Supply chains have always been vulnerable to disruption. Although rightly called the ‘plumbing of global commerce,’ supply chains have typically received little attention.
Unprecedented events such as the COVID-19 pandemic and the ongoing conflict in Ukraine have again put the spotlight on the vulnerabilities of global supply chains.
Fast evolving and rapidly changing customer needs have added to the current challenges in supply chain management.
Challenges of Supply Chain Management
Globally, supply chains have faced headwinds from unforeseen demand and limited logistics capacity. The key challenges faced in supply chain management include:
• Rising risks in the supply chain
Risks in the supply chain primarily arise from volatility in the markets. Changing consumer demand, trade wars, raw material shortages, climate change, stricter environmental regulations, economic uncertainties and policy changes, industrial unrest, etc., contribute to supply chain management risks and challenges.
• Unexpected delays
Global supply chains inevitably involve large distances and many steps, making them vulnerable to delays. Long lead times for goods make the shipments susceptible to unexpected delays.
• Cost control
Costs of raw materials, energy, freight, and labor have seen a spike around the globe. To ensure operations without production interruptions and continued delivery of quality goods at reasonable rates - businesses must tighten cost control.
• Collaboration and syncing of data across the supply chain
Access to supply chain data is key to the efficient management of supply chains. Due to the multitude of data points in global supply chains, data management is a key challenge in supply chain management.
• Increasing freight prices
The rise in energy prices and the increased demand for container shipping have pushed freight prices. Container shipping demand experienced an increase from the e-commerce surge seen during the pandemic.
• Difficult demand forecasting
The pandemic and the consequent supply chain disruption made demand forecasting difficult and nearly impossible to estimate numbers for manufacturing and the inventory to be stocked.
• Digital transformation
Digital transformation through adopting technologies such as IoT, AI, drones and robotics is necessary to improve supply chain operations. However, the major challenge of supply chain management lies in implementing these technologies across existing supply chain operations.
• Port congestion
The pandemic led to restricted freight loading/unloading operations, causing port congestion. This, in turn, led to delayed dispatches and deliveries.
Supply chain challenges in the recent past have compelled businesses of all sizes to redesign their operational strategies to maintain healthy bottom lines and retain their customer base.
The critical challenges that global supply chains must contend with include:
- Navigating an environment of persistent unpredictability
- Labor shortages
- Ripple effects of global bottlenecks
- Equipment availability
Ways To Overcome the Major Challenges Faced In Supply Chain Management
• Automate processes.
Increased automation will help balance inventory levels, warehousing costs, and customer demand. Automation of forecasting helps optimize inventory, minimize overhead costs, and obviate the possibilities of stockouts and inventory shortages.
• Partner with industry peers
Considering the complexity of the modern supply chain, the traditional methods of operating with excel spreadsheets will not work. Ongoing and continuous collaboration with industry peers, vendors, regulators, manufacturers, financiers and logistics teams is imperative to keep the supply chain in motion. Software tools with automated permissions, alerts, information-rich dashboards and real-time updates will make these partnerships feasible and easy.
• Get end-to-end visibility
To effectively control supply chain operations, you must have end-to-end process visibility, from procurement of raw materials from suppliers to delivery to the customers. This can be achieved by tracking and monitoring the supply chain with data logging. The analysis of the data obtained enables effective control over the process.
Conclusion
An agile and resilient supply chain is the need of the hour. However, resilience and agility cannot be built into a supply chain without carefully considering its design, implementation, and operation. This requires a change in mindset, the adoption of advanced technology and tools, and the inclusion of risk and agility KPIs along with the traditional KPIs of cost, quality, and service levels.
Frequently Asked Questions
What are the technical challenges in supply chain management?
The slow adoption of automation tools and the inefficient use of data insights hold back the optimization of supply chain management.
What are the key takeaways from the supply chain management challenges?
The increased complexity of global supply chains implies that traditional supply chain management methods will no longer work. Automation using software tools is an inescapable necessity to overcome the challenges of supply chain management.
How are companies navigating the challenges in supply chain management?
Companies are increasingly adopting automation tools or outsourcing supply chain management to third-party service providers to navigate current challenges in supply chain management.
What is the key to handling challenges in supply chain management?
Efficient management of risks in the supply chain, effective collaboration, and greater use of supply chain data are vital in handling supply chain management challenges.
