Supply chain management is the crux of today's globalised and interconnected commercial industry. It is the pillar behind the seamless availability of products and services.
Supply chains are not just mere logistics procedures; they tackle various problem-solving mechanisms. Supply chains are an indispensable tool for consumers and businesses alike.
In this blog, we will address the various problems supply chains face and how they are solved quickly and efficiently by a robust SCM system. If you want to establish a career in supply chain management, keep reading to learn how these logistics marvels navigate complex challenges and ensure stellar business operations.
What is Supply Chain Efficiency?
One should comprehensively understand supply chain efficiency to excel in supply chain management. Supply chain efficiency is not only known for its supremacy in cost efficiency or achieving customer satisfaction; it also helps gain a competitive edge in the global market.
The supply chain streamlines various procedures, enabling minimal delays, reducing excess inventory and eliminating bottlenecks. Adopting an accurate forecasting method alongside investment in advanced technology is essential for efficient supply chain management. To pursue excellence, businesses should consider that supply chain efficiency is not about cost-cutting and enhanced values. It involves continual improvements and a proactive approach to problem-solving.
To understand supply chain efficiency, a supply chain management course is ideal for upcoming professionals eyeing the role of supply chain managers.
Importance of Supply Chain Efficiency
Supply chain efficiency plays a vital role in the sustainability and success of organisations across various industries. The reasons for their importance in the global marketplace are listed below:
- Cost efficiency: Efficient supply chains minimise operational costs via streamlining through optimised transportation and reduced inventory holdings.
- Customer satisfaction: With supply chain efficiency, consistent customer satisfaction has become feasible because of consistent product availability.
- Risk mitigation: Efficient supply chain management promotes resilience against any disaster, integral to risk mitigation.
- Global expansion: Supply chain efficiency promotes global expansion as it enters and adapts easily to different geographical and cultural landscapes.
Problems Solved by Supply Chains
An efficient supply chain is always up for solving any problem that might arise shortly or in the present. Here are some issues supply chains face and how they could be mitigated.
1. Material Shortage
In 2022, McKinsey and Company considered material shortage as one of the significant challenges of the global supply chain. It also specified how these have disrupted the overall supply chain efficiency and faced more disruptions than in 2020-2021.
Methods to Overcome the Problem: Supply and Demand Change Executive has specified that around 57% of the disruption would be solved if the manufacturing procedure is diversified. It should include strategies like supply chain automation, efficient supplier collaboration and focus on inventory management.
2. Lack of Supply Chain Visibility
Supply chain visibility is pinpointing and tracking logistics movement, be it raw materials or other counterparts. High visibility is the pinnacle of efficient company operations and seamless business. During the pandemic, supply chain visibility was in shambles, hampering the overall distribution procedure.
Methods to Overcome the Problem: To increase supply chain visibility, analyse the current pain points. Remedy these areas adhering to the company's goals and objectives. Eliminate any form of siloed technology and implement a robust supply chain management system.
3. Demand Forecasting Complexity
The capacity to effectively predict consumer demand and anticipate future requirements is crucial to effective supply chain management. Creating good customer relationship management and ensuring corporate profitability and growth is critical. Some approaches organisations use for demand forecasting include exponential smoothing, moving average forecasting, auto-regressive integrated moving averages, bottom-up forecasting, and multiple aggregation prediction algorithms.
Methods to Overcome the Problem: One of the integral methods to overcome these problems are:
- Providing clean and reliable data.
- Having an actionable input towards the affected stakeholders.
- Imposing robust analytics.
- Building strong collaborations with other supply chain partners.
4. Supply Chain Fragmentation
Fragmentation occurs when the supply chain is dispersed among various suppliers and manufacturers. While this may provide some pricing or quality advantages, controlling the supply chain may be difficult. The pandemic once again demonstrated how unstable the fractured supply chain can be when manufacturing is closed in one country or borders are blocked altogether, prohibiting the transportation of required parts.
Methods to Overcome the Problem: Improved data management is the most effective strategy to address the problems caused by supply chain fragmentation. Remove isolated systems that are unable to communicate with one another. Actively capture disruptions to the supply chain and assess their potential impact on the business.
Congestion at Critical Ports
Congestion at crucial ports can be induced by circumstances other than those seen during the pandemic. The reasons are:
- Outdated and insufficient equipment.
- Labour strikes.
- Insufficient transmodal capabilities.
Methods to Overcome the Problem: Increasing supply chain visibility and extending time leads would exponentially help overcome these problems. Investigation into proper ports can also help mitigate congestion.
Increased Freight Costs
Transport and freight costs are also affected by the epidemic, global social upheavals, and rising inflation. Fuel prices have soared, affecting all modes of transportation by land, sea, and air.
Methods to Overcome the Problem: Consolidating shipments on time alongside searching for suppliers within geographical proximity is one of the best mitigation procedures. Furthermore, imposing dual sourcing is another efficient way to decrease freight costs.
Digital Transformation and Integration
Improved digital technology is required to gather, analyse, and integrate high-quality, up-to-date data. This data can assist the automation and forecasting technologies required for today's supply chain management.
Methods to Overcome the Problem: Perform a supply chain audit. Evaluate present circumstances and prioritise requirements. Investigate potential technologies that satisfy the requirements. Request product demonstrations to witness the technology in action. Establish a team of implementation representatives from all affected parties.
Strong and effective supply chains are crucial in dealing with critical organisational concerns. They address issues like inventory management, fluctuating demand, and cost optimisation, eventually improving competitiveness and customer satisfaction.
If you are looking for an efficient supply chain course, check out Imarticus Learning's Professional Certification in Supply Chain Management and Analytics. This supply chain course has a campus immersion programme and helps you understand the new age of supply chain management.
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