The modern supply network must adapt to meet changing demands and supply chain challenges. Supply chain managers need to plan ahead in order to ensure that everything runs smoothly. The supply chain network faces significant challenges due to a combination of international complexities, consumer expectations, and more routes to market.
This post will explore the key changes we see in the supply chain.
Higher Costs in the Supply Chain
As costs rise throughout the supply chain, profit margins are being squeezed. This can come from many places, and there is no accountability or visibility to reduce them.
The following are major contributors to rising costs:
- Rising fuel costs to transport goods via road, sea, or air.
- The rising commodity prices have a negative impact on the price of raw materials.
- Suppliers and manufacturers have higher labor costs
- Complex international logistics can lead to higher product storage, transfer, and management prices.
Consumers purchase products through multiple channels. As these routes to market expand, so must the supply chain. Each channel requires different supply chain management processes.
- eCommerce websites that sell directly to consumers need fast last-mile delivery.
- Wholesalers and traditional retailers need large storage spaces close to major cities. They also need accurate inventory control to ensure product availability.
- Amazon and third-party marketplaces such as eBay require an in-depth understanding of fulfillment options and strict compliance with their terms.
- Dropshipping retail requires quick international services to ensure that customers receive their goods promptly.
To ensure that customers have a great experience with their products, supply chain managers must manage multiple supply channels, third parties, and other organizations.
Increased Demands from Consumers Lead to Need for Better Speed, Quality, and Service. Consumers have never had more choice, and every industry faces disruption. All touchpoints with end-users must be focused on providing exceptional products and services. When it comes to buying goods, quality and speed are just as important as the price.
- Consumers are looking for online and retail products within days.
- All products must meet consumer quality standards.
- All countries that have safety regulations must ensure the quality of raw materials, goods, and finished products.
- To ethically-aware consumers, it is increasingly important to consider the source of goods.
- Products that satisfy consumer needs for quality, availability, and price are the most successful. These needs can be met only if the supply chain supports them.
Supply Chain Risk Creates Pressure
The supply chain is under pressure from international complexity, economic pressures, trade disputes, and environmental changes. This pressure can quickly turn into significant risks and issues throughout the supply chain, creating serious problems.
Customers, suppliers, manufacturers, logistics, and clients are scattered across many countries, time zones, and continents and require careful coordination and management.
- The supply chain becomes more complex as there are more steps.
- Lack of visibility and siloed data can make it difficult to report, get business intelligence and make good decisions.
- Strong agreements, contracts, and controls with supply chains organizations are required for compliance, quality management, and regulations.
- Supply chain managers need to plan contingencies and mitigation actions in order to manage and prioritize risks.
The Impact Supply Chain Volatility
Complexity and volatility don’t only cause problems at one point in the supply chain; they can also have an impact on the entire infrastructure. Therefore, supply chain managers must address these issues immediately to avoid delays, backlogs, and other problems.
Protectionism and political circumstances have led to the introduction of tariffs on trade routes. This results in increased fees, delays, and longer customs processing times. This results in slower international shipping and allows competitors from different countries to benefit from lower tariffs.
Additional pressures are created by the fact that ships, trucks, and trains must wait for products to be loaded, unloaded, and transferred. In addition, port authorities and operators often charge organizations for storage at the port.
A chronic, ongoing shortage of long-haul truck drivers is causing major problems with trucking capacity and causing delays in goods transporting across borders. Truck driving is becoming less appealing due to the increasing demands on it. As a result, logistics providers have difficulty attracting and keeping the right people.
These are serious problems that affect the supply chain and can be difficult to solve on an organizational or local level. Supply chain managers must understand the main issues affecting supply chains worldwide and develop strong reporting and management plans in order to quickly resolve them. This will be largely due to the ability to predict problems before they occur, build strong contracts, and rely on strong relationships management, collaboration, and prioritization to minimize their impact. The supply chain consulting firms like KEPLER address this challenges on supporting the organization growth.
Read more: Supply chain consulting case study.
