Supply chains shift and evolve continually. A best practice supply chain management process today looks very different from even a few short years ago–each of the elements of supply chain management must be agile and adaptable to changing environmental, logistical, and sector-specific conditions.
This guide explores some of the biggest challenges supply chain management will face in the year ahead, along with suggestions for suitable solutions.
Here in Part Two, we’re going to talk about some specific steps supply chain leaders can take to respond to these continuing challenges. We think those who take this moment in the spotlight to craft a truly strategic response, have the opportunity to emerge as leaders, not only for their supply chain operations, but for their companies as a whole.
What Is the Most Significant Problem in Supply Chain Management?
Complacency, or a focus on maintaining the status quo, has the most detrimental impact on modern supply chains–this happens when established companies accept inefficiencies as a normal part of life. Accepted inefficient practices and conditions often include:
- Manual data entry errors
- Raw material wastage
- High instances of substandard products
- Bottlenecks in logistics and production
- Recurring variances or exceptions
- Inventory overstocks
Businesses must be proactive in resolving these difficulties. Fortunately, there are a vast range of tools available to build a supply chain that can withstand a broad scope of pressures.
Five Supply Chain Management Challenges in 2022
The last two years have caused endless disruptions to supply chains, but have also presented an opportunity to diversify and think creatively. We have seen tremendous material shortages, delays in global logistics, and a release of pent-up demand, each of which can stop a supply chain in its tracks.
1. Supply Chain Shortages
Material scarcity was an issue long before the COVID-19 pandemic or the conflict in Europe, but the situation has undoubtedly been amplified by these events. Wide-scale demand for basic materials, higher commodity prices, and slowdowns in delivery times pose a complication for businesses that don’t have contingency plans or working capital resources.
Accurate planning, what-if scenario forecasting, and an awareness of alternative materials are all tactics that can contribute to identifying a satisfactory outcome to supply chain challenges.
2. Increasing Transport Costs
A global lockdown meant that vast volumes of goods stalled in transit, and as consumers turned to online shopping to fulfill their needs, the demand for container shipping services increased dramatically. With a growing requirement for raw materials and consumer goods, insufficient shipping capacity exacerbated cost increases.
Spikes in the costs of logistics are a concern for supply chain managers, but can be addressed through consolidated transportation planning, forward ordering, and precise knowledge of the required material volumes and transport space.
3. Uncertain Forecasting
Another core problem is forecasting, which is a fundamental requirement for all supply chain managers. Recent global events make forecasting tricky. With uncertainty, it is difficult to create accurate demand forecasts or predict how the market will respond.
It is best to use data-driven research and quantifiable metrics rather than relying on gut instinct or historical information that may not reflect current conditions.
4. Changing Customer Demands
Today’s consumers not only expect immediate deliveries, low-cost shipping and excellent customer service, but they also require the brands they do business with to be sustainable.
So, what is sustainability management, exactly? Sustainability management refers to managing supply chains to minimize environmental impacts, source ethically produced materials, and provide transparency about supply chain practices.
5. The Shift to Digital
Finally, supply chain operations cannot scale upward without enhancing their systems and services; however, integrating algorithmic forecasting or just-in-time inventory controls can be complex, particularly for large supply chains.
That said, optimized fulfillment strategies and automated reporting can ensure a supply chain has the agility and responsiveness to react quickly to declining or accelerating demand.
The Future of Supply Chain Management
Supply chain managers face a range of hurdles from increasing environmental regulations to talent shortages—but the key to success is finding ways to overcome future complications, whether anticipated or not. Manual processes are often a big factor in supply chain issues–a business that wishes to compete in today’s automated world must embrace the power of digital transformation.
Buyers and managers that recognize how automation can streamline supply chains leave archaic processes behind and adopt best practice solutions that meet the current market demand head-on.