Resources and Tips / Overcoming supply chain disruptions

Overcoming supply chain disruptions

By SME Institute

The uncertainties of COVID-19, an unexpected boom in ecommerce, labour shortages and slowdowns caused by COVID lockdowns all combined in the past few years to create supply chain headaches unlike anything seen in recent memory.

This has led to widespread turmoil across the economy, with manufacturing hold-ups, lost sales, frustrated consumers, and fraught business planners. While the supply chain tangle may be loosening a bit in some countries, it is likely to take years for it to be straightened out completely.

These risks, when realized, can badly undercut a business’s reputation, sales profitability and professional standing. It’s clear that business owners need to respond by re-examining and disruption-proofing their operations—both for the short and long term. And addressing these potential issues requires a comprehensive strategy because, as Deloitte has stated, “a supply chain is only as strong as your weakest link.” Among the challenges that you need to address in this process are:

  • Shortage of components and products

  • Difficulties in forecasting demand

  • Bottlenecks in the transportation network

  • Increasing costs of raw materials and products

  • Here are some strategies for overcoming supply chain challenges:
  • Supply chain diversification.

    Increasing your range of suppliers should help cut down on backorders and late shipments, allowing you to have more confidence in committing to customer service. It also offers the possibility of cutting costs by providing more purchasing options.

    So before any problems occur, make sure you have backup suppliers lined up. Identify suitable suppliers and engage in the same checks you would when choosing a primary supplier.

  • Focus on ensuring you have adequate stock when demand is rising.

    Demand and supply trends remain in flux after more than two years of supply chain problems from the pandemic. The impact on business of these disruptions has shown why it’s important to upgrade your demand forecasting.

    This means it’s crucial to leverage your company’s data and analytics over specific periods of time to make better-informed supply decisions that estimate total sales and revenue. By analyzing historical data, you optimize inventory by predicting future sales volumes and can reach better-informed decisions about everything from materials purchasing to warehousing and trends in customer demand.

  • Plan for the unpredictable.

    The unexpected is becoming the new normal in the post-pandemic era. With demand shifting rapidly and supply sometimes undependable, your business needs a contingency plan, a strategy to address potential supply/demand emergencies. It should include plans for increasing production or sales; a well-developed contingency blueprint for reaching out to other suppliers; cost implications; and how to adjust to potential slowdowns in operations or sales.

    It’s important to specifically identify and understand potential risks that could throw off your operations and get ready for the worst case scenarios. Set out control measures that can be introduced throughout your operation to cut down on risks and have ready-to-go responses to possible events and risks that could slow production or otherwise impede your operations.

  • Reduce risk by involving your business partners in planning

    To properly access and get ready for supply chain risks, it makes sense to include business partners and your suppliers in discussions and planning. They can provide unmatched insight on risks and possible management of disruptions. And you can ensure that they are also employing good risk management practices.

  • Don’t oversell.

    Surveys show that a majority of customers would break off ties with a company as a result of a disappointing buying experience. So overselling can be a disaster in an economy with so many uncertainties. Careful inventory control is the key to avoiding this problem.

  • Look to the future

    Humans simply cannot take vast sets of data and make decisions from them to see what is impacting their product portfolio—especially in enterprises that have many parts and suppliers, experts note.

    The pandemic has shown the limitations of traditional procurement techniques. “Because of today’s operational complexities, companies should establish more efficient supply chains to deliver their products and services to a diversified customer base while maximizing profits,” KPMG states in its 2021 report, “Future of Supply Chains.”.

    Consider using AI capabilities to realize business opportunities earlier, proactively and continuously. Give your business a head-start by leveraging adaptable, intuitive IT.

  • Ensure everyone learns from experience

    Management needs to focus on processes designed to make sure that supply chain issues are accessed and dealt with on a whole-of-organization basis that prioritizes lessons learned. This is important to move business operations forward, reduce disruptive risk and integrate experience into production and/or service provision.

Need for action

No one can say when the bottlenecks and slowdowns in supply chains created by COVID-19 will be fixed. In the meantime, businesses shouldn’t sit still but should adjust and bring in new practices to deal with unpredictable, wildly fluctuating market conditions.

Above all, flexibility is the key to meeting the current challenges in supply. Reliable strategies, such as supplier diversification, contingency planning and demand forecasting, can give your business an edge in confronting supply chain issues and avoiding the pitfalls of overpromising, production delays or a sudden drop in sales.

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