Supply chain management crash course: What you need to know
Managing a supply chain is no easy task. You must take into consideration multiple moving parts, spanning from internal operations, partner and vendor relationships, management systems and software, impending risks, and more.
The cost of a disrupted supply chain to business is colossal. By implementing incorrect supply chain management procedures, companies risk a loss of productivity, increased costs and complaints, possible regulatory infractions, and reputational damage.
How to manage a complex supply chain
Supply chains have evolved to become incredibly complex as demand grows and the number of customers expands. Supply chain systems must adapt to the needs of this and future markets, or risk collapsing. To manage a modern supply chain, you must first understand the current climate you’re in. No matter where your supply chain is, there are a few key factors affecting its success and competency.
According to Forbes, the global economy has seen supply chains expanding on scale with many ‘people, systems, vendors, suppliers and processes involved in designing, making, selling, inventorying, shipping and delivering a product’. Supply chains have evolved to become incredibly complex as the demand grows and the number of customers expands. Supply chain systems must adapt to the needs of this and future markets, or risk collapsing.
Managing partner relationships
Managing an intricate supply chain network requires collaboration with several external players to achieve a successful execution strategy. If suppliers are sought out to improve supply chain performance strategically, so should the supply chain manager contribute to this collaborative effort for both parties to achieve consistent results.
Assessing the quality and performance of each relationship to identify whether you are collaborating with a winning partner, or if you are merely sustaining a contact is crucial. As a result of poor partner performance, you will see an impact in areas such as your time, service quality and overall cost. To optimize these areas, let’s take a look at how to implement a few key practices to ensure your supply chain stays on the right track.
Planning ahead
Here are some proven practices you can implement in your supply chain management strategy today:
- Sourcing from multiple suppliers
Diversifying procurement for supply chains is an important way to avoid the inevitable disruption caused by geopolitical conflicts, trade embargoes, global health crises and climate changes. To achieve a multi-sourcing supply chain strategy, you must invest time in analysing the existing supplier networks and categorise by revenue impact if such a disruption occurs. Getting ahead of the problem and making a plan is vital for a smooth-running supply chain.
- Sourcing locally
Establishing a more sustainable supply chain means analysing the geographic areas for procurement and finding ways to diminish dependence on global networks. Although there might be cost differences when sourcing locally, diminishing the global footprint reduces transport distances and results in long-term savings.
- Strategic partnerships
For smaller organisations not able to operate at scale, reliance on strategic partnerships will also help achieve the necessary diversified sourcing approach. By building relationships with global third-party logistics (3PLs) and contract manufacturers, companies are better prepared to avoid supply chain failure.
- Creating layered systems
While the nature of a global supply chain disruption can’t be predicted, supply chain managers should always expect the unexpected and plan accordingly. For example, developing more layered systems to handle different functionalities so that disruptions are kept to a minimum is a great place to start.
- Data-driven decision-making
Now is the time to implement technological innovation as a way to maintain best practices in the supply chain. IT systems that analyse supply chain data provide valuable, decision-making information. This is a way to anticipate future complexities and future-proof the supply chain against potential failures.
- Prioritise visibility
A 2019 survey conducted by JDA, Microsoft and Incisiv, ‘showed that 78% of C-level executives lack real-time visibility across their supply chain, despite plans to invest in agility, intelligence and automation initiatives'. Where supply chains implement data-driven technologies, including AI and BI, visibility across the supply chain is essential.
- Identify challenges
The use of technology to enhance visibility is something managers must use to its full potential by identifying in real-time any challenges in the supply chain as well as potential opportunities down the line. As soon as any visible weaknesses emerge, it’s imperative that the corrected processes or upgrades are then implemented to address these issues and avoid future failure in the supply chain.
- Increase accountability
As is too often the case in corporate entities, individuals are not held responsible for certain tasks. When supply chain disruptions occur, it’s vital that those responsible are held accountable and are able to lead the charge in addressing disruptions to the supply chain. Accountability can be achieved by creating an action plan and establishing a clear strategy for every step of the supply chain. This ensures that every role is assigned accordingly and the risk for disruption is ultimately minimized.
"A 2016 report on supply chain resilience from BCI found that 70% of managers had experienced disruptions the previous year, and for a third of them, the disruption had resulted in cumulative losses of at least $1 million, causing lower profit margins, revenue decline and customer losses. “
Forbes
- Open lines of communication
By creating clear lines of communication between manufacturers, suppliers, staff and customers, chances of disruption to the supply chain decrease. This free flow of communication connects every link in the chain, alerting managers to possible challenges, and inviting discourse on innovative solutions.
- Prepare for broader vulnerabilities
Risk management is vital to every business operation, but it’s more than just considering the traditional disruptions in supply chain – weather, labour concerns, equipment failure or delays. A modern approach to the supply chain involves creating a broader scope for vulnerabilities and planning accordingly. Elements such as geopolitical conflict, terrorism, cybercrime, and sanctions are all real threats to the supply chain.
How to manage the supply chain of the future
As the global market expands and demand increases, the links in the supply chain have become much more vulnerable. In addition to this is a volatile global atmosphere contending with climate changes, conflict, socio-economic instability, and the impact of a pandemic. To avoid future failure in the supply chain, it’s important to consider digitalization, which enables elevated supply chain risk management. These technologies allow for better supply chain visibility, open lines of communication, and the provision of data-driven insights to future-proof operations.
Through collaborative efforts by supply chain managers, procurement, and software providers, the supply chain is strengthened. A stronger supply chain is then able to survive the unknown yet not unexpected vulnerabilities looming ahead and avoid failure.
