately predicting consumer demand.
Accurately predicting fluctuating consumer demand is essential to your supply chain management – and correctly forecasting consumer demand is one way to optimize inventory management and order fulfillment. Demand predictions also inform raw materials purchases, resource allocation, manufacturing and more.
If consumer demand is lower than you predicted, your company will be left holding too much inventory (surplus or excess inventory). If you predict weak consumer demand but real demand is high, you’ll experience shortages and stockouts. Either of these scenarios will cost your business, making it harder to budget or offer an exceptional customer experience.
Solution: The solution to demand-forecasting issues is to adjust your methods. Additionally, leverage AI and/or use solutions that achieve more accurate forecasts. You can also consider the price elasticity of demand for your products or services. If your customers respond strongly to changes in price, use price adjustments to nudge customer demand to align with your predictions.
2. Shipping cost increases
Rising shipping and logistics costs pose a significant challenge for businesses, forcing them to navigate between passing on the burden to consumers or absorbing the costs and impacting profitability. This dilemma is exacerbated by high shipping demand relative to capacity, driving up costs until demand subsides or capacity expands. Moreover, customer expectations for fast, affordable or free shipping further complicate matters, requiring brands to balance meeting these demands with mitigating rising costs.
Solution: To address escalating shipping expenses, brands can explore alternative transportation methods, such as ground transportation when ocean freight becomes prohibitively expensive. However, while companies ultimately opt to increase prices for customers to mitigate losses, it's crucial for businesses to optimize shipping costs wherever possible, ensuring competitive pricing while maintaining profitability.
3. Long lead times
Lead time, defined as the duration from the initiation to the completion of a production process, is crucial for gauging efficiency in supply chain operations. For instance, if a purchase order is placed on Jan. 1 and the delivery is received on Jan. 15, the lead time for that order would be 14 days. Each segment of the supply chain entails its unique lead time, collectively contributing to the overall lead time for delivering products or services.
Extended lead times within the supply chain can result in prolonged total lead times, potentially compromising customer satisfaction and sales opportunities.
Solution: To address lead time issues, businesses can streamline operations by eliminating unreliable suppliers and selecting vendors located closer to distribution centers and warehouses. By doing so, companies can effectively reduce lead times, ensuring prompt deliveries and enhancing overall supply chain performance.
4. Keeping up with technology
Supply chain technology problems often arise due to outdated systems, lack of integration between different platforms, data silos, limited scalability and cybersecurity vulnerabilities. These issues can lead to inefficiencies, errors in data management, operational disruptions and compromised data security. Technology in the supply chain has advanced rapidly, with innovations such as Internet of Things (IoT) sensors, blockchain, artificial intelligence (AI) and machine learning revolutionizing operations by providing real-time visibility, predictive analytics and automated decision-making capabilities. These advancements have transformed traditional supply chain processes, enabling greater efficiency, agility and responsiveness to customer demands.
Solution: To address technology challenges, businesses can invest in modernizing their technology infrastructure, implementing integrated systems that facilitate seamless data flow and collaboration across the supply chain, and adopting robust cybersecurity measures to safeguard sensitive information. Another option is to partner with services or solutions that provide the technologies needed. By leveraging advanced technology solutions, companies can enhance efficiency, visibility and resilience in their supply chain operations.
5. Sourcing a reliable carrier
Brands strive to collaborate with suppliers and partners known for reliability, yet sourcing dependable carriers can present challenges. Entrusting carriers with the transportation of materials or finished products requires confidence in their ability to ensure safe, timely delivery. Unreliable carriers can jeopardize shipments, leading to potential damage or delays, which often leads to supply chain issues and incurs significant costs.
Solution: Conduct comprehensive vetting of all potential carriers before engaging their services. Begin by conducting thorough online research to assess their capabilities and specialization in shipping certain types of goods. Be vigilant for warning signs, such as a history of safety violations in the Federal Motor Carrier Safety Administration (FMCSA) database and avoid carriers with red flags.
Prioritizing due diligence during the procurement process is essential for safeguarding your business against unreliable carriers. Alternatively, consider partnering with a reputable 3PL or logistics partner that boasts a network of trusted carriers, ensuring reliable transportation services for your goods.
6. Risk management
There’s a lot of inherent risk in your supply chain. While it’s not possible to eliminate it, you can mitigate it with proper risk management.
Some of the internal and external risks you should address through supply chain risk management include:
- Supplier bankruptcies
- Theft
- New government regulations
- Natural disasters
- Cybersecurity vulnerabilities
Any of these risk factors could severely disrupt your supply chain and impact your bottom line. Both known and unknown risks will always be in play, which is why supply chain risk management is so difficult.
Solution: Mitigate supply chain risk by implementing proactive measures to anticipate and address potential disruptions. First, businesses should diversify their supplier base to reduce reliance on a single source and mitigate the impact of supplier failures or disruptions. Additionally, maintaining open communication channels with suppliers and partners enables early detection of issues and facilitates collaborative problem-solving.
