In today’s volatile and challenging world, supply chain networks face many obstacles. Supply chain networks are interconnected systems of organizations, resources, activities, information, and technologies involved in producing, distributing, and delivering goods or services from suppliers to end customers. The network encompasses the flow of materials, information, and finances across procurement, manufacturing, warehousing, transportation, and customer service. These multiple entities, which include suppliers, manufacturers, distributors, retailers, and logistics providers, collaborate and coordinate their activities to ensure the smooth movement of products from the point of origin to consumption.
Specific challenges of a supply chain network can vary depending on factors such as the industry, geographical location, and the nature of the products being handled. Many supply chain networks were disrupted when COVID broke out, causing the loss of suppliers, workers, and transportation modes. Businesses had to scramble to find new suppliers that had gone out of business. Truck carriers closed, squeezing freight capacity. Workers went missing during the Great Resignation, making it hard to fight the labor needed for the warehouse, distribution center, production facility, and manufacturing plant.
Challenges and opportunities that supply chain networks still face today involve:
• Demand volatility - Fluctuations in customer demand can be unpredictable, making it challenging for supply chain networks to accurately forecast and plan inventory levels. Sudden changes in demand patterns can lead to excess inventory or stockouts.
Better demand forecasting helps organizations make more informed decisions, reduce costs, and enhance customer satisfaction. By sharing accurate demand information with suppliers and other stakeholders, organizations get better collaboration, improved visibility, and better coordination throughout the supply chain network.
Accurate demand forecasts enable organizations to allocate resources, such as labor, equipment, and materials, more effectively, leading to improved resource efficiency, increased productivity, and cost savings. Demand forecasts contribute to better supply chain optimization by aligning various network activities. When the demand is accurately predicted, procurement, manufacturing, and distribution activities can be coordinated more effectively, resulting in streamlined processes, reduced lead times, and improved overall supply chain performance.
• Globalization - Many supply chains are now global, involving multiple suppliers, manufacturers, distributors, and customers across different countries. Businesses need help managing complex supply chain networks, which involve coordinating activities across various locations and stakeholders.
Managing a global supply chain network expands market reach, provides opportunities for cost optimization, and builds resilience. Global supply chain networks must be flexible and agile to help businesses quickly respond to market changes and adapt to dynamic business environments. Your supply chain network can bring significant competitive advantage, such as capturing market share on a global scale.
• Visibility – Without visibility into your supply chain network from end to end, tracking shipments, identifying bottlenecks, monitoring inventory levels and product quality, and responding quickly to disruptions can be challenging.
Companies need technologies that facilitate real-time tracking and monitoring of inventory, shipments, and performance metrics across all transportation modes to gain visibility. Real-time data collection, tracking, and analysis allow for improved decision-making, identification of bottlenecks, and optimization of processes. Improved visibility also enhances risk management and proactive issue resolution.
• Managing inventory - Maintaining an optimal inventory level is crucial to balance costs and customer service levels. Still, with inaccurate demand forecasting, supplier reliability, and production delays, businesses may have too much or too little inventory in the wrong places, which can impact the overall performance of the supply chain.
To avoid stockouts, optimal inventory management is needed. Maintaining adequate stock levels helps organizations to reduce the risk of stockouts and backorders, helping to improve customer satisfaction. When inventory levels are optimized, you will minimize the amount of capital tied up in your business. Excess inventory also means you may incur costs associated with storage, obsolescence, and write-offs.
• Supplier Relationships - Establishing and maintaining solid supplier relationships is essential for a smooth supply chain operation. Challenges include supplier reliability, quality control, pricing fluctuations, and capacity limitations. These suppliers can be parcel carriers, trucking companies, or raw material providers.
Strong supplier relationships can lead to cost savings and create value. Organizations can negotiate favorable pricing, volume discounts, and contract terms when developing long-term successful partnerships. Building strong supplier relationships requires trust between involved parties, but once trust is established, your business can stay ahead of the competition and meet customer expectations.
• Managing risk - Supply chains are vulnerable to various risks, such as natural disasters, political instability, transportation disruptions, and supplier bankruptcies. Developing effective risk mitigation strategies and contingency plans is critical to minimize the impact of such disruptions.
With the possibility of a UPS strike (thankfully diverted!) and Yellow Freight's recent cash flow and operations challenges, supply chain managers were scrambling to find alternative carriers to keep their products moving if a strike had occurred. And even though a strike was avoided this time, companies still need to have strategic plans to mitigate disruptions in their supply chains that may affect inbound and outbound shipments across all transportation modes.
Using a network optimization solution, businesses can design optimal supply chain networks that minimize risk. Designing an optimal network helps companies find much-needed warehouse space or locate distribution centers closer to customers. Optimal supply chain networks balance inventory levels, use the most cost-efficient and reliable transportation modes, optimize routes, and more. With an optimized supply chain network, companies minimize transportation and warehousing costs, improve efficiencies, and reduce lead times.
A balanced, optimized supply chain network is streamlined and transparent and ensures continuity of operations. Shippers gain greater efficiencies, improved customer service levels, lower costs, and a competitive advantage with an optimal supply chain network.
Ryan Polakoff is the president of Nexterus, a leading 3PL that helps small and medium-sized companies better compete through the power of their supply chains. www.nexterus.com
