Supply chains are an integral part of a business and can significantly impact performance if not regularly monitored and assessed closely. Should problems with a supply chain arise, this can have a negative knock-on effect on all other aspects of the business.
What are the most common pitfalls in supply chain management?
With the increasing challenges facing supply chains, especially in the aftermath of the pandemic, businesses need to be able to adapt quickly to market changes to reduce the risk of encountering problems, which could have a significant impact on their wider business and, more worryingly, their customers.
There are a number of pitfalls which businesses can encounter when it comes to supply chain management, the most common of which include;
Lack of visibility
In the current economic climate, it’s crucial for businesses to have a deep understanding of their supply chain. This knowledge enables them to conduct thorough risk assessments and be prepared with strategies to mitigate the most probable scenarios before they become major problems.
Demand forecasting
Demand forecasting involves analysing historical data, market trends, and other relevant factors to anticipate customer demand for a product or service. Aligning supply with demand is key for an organisation’s supply chain management to reduce costs and optimise inventory.
Structural flexibility
This is vital across supply chains for businesses as it allows organisations to naturally respond to changes within the supply chain rather than wasting resources to respond to shifting dynamics.
Other challenges that can arise within supply chains include product life and end of life management, water usage and pollution, economic pressures and consumer awareness.
How can businesses prevent these pitfalls?
To avoid lack of visibility in a supply chain, organisations need to ensure that they are mapping their supply chain network and consistently providing updates and communicating with suppliers to avoid any disruptions. Having this oversight of your supply chain will allow for more in depth risk assessment and reduce disruptions, allowing businesses to prepare to mitigate potential issues.
Adapting a supply chain to match shifting demand enables businesses to set prices at a more competitive level and manage costs effectively. By understanding supply and demand, companies can accurately adjust prices to reflect market conditions, which in turn can attract more customers and increase sales. This strategy plays a pivotal role in maintaining cost controls and service delivery performance, as well as optimising inventory volume, which ultimately leads to better financial management and improved customer satisfaction.
Structural flexibility refers to the ability to fundamentally adapt or change the supply chain design in response to changes in global demand or supply. Structural flexibility helps prevent supply chain pitfalls by allowing for quick adjustments in production, distribution, and inventory levels in response to changes in demand or supply. This flexibility gives businesses a competitive advantage and enables the supply chain to adapt to unforeseen events, such as disruptions in production, changes in consumer preferences, or fluctuations in raw material availability.
The future of supply chain management
Businesses across multiple sectors are experiencing a range of challenges in relation to their supply chains and how they function.
One of the most prevalent problems organisations are experiencing is the increased pressure to improve their sustainability and carbon footprint, particularly with the UK’s wider efforts to achieve Net Zero successfully by 2050.
There are various strategies that can be implemented to mitigate such challenges, for example, creating a circular economy by improving lifecycle management to reduce pollution, waste and improve product life and end of life management.
AI and technologies such as digital twins offer vast solutions to streamline and improve the efficiency of supply chains, which can in turn improve sustainability. We can expect to see this become an instrumental part of supply chains, with AI and other digital technologies alleviating human error and connecting decision making.
With supply chain challenges being ever present and ever changing, it’s imperative for businesses to maintain a holistic overview of their supply chain and be positioned to pivot and adapt according to market conditions and customer demand.
By seeking support and expert guidance on supply chain management and strategy, organisations can ensure that they are able to effectively navigate the numerous potential challenges supply chains face, while maintaining minimum disruption for customers and the wider business.
- Risk & Resilience