Utilizing advanced technology solutions, such as supply chain visibility platforms and predictive analytics, can enhance visibility and enable proactive risk management. Creating contingency plans and establishing alternative sourcing options can also mitigate the impact of unforeseen events and ensure business continuity in times of crisis. By adopting a comprehensive risk management strategy, businesses can minimize vulnerabilities and build resilience in their supply chains.
7. Labor shortages
Throughout the supply chain, your business relies on workers. Labor shortages hurt your brand’s ability to get your product or service to customers on time and without problems. Consider the multitude of labor required to deliver your product to consumers. You need warehouse and distribution center staff, dockworkers and longshoremen to operate ports, truck drivers to move your goods across land and more. Shortages of workers in even just one of those positions will disrupt your supply chain.
Several different factors cause labor shortages, including:
- Interindustry competition: When there are more open jobs than available workers, different sectors must compete for workers. Inevitably, some industries will not get enough workers and will suffer a labor shortage.
- Shifting priorities: Recently, many workers have shifted their priorities toward flexibility or more time at home. This has left in-person jobs with fewer workers and applicants.
- Lower labor force participation: Whenever fewer people participate in the labor force, a labor shortage can happen. For example, if a big chunk of the workforce retires and there aren't enough incoming workers to replace them, the labor force participation will go down.
- Skills shortages: Sometimes, workforce professionals lack the right skills to fit the industries looking for workers, leading to labor shortages.
Regardless of the cause of the labor shortage, it can result in a supply chain disruption.
Solution: Proactively addressing labor shortages or reducing reliance on manual labor within your business operations ensures timely delivery of products to customers. Strategies such as offering competitive salaries and attractive perks can aid in recruiting top talent, while investing in employee training and cross-training can empower existing staff to fill gaps created by labor shortages.
In the long term, leveraging automation and re-engineering products can help diminish dependence on labor-intensive processes. Partnering with a reputable 3PL can mitigate labor-related challenges by tapping into their expertise and scalable workforce. Take the time to identify 3PL partners known for their effective management practices, strong employee culture and ability to adapt staffing levels to align with your evolving requirements.
8. Delayed port operations
Port congestion is an ongoing concern in the supply chain and logistics world. When port stations are already at full capacity and ships can’t load or unload freight, port operations experience costly delays. Many critical global docks still suffer bottlenecks, disrupting supply chain operations. And while things have improved since the pandemic, there is still a ways to go.
Solution: Handling delayed port operations requires proactive communication with suppliers and customers to manage expectations. Implement contingency plans to reroute shipments or expedite alternative transportation methods, such as air freight, to mitigate delays. Collaborate closely with logistics partners and utilize real-time tracking technologies to monitor progress and adjust strategies accordingly, ensuring minimal disruption to supply chain operations.
9. Poor logistics management
Logistics management involves the strategic coordination and execution of processes related to the transportation, storage and distribution of goods or services. It includes activities such as multichannel inventory management, warehousing, transportation planning and order fulfillment to optimize efficiency. Poor logistics management can lead to delays in order fulfillment, resulting in dissatisfied customers and potentially damaging the reputation of the business. Inefficient inventory management may result in stockouts or overstock situations, leading to increased carrying costs or lost sales opportunities. Additionally, inadequate transportation planning can result in higher shipping costs, delays in delivery, and ultimately, reduced profitability for the company.
Solution: Optimizing processes that enhance efficiency and effectiveness throughout the supply chain will help improve your logistics management. You can also invest in and implement advanced technology solutions, such as transportation management systems and inventory optimization software, which provide real-time visibility and streamline operations. Collaborating with your logistics partners and continuously monitoring performance allow you to proactively problem-solve and further improve your logistics processes.
10. Quality control
Every business practices some form of quality control to ensure its products or services meet set standards. Quality control shouldn't start on your own production lines, though — it applies to all steps in the supply chain.
If your business has unaddressed quality control problems throughout your supply chain operations, your customers and brand reputation will suffer. Better quality control means a lower chance of returns and product failures.
Solution: Implement a strong production parts approval process (PPAP) to ensure that the components from suppliers meet your quality standards. Make your suppliers a part of your quality control process by connecting them to your quality management system (QMS).
The current state of the global supply chain
The current state of the global supply chain is characterized by unprecedented challenges and disruptions caused by the COVID-19 pandemic. Supply chain networks are experiencing significant strain due to labor shortages, transportation bottlenecks, and raw material shortages. Moreover, geopolitical tensions, trade disputes, and natural disasters further exacerbate the complexities and uncertainties facing supply chain operations. To navigate these challenges, businesses are adopting agile strategies, diversifying sourcing options and leveraging technology to enhance visibility and resilience in their supply chains.
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