Once upon a time, supply chain management was easy. Today, businesses have to contend with global competition, product life cycle compression, and most importantly, rising customer power.
Technology has allowed control to rapidly shift over into the hands of end consumers. People want what they desire, when and where they desire it. To fulfill these demands, business owners need to anticipate supply chain challenges and reinvent their supply chain into scalable and efficient infrastructures.
In essence, if your supply chain is weak, you’re out of the game.
The more you know about the common obstacles that plague supply chain models, the easier it will be to avoid them and remain competitive.
1. Long and risk-heavy lead times
The price to pay for seeking cheap, foreign labor is that you have to deal with extensive lead times and face the risks associated with long-distance shipping. A lot can happen in the 40 to 50 days you are waiting for your shipment to arrive. And once it’s in transit in the middle of the ocean, you can’t send it back.
Trouble at sea can double your expected delivery date with chances of losing the cargo, encountering labor strikes, or even getting robbed by pirates.
It’s every business owner’s nightmare to disappoint customers and be put in a position where they have to explain why orders have been delayed. Even a tiny delay in your promised date of delivery can have heavy repercussions for your entire supply chain workflow.
2. Increasing complexity
Supply chain complexity continues to increase in a number of ways.
Firstly, competition and the need to satisfy customers’ price expectations have pushed companies to relocate manufacturing to countries with low labour costs. It has become the norm for businesses to manage complex, global networks of manufacturers, suppliers, distributors, transporters and other players across different time zones and locations.
Many companies also struggle with omni channel sales and fulfillment. Although e-Commerce and mobile-enabled consumers are helping to increase revenues, it’s also raising the bar for operations and logistics management.
3. Excessive cost cutting measures
Choosing to implement a lean manufacturing or distribution model doesn’t necessarily mean that you should be saving at the cost of productivity or quality.
Overemphasizing cost cutting can be detrimental to your supply chain. For example, it can hinder your ability to quickly adjust to supply and demand shifts without incurring heavy losses.
Any deviation from the production plan could have catastrophic results for anything lower down the supply chain.
Therefore, it’s important that you bear in mind the flexibility you need to be responsive to changes in orders, demands and products. Cost cutting is at the top of every business owner’s mind today, but there is a fine balance between trimming the fat and cutting the muscle of your supply chain. Don’t skimp on what you need!
4. Poor forecasting
Poor demand forecasting can sabotage your business, leaving you starving in a stock out or drowning in a surplus.
A demand forecasting system is the key to keeping your business afloat in times of massive fluctuations in market demand for your products.
Keep track and compare metrics in real-time, and ensure that you’re using historical data for forecasting sales trends. In addition, monitor market metrics such as credit ratings, product quality by suppliers, and delivery performance.
Demand, competition, market size and costs are just some of the things that must be considered, quantified and explained to develop a solid and credible forecast.
5. Little or no risk management strategy
Just when you think you’ve achieved supply chain efficiency, an unexpected ‘kink’ throws everything off course. Risk is inevitable, but it helps when you have a proactive plan in place. A reactive, knee jerk response can often cause more damage than the problem itself.
Having a solid risk management strategy can help you mitigate this risk. A well-planned strategy can help you minimize and control the impact that unexpected events can have on your supply chain, while maximizing the opportunities they can present.
While there are a lot of lessons to be learned from supply chain management best practices, your focus should be on familiarizing yourself with your own supply chain – and ensuring that it aligns with the rest of your business.
See also:
Why adding a pop up store to your e-Commerce business will benefit you greatly
Are you confusing markups and margins?
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