Today’s logistics and supply chain executives have to constantly solve the price, capacity and service equation within their company to maximize market presence and bottom line impact. Within the equation there are a number of challenges that need to be addressed. An awareness of the 12 supply chain challenges spotlighted here will help in keeping the focus on the areas that can optimize a company’s results.
Top 12 Challenges in Today's Supply Chain
1. Supply Chain Costs
Supply chains operate in highly competitive markets, where there is constant pressure to reduce costs and improve efficiency, while maintaining a consistently high quality service level.
Shippers must balance the cost of transportation with the speed and reliability of their logistics service providers to optimize freight costs. Market conditions that cost containment is difficult to control include: fuel prices, driver shortages, increased operating costs and freight market capacity constraints. These external factors can make freight costs unpredictable and volatile.
Outside of freight costs associated with moving products, shippers also have to be mindful of other costs impacted by the supply chain. Examples include: inventory carrying costs, customer chargebacks, warehousing costs, etc.
All said, there is not another area within a company that has the greatest impact to top line sales, but also a strong impact to a company’s cost structure and bottom line.
2. Capacity Constraints
The availability of shipping capacity can be affected by various factors such as peak seasons, weather, port congestion, seasonal shipping patterns or general supply chain disruptions.
Shippers must plan for capacity constraints and put contingency plans in place to secure reliable transport of their goods, with diversification being key. This could include a combination of diversifying suppliers, freight modes and across regions to help combat potential capacity constraints.
3. Inventory Management
Shippers need to keep the appropriate amount of inventory at the right place and at the right time. This requires careful planning, forecasting and coordination with suppliers and customers. Failure to manage inventory effectively can result in stockouts and overstocking, which will affect sell-through and increase costs.
The move to just-in-time (JIT) makes inventory management even more important of a topic because one disruption in the supply chain has the potential to cause a domino effect that takes a company time to recover.
4. Customs and Regulations
International shipping involves compliance with customs regulations and trade laws, which are both complex and vary by country. Shippers must ensure compliance to avoid costly delays, fines or legal issues.
Regulations continue to rise as countries are using trade practices and restrictions to manage international disputes on particular industries or countries.
5. Regulatory Compliance
And if international concerns were not enough, domestically, rules and regulations continue to expand to protect consumers, the environment, ethical sourcing and increase safety on roads, air and rail corridors.
For industries with specific regulatory challenges, such as food and beverage or aerospace and defense, additional measures are needed in the event of a government or industry audit. The data must be accessible and retrievable with a high degree of accuracy to avoid penalties and litigation.
6. Visibility and Control
Shippers need real-time visibility into their shipments, inventory and supply chain processes to optimize operations, improve customer service and mitigate risks.
Companies without visibility are driving their business blindly and are handicapping their ability to beat their competition on sell-thru performance.
The lack of visibility also opens companies up to greater expense. Some examples of cost increase could include:
- Run at higher inventory levels to reduce stock out situations.
- Backorders grow, reducing top line sales.
- The possibility for more freight accessorials, such as detention, demurrage, per diem and storage.
- More frequent need for expedited freight options.
- More use of truckload on lanes intermodal could bring 15% to 20% cost improvement because of the need for the one- to two-day faster truck transit.
Companies are increasingly expected to adopt sustainable practices, reduce their carbon footprint and minimize waste throughout the supply chain. This can be challenging as it often requires significant investments and changes to established processes and practices that are often hard to break.
Supply chains are complex involving multiple suppliers, manufacturers, distributors, countries and customers. Each entity brings their own set of processes, communication, systems and requirements. This complexity makes it challenging to coordinate activities, track inventory and ensure timely delivery of goods.
Supply chains are subject to various uncertainties including: changes in demand, disruptions in supply, geopolitical risks and natural disasters. These uncertainties make it difficult to assemble a consistently reliable demand forecast.
A globalized supply chain is subject to a range of political, economic and social factors that affect the flow of goods and services. Differences in language, culture and regulations can add additional layers of complexity and uncertainty that would otherwise be non-existent in companies with a more localized supply chain.
An important step that should be sewn into the vendor selection process is evaluating the countries of origin and the levels of risk vendors bring into a company’s supply chain - and if they have vetted their systems for supply chain resilience themselves.
Cybersecurity in supply chain management has been challenging with bad actors finding the amount of disruption they can bring on a company’s supply chain. The effects can be devastating as they either enter a company’s system to bring it down or take it hostage for the purpose of collecting a ransom.
The cybersecurity issue has been moved front and center to the decision process of investmenting in technology. Many cloud operating platforms have built-in security layers that can be leveraged to safeguard data and system integrity.
And with other supply chain challenges, companies need to also gauge the strength or vulnerability of their vendors and customers to help shield their company from external attacks.
12. Staying in Front of and Investing in Technology
To optimize today’s supply chains requires companies to use advanced technologies, data analytics, AI and automation.
It is tough enough to stay in front of what’s available, but there are also lead times to implement and train, along with the cost challenges associated with some solutions. For these reasons many companies have chosen to outsource all or a portion of their supply chain management work to third party logistics companies that can offer full solutions through a cloud platform that has a SAAS pricing model.
Summary on Top 12 Supply Chain Challenges
While these supply chain challenges are not new, they have yet to be fully overcome by any one company. Those companies with a high degree of sophistication in the management of their supply chains do however tend to outperform the competition.
A well thought out strategy, combined with technology and a talented team that can translate data into actionable results will be far more successful in overcoming today’s supply chain challenges than the competition.
And for those small and mid-market shippers, it is worth leveraging a logistics partner that manages supply chains as their reason for existence. They will bring the best technologies, process and team at a variable-cost SAAS based pricing model.
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