Supply chain management (SCM) is the management of the entire production network of goods or services—starting from procuring raw material from suppliers to converting it into a final product and distribution to the end customers.
Globalization has transformed the ways the logistics industry operates. To stay ahead of the competition in the demand-driven world, supply chain leaders need to be proactive in their approach to reduce friction at all internal and external points of the entire chain, bring transparency and visibility in all processes, minimize disruptions, and provide the best products and services that deliver the ultimate customer experience.
Supply Chain Disruptions During Pandemic
COVID-19 drastically changed the business trajectory and also transformed customer expectations. The closing down of borders, social restrictions, and global economy shutdown severely impacted many industries, particularly the manufacturing and supply chain industry. Delays in logistics and delivery of products and services to the customers disrupted the supply chains, and many businesses suffered huge losses.
CNBC surveyed about 2000 SMB (small and medium business) owners in 2021, out of which 70% reported experiencing rising costs of supplies and 55% reported disruptions in the supply chain. Another study by Oracle concluded that 92% of customers believe there will be more supply chain disruptions in the future, but 81% are willing to pay a premium for the smooth and timely delivery of their items.
Other possible causes of disruption include:
- Natural disasters—Be it local or global, natural disasters, such as floods, hurricanes, earthquakes, tornadoes, wildfires, or nuclear events, can disrupt the supply chain.
- Cyber attacks—Flawed security at any point of the supply chain leads to data breaches, compromise of sensitive information, or even financial losses.
- Transportation delays—Be it land, air, or sea, probability of occurrence of such delays always exists, but the lockdowns and restrictions during COVID-19 particularly disrupted the supply chain workflows.
- Product failures—Quality is the backbone of any supply chain business. In addition to financial losses, you may lose valuable customers forever if they receive faulty products.
- Economy changes & price fluctuations—Several factors may cause price changes. Increased demand leads to increased supply, hence increased prices, and vice versa. Price changes affect your suppliers, which impacts the whole supply chain.
Best Practices or Tactics to Minimize Disruptions
As business and life adjust to the changes and disruptions caused by the COVID-19 pandemic, it’s critical for supply chain leaders to be more resilient and take immediate actions to rebuild and sustain their business operations, maximize profitability, and meet customers’ expectations.
You need to have a formal supply chain strategy in place that aligns with your business objectives by minimizing disruptions and maximizing profits. Here’s a list of a few best practices to help you handle disruptions and optimize the supply chain.
Recruit skilled supply chain team
In order to run the supply chain operations smoothly, you need to have a dedicated team of professionals with clearly defined goals to handle all workflows and disruptions. With more people preferring remote work during the pandemic, many companies lost a huge skilled workforce. You may need to update policies and procedures to offer flexibility to your workers. Only by providing high-quality training to your workforce, empowering and trusting them, and improving cross-functional team communication, can you retain skilled employees and improve your supply chain operations.
Diversify supplier base
Establishing and maintaining a healthy supplier relationship is the heart of successful supply chain management, as it plays a central role in revenue generation. Suppliers include distributors, third-party vendors, manufacturers, and wholesalers. This relationship needs to be strategic and growth-focused. You shouldn’t put all your eggs in one basket. You need to make sure that you have multiple high-quality and trustworthy suppliers. In the event that one supplier faces material shortage, your workflow won’t suffer and there won’t be any delays. Detailed agreements with suppliers, timely payments, trust, and transparent communication are the key factors to building a strong supplier relationship.
Adopt digital technology to streamline processes
Adopting the right innovative technologies where needed is most crucial to any business to save time and cost and reduce human error. Artificial intelligence (AI), the Internet of Things (IoT), machine learning (ML), and enterprise resource planning (ERP) software enable you to monitor real-time information from multiple sources, forecast demands, and direct your product management team to proactively take action and deliver what consumers require. Other benefits include gaining visibility of the whole operation, monitoring employees’ performance, better communication with stakeholders, keeping track of supplies, optimizing inventory management, and effective order tracking and delivery.
Secure your supply chain by preventing cyberattacks
Be it physical security of products or the cybersecurity of software or applications, you need the best supply chain security practices to mitigate risks. Many cyber threats exist, as there are several touchpoints throughout the supply chain—from raw material supplies to production and manufacturing, logistics, and transportation.
According to an Accenture report, over 40% of cyber attacks originate within the extended supply line. Organizations need end-to-end supply chain traceability solutions to identify such vulnerabilities and take prompt action to secure the whole line. This means you should have basic controls in place including secure storage and encryption of data, proper documentation of suppliers, working with trusted vendors, a tool to track and monitor employees and customers, and an emergency response plan to handle any data breaches. You should also consider hiring cybersecurity experts and deploying AI to detect threats proactively.
Supply chain elasticity
Is your organization responsive and flexible enough to readjust itself to fluctuating demands? Expanding and contracting your logistical capabilities based on consumer demands or in face of disruptions, such as the global pandemic, is known as supply chain elasticity, and it’s the most critical factor of any successful supply chain management. It’s basically about achieving the optimal balance of standardization and customization to meet customer demands.
A number of factors are involved including demand forecasting and creating an agile infrastructure that minimizes costs and risks and improves efficiency and customer experience. With increased automation and innovative technologies, you can
- Forecast changing consumer demands
- Manage the number of orders
- Reduce turnaround time
- Deliver high-quality product
- Reduce shipment and delivery time
- Gain high return on investment (ROI)
- Reduce churn rate
Every Supply Chain Business Should Adopt Digitalization and Elastic Approach
Overwhelmed by COVID-19 and other geopolitical disruptions, many organizations are finding it challenging to revitalize their supply chain business in the face of a “new economy” and adjust to changing customer preferences. Only by deploying innovative technologies and adopting an elastic approach, can you bounce back from such crises. An advanced ERP suite helps you track KPIs, including purchase orders, inventory to sales ratio, warehousing costs, and logistics costs and centralize the whole documentation process to minimize errors and risks with automation of all operations.
You can be a winner in this changing economy by being socially responsible, improving the workplace for employees and the community, and putting your customers first by quickly responding to their fluctuating demands.