10 tips to avoid failure in supply chain management
The cost of a disrupted supply chain to an organization is colossal. Having inefficient and unstable supply chain management procedures in place, companies risk a loss of productivity, rising costs, unsatisfied customers, possible regulatory infractions, and reputational damage. Gartner asserts that 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. These global pressures have continued to push companies to re-evaluate their current global supply chain setup to adapt to the needs of such an ever-changing market.
Here are our top 10 tips to avoid failure in your supply chain to get ahead of these global volatilities and secure your organizations success.
Procure from multiple suppliers
Everyone has heard the saying, don’t put all your eggs into one basket – the same goes for your supply chain. Diversifying procurement is essential in avoiding the inevitable and growing disruptions caused by geo-political conflicts, trade embargoes, and the consequences of the COVID crisis, just to name a few. Every day, more companies are looking to diversify their operations quicker than ever. Take the approaching conflict between China and Taiwan for example; a study by Gartner found that in response to recent developments, roughly 75% of supply chain leaders are reevaluating their operations and exploring alternative options, with 55% already doing so. In order to achieve a multi-sourcing supply chain strategy, leaders must analyze the existing supplier network holistically, identify possible dependencies, categorize the effects of the loss of suppliers by revenue impact, and define appropriate countermeasures in order to quickly respond to disruptions in the supply chain.
When thinking about establishing a more sustainable supply chain, great emphasis is put on the analysis of the geographic areas you currently use for procurement and finding ways to diminish dependence on global networks. This is becoming more critical in the today's increasingly volatile world. As mentioned above, companies are choosing to take swift action in their sourcing habits, understanding the ramifications that come with sourcing on a global scale. Supply chain leaders must find the right balance between local and global sourcing, as a deep dependency on one or the other inevitably comes with pitfalls. Although there might be cost differences when sourcing locally, diminishing the global footprint reduces transport distances and your organization's overall spending.
Foster strategic partnerships
If your organization isn’t currently able to operate at scale, reliance on strategic partnerships will help achieve the necessary diversified sourcing approach. By building strong and trusting partnerships with global third-party logistics providers (3PLs) and material suppliers instead of fishing for every cent and squeezing the service providers and suppliers, your supply chain will be better prepared to avoid supply chain failure.
Create layered supply chain systems
If the past few years have taught us anything, it’s that the nature of a global supply chain disruption can’t ever be predicted. With this harsh reality in mind, supply chain leaders 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.
Use data to drive decision-making
By basing decision-making processes on real-time and hard data, supply chain leaders can create a system wherein they can be confident in their decisions and ultimately allows them to plan ahead based on the patterns previous data has provided. Modern technologies analyse supply chain data in real-time and provide valuable information to drive fast decision-making. This way you can anticipate upcoming disruptions and future-proof the supply chain against potential failures. By adopting a data driven mindset, you’ll find a deeper understanding of your customer’s demand, a clear path in planning, enhanced reporting capacity and more.
Create end-to-end global supply chain visibility
A 2019 survey conducted by JDA, Microsoft and Incisiv, indicates 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 modern and data-driven technologies, visibility across the supply chain is prioritised. Supply chain visibility is essential if you would like to fully understand your supply chain and ensure that no area goes unmanaged. Visibility into virtually every aspect of your supply chain system is the only way to ensure that no cost inefficiencies occur, or worse, go unaddressed.
Be informed in real-time about issues in your supply chain
The use of technology to enhance visibility is something supply chain organizations must use to its full potential. To do so, identifying in real-time any issues in the supply chain as well as potential opportunities down the line is integral. 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.
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. 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. By establishing clear processes and tasks for each area within the supply chain, and assigning roles and responsibilities accordingly, the risk for failure is minimized. In this case, if disruptions then occur, there are clear responsibilities in place to rectify the situation as quickly as possible in accordance with the pre-defined action plan.
Create open lines of communication
By creating clear lines of communication between manufacturers, suppliers, staff and customers, the likelihood of disruption occurring in your supply chain will decrease. Information needs to be accurate, up-to-date, and accessible to all involved players in your supply chain network. If not, there is a very high risk that relevant and important information will not be available to decision-makers when problems or deviations arise in order to react in time. The free flow of communication connects every link in the chain, alerting everybody that needs to be involved to possible challenges, and opening discourse on innovative solutions.
Prepare for broader vulnerabilities by creating a risk management strategy
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. According to Gartner, “Key tenets of supply chain risk management are enhancing resilience and improving competitiveness. Supply chain risk management today must account for unprecedented, fast-developing market disruptions, making it difficult to achieve agility and competitive advantage.” 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, making it even more important to plan ahead to mitigate the effects of these stressors.
As the world becomes more and more volatile the links in global supply chains become much more vulnerable. Avoiding failure is critical to get ahead of the current global disruptions and secure your organizations success. Through collaborative efforts by all parties in your network, your supply chain can surely be strengthened. Diversifying your supply chain procurement, creating strategic partnerships, designing layered systems that foster data driven decision making, increasing visibility and accountability, open communication, and risk management are essential in building a resilient supply chain for the future.