10 tips to avoid failure in supply chain management

Jonas Mehrhoff
Jonas Mehrhoff
May 23, 2022
5 min read

Note on the authors

Heiner Murmann is the founder and CEO of Orkestra SCS, a logistics, technology and services company. In addition, Heiner serves as Executive Chairman for Evolution Time Critical and President of The Five Inc., and as an Advisory Board Member for both Metro Supply Chain Group and Black & McDonald Limited. Notably, Heiner previously held various senior executive roles at DB Schenker, one of the top three global logistics companies, as a Member of the Board of Management responsible for Air and Ocean Freight, and as CEO of the Region Americas.

Arnold da Silva, Senior Ocean Freight Advisor for Orkestra SCS, is head of an ocean freight consulting company where he actively advises global shippers on ocean freight strategy and execution. With 40 years of experience in the ocean freight industry, Arnold served as Executive Vice President for Ocean Freight Region Americas for DB Schenker. Arnold's passion is to conceptualize and implement innovative ocean freight solutions that transform one’s supply chain and promote a shipper's success.

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. 

Brexit, the U.S.-China trade war, a general geopolitical trend toward nationalization — and lately the COVID-19 pandemic — have changed the priorities of many supply chain leaders. They now need to balance cost and operational efficiency with greater supply chain resilience.

- Gartner

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. 

Here are the top 10 ways to avoid failure in supply chain management.

  1. Sourcing from multiple suppliers
    Diversifying procurement for supply chains is an important way to avoid the inevitable disruption caused by geo-political conflicts, trade embargoes, global health crises and climate changes. To achieve a multi-sourcing supply chain strategy, managers need to analyse the existing supplier networks and categorise these by revenue impact if such a disruption occurs – and make a plan. 
  2. 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.
  3. 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.
  4. Creating layered systems
    While the exact nature of a global supply chain disruption can’t necessarily be predicted, supply chain managers should always expect the unexpected and plan accordingly. One such example is by developing more layered systems to handle different functionalities, and to build in redundancy so that disruptions are kept to a minimum.
  5. 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 information to drive decision-making. This is a way to anticipate future complexities and future-proof the supply chain against potential failures.
  6. 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 prioritised. 
  7. 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 and avoid failure in the supply chain.
  8. Increase accountability
    "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. To minimize the financial, reputational and customer-base damage caused by disruptions, companies need to appoint an accountable leader and provide them with the necessary infrastructure that enables them to take control and end the crisis.” - Forbes

    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 make the necessary recommendations and lead the charge in addressing disruptions to the supply chain. Accountability can be achieved by:

    - Creating an action plan: By establishing a clear strategy for every step of the supply chain, and assigning roles accordingly, the risk for disruption is minimized. Furthermore, where disruption does occur, those accountable are tasked with rectifying the situation according to the action plan. 

    - Creating key roles: Companies need to assign positions dedicated to the supply chain rather than simply focusing on risk. 
  9. 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 opening up discourse on innovative solutions. 
  10. Prepare for broader vulnerabilities
    “Key tenets of supply chain risk management are enhancing resilience and improving competitiveness. But supply chain risk management today must account for unprecedented, fast-developing market disruptions, making it difficult to achieve agility and competitive advantage.” - Gartner

    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.

Key takeaways

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 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 futureproof 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.

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10 tips to avoid failure in supply chain management

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