5 factors effecting supply chain health

Supply chains impact almost every person on the globe and disruptions can have disastrous effects. This has been made abundantly clear by the supply chain crisis resulting from Covid-19, including the blockage of the Suez Canal by the Ever Given in 2021. Just this one container vessel is believed to have cost global trade between $6bn to $10bn a week, according to German insurer Allianz.

While these two global crises are fairly unique in the recent history of the supply chain, they highlight just how volatile the system can be when the unexpected emerges. For supply chain managers to avoid such catastrophic impacts, it’s worth analyzing past and present threats - and what can be done to mitigate these challenges. 

Behind the scenes, we see many factors causing the recent supply chain interruptions. But we also understand the forces at play here – disruptive technologies and societal developments transforming the way we do things. In some cases, the solutions we need are already in place and keeping us trucking, but they have yet to become industry standards. Others are just now ready for prime time and are guaranteed to be game-changers. Logistics providers with an eye on the future are diving headfirst into the disruption and seizing opportunities.

DHL 

What is supply chain health?

Supply chain health refers to the overall efficiency, resilience, and effectiveness of a supply chain. It encompasses the ability of the supply chain to function smoothly, adapt to disruptions, and meet business and customer demands efficiently. Key indicators of a healthy supply chain include reliability, flexibility, cost-effectiveness, timely delivery, and sustainability. A healthy supply chain is critical for maintaining competitive advantage, ensuring customer satisfaction, and minimizing operational risks. Regular assessments and improvements are vital to maintaining and enhancing the health of a supply chain.

1. Climate change

According to NASA, more than 97% of climate scientists agree on one thing: climate-warming trends over the past century are extremely likely due to human activities. The global climate crisis is creating much more unpredictable weather patterns, resulting in everything from severe natural disasters to resource shortages. Managers cannot overlook the impact the changing environment will have on sustainable supply chains, whatever the location or line of business. 

What should be done? 

Supply chain professionals need to implement sustainable business practices that ensure they’re not contributing to the problem. This ties in with growing environmental regulations as well as a much more informed consumer that demands ‘greener’ operations. Sustainable practices require the building of more efficient and resilient supply chains for increased flexibility. Efforts to reduce waste, prioritize ethical sourcing and minimize overproduction are just a few steps supply chain leaders can take to combat these environmental stressors.

2. Supply chain management

Supply CM involves everything from material sourcing and logistics to distribution and delivery to the customer. Where SCM is not correctly implemented, the supply chain will suffer from redundancies, decreased efficiency, delays and a failure in meeting customer requirements. 

What should be done?

Effective SCM requires strategic supplier partnerships, increased visibility, and transparency. By coordinating all supply chain activities, there is less chance of disruption to the supply chain. This can be achieved with the implementation of modern technologies such as supply chain management technology and enterprise resource management.

3. Technology

Technology holds the solution to so many challenges facing the supply chain, but if it’s not implemented correctly, or the right technology is not matched to the individual supply chain, then it can become more of a hindrance than a help. Supply chain technology provides stakeholders with real-time access to operations which is hugely beneficial for addressing any potential factors that might disrupt the supply chain. 

Supply-chain technology has a checkered history. Since the development of the first mainframe computers, companies have pursued technological solutions for their supply-chain challenges. Their search has led them up plenty of costly dead ends.

McKinsey 

What should be done?

It’s important to work with software providers who have a keen understanding of the industry so that the technology can match requirements. Once implemented, supply chain managers can enjoy a range of features that streamline the supply chain, increase visibility and meet customer expectations. This should be paired with ongoing training of employees to ensure they understand the technological parameters. Some of the beneficial technology types include:  

• Artificial intelligence
• Drones and robots
• Radio Frequency Identification (RFID)
• End-to-end performance management software
• On-demand delivery
• Advanced supply chain analytics

4. Skills’ shortage

In 2018, before the disruption of Covid-19, alarms were already sounding about ‘severe talent shortages’ of supply chain professionals in manufacturing, retail, logistics and more. Some of the prevalent skills’ shortages are in the field of modellers, data engineers and data scientists – largely because of the speed at which technology is developing. 

What should be done?

Companies must implement training and professional development in the areas of technology so that staff are empowered with these skills. Where possible, partnering with tertiary institutions is beneficial as supply chains are then meeting the skills’ gap directly.   

5. Poor forecasting 

A sudden spike in demand, or not anticipating a drop in demand, can leave managers with an under- or oversupply of inventory, resulting in massive losses. Supply chain managers need to keep a handle on so many factors that can impact product demand such as market trends, seasonality, and customer expectations. But even the most experienced manager couldn’t necessarily foresee a global pandemic or blockage in trade routes. 

What should be done?

Once again, solutions to this challenge lie in technology. AI-powered demand modelling tools empower supply chain managers with real-time insight into company data so that trends and weaknesses can quickly be addressed.  

Key takeaways

Despite impending need for action in these areas, companies are still slow to make the necessary decisions to combat the aforementioned stressors. A recent Gartner survey found that 70% of respondents don’t look beyond three years when developing a vision for their digital supply chain roadmaps. There will always be factors with the potential to affect supply chain, and many of these can be anticipated.

Taking actionable steps such as integrating sustainable business models, building bonds internally and externally through proven SCM practices, aligning yourself with knowledgeable service providers, focusing on necessary training as well as incorporating the right technology will all give you an advantage over competitors.  

By creating a more resilient supply chain that incorporates technological tools, a skilled employee base and more integrated supplier partnerships, managers are able to withstand many of the disruptions – and overcome those that can’t be anticipated with greater speed than competitors.