Supply Chain Management
Supply Chain Management Insights 2024:
Encouraging development and exercising Resilience
Vast supply chain disruptions brought by the pandemic caused businesses to rethink their strategies, even now other disruptors continue to occur such as difficulty in demand forecasting. The lack of transparency, automation, and inefficient management result in delays. In this article, we present you various insights that can help cope with supply chain disruption.
Invest in Automation
One of the advantages in automation is it reduces human errors and improves supply chain agility by passing routine tasks to bots. On the contrary to popular belief, automation does not completely replace human workers, it enhances them. With tracking, optimization, and alert features, you can speed up the delivery process allowing you to save time and minimize delays. Automations can be implemented in warehouses, inventories, back-office, and logistics. It also includes Robotic Process Automation (RPA) that can handle simple repetitive tasks, and Intelligent Document Processing (IDP) that can extract relevant information to be used in business processes; these tools help simplify handling data. With supply chain automation, you can get better results from your processes. Let’s take a look at Amazon, the AWD auto-replenishment increases delivery speeds by automatically replenishing your inventory. Emerging technologies like Artificial Intelligence (AI) and Machine Learning (ML) that are integrated between processes makes automation intelligent by managing complex operations in a short time in addition to automating repetitive tasks.
Integrating data and processes in a centralized interface could also help you identify problems in an early stage and plan a strategy to mitigate risks. For a successful transition to automation, it is necessary to research and understand: What are the problems that you want to address? What are the possible solutions and which among them fits in our goals? What is the timeline, budget, and objectives for this implementation? What are the necessary staff training and recommended specialists for this technology?. Making long term plans that align with your goals is important in implementing a technology that aims to contribute to efficiency and revenue.
Visibility and Transparency
Another major challenge in supply chain management is the lack of visibility and transparency. End-to-end supply chain visibility is vital in supply chain management. Without this, the risks of disruptions such as: missed deadlines, unnecessary cost, customer dissatisfaction etc. are likely to occur. Being able to monitor your inventory as it travels through the supply chain gives you a better understanding on how your supply chain functions. BI tools also contribute to supply chain visibility with ad hoc reporting, analytics, interactive dashboards, etc., that provides a detailed overview on your business’ performance, making it easier to access and share information. These overviews can help you reduce risk of bottlenecks and identify discrepancies before they turn into major problems. Another way to improve supply chain visibility is by mapping processes. Getting a full view of your operations helps you identify priorities and optimize supply chain strategies. Leveraging integrated supply chain systems also helps with visibility allowing you to communicate and share information effectively.
Supply chain transparency is building trust with consumers and forge stronger partnerships with suppliers. This requires accurate and reliable data that is available to suppliers, manufacturers, consumers, partners etc. Nowadays, consumers tend to be concerned about the product they are purchasing: its quality, origin, or if the product is sourced ethically, making this information available to the public increases trust and improves brand reputation. Inventors also prefer businesses who practice transparency in their supply chain, this gives assurance that materials are ethically sourced, operations are compliant, and processes contribute to the greater good.
Reshoring
Although it has been practiced for quite some time, reshoring resurfaced when the pandemic hit. Long lead times have been a problem even before the pandemic, rising labor cost overseas also takes away the cost advantages of offshoring and other challenges such as market shifts, sanctions, geopolitical uncertainties, and etc. Compliance on overseas regulations can also be quite challenging compared to reshoring where business follows a single framework. Switching operations from overseas to domestic allows business to gain better quality control, support local goods and employment, and optimize supply chain management. With the growing popularity of last-mile logistics, reshoring provides shorter delivery times. Shorter transportation of goods could also lessen the cost as well as the number of goods damaged along the way. Businesses focusing on customer satisfaction will also benefit from reshoring by ensuring the quality of raw materials and production. Managing is also more efficient within the same country compared to overseas, this also increases collaboration and better understanding of the market. Repatriation supply chain also boosts the economy allowing for more innovations and investments in R&D as well as increasing local employment.
The factors to consider when reshoring is gathering and analyzing data: understanding how your operations work and what are the risks that could affect the transition. Depending on the country and industry, businesses originating from a country with high labor costs may minimize costs offshore, which is why it is important to first evaluate your business needs then build a strategy: calculate financial trade-offs, set up a timeline, and allocate resources. It is also important to set goals and evaluate effects while monitoring progress. Creating a strategy on supplier diversification and building partnerships are also critical in planning. Reshoring is not a one-size-fits-all solution and can be challenging at first but with proper planning and execution, would result in better performance and efficient management by bringing your business closer to suppliers and consumers.
Risk Management and Resilience
Material shortages have been a problem for quite some time and it got worse when the pandemic hit. Focusing on disruption avoidance is the primary objective in risk management. According to Gartner, 89% of companies experienced a supplier risk event in the past five years, yet awareness and plans to mitigate risk lack maturity. Considering various factors such as ripple or domino effect and anticipating potential problems will help you apply effective countermeasures to potential scenarios. Carefully selecting and evaluating suppliers helps you learn about their strengths, weaknesses, opportunities, and threats giving you a head start in managing potential risks. Resilient supply chains work by diversifying suppliers and manufacturing partners, optimizing distribution routes, and increasing collaboration with suppliers and manufacturing partners. Increasing inventory buffers and adding sourcing strategies for critical raw materials will help businesses prepare for inevitable disruptions. It is also important to prepare for future fluctuations by continuously managing and monitoring demand as well as understanding its impact. Ensure that the critical areas in supply chain such as: warehousing, logistics, documentation and processing are properly managed.
Planning is the most important factor in building a resilient supply chain, a wide understanding in supply and demand is also required in creating a risk management approach. Leveraging new technologies to analyze data helps businesses create a more relevant strategy because understanding all parts of your supply chain will help you recognize unusual activity before it becomes a major problem. Setting up workflows and policies also help managers get a big picture of their operations and spot vulnerabilities. This also includes having a flexible contingency plan and recovery strategy to help you respond with disruptions quickly. We cannot predict what or when is the next crisis but we can evaluate the probable risk and implement strategies. Having a risk management system in place and being able to flexibly switch between suppliers to ensure continuous production whenever there’s an emergency is the key to resilience.
Sustainable Supply Chain
Integrating environmentally responsible practices in product design, sourcing, production, storage, logistics, and product management creates a sustainable supply chain. Recently, customers’ preferences are diverting to environmentally friendly products and tend to support companies that highlight sustainability practices. Companies are also taking steps in addressing global issues by reducing waste, improving labor conditions, and lowering greenhouse gas emissions. Investors also choose to invest in companies with good sustainability practices as reputation and financial risk is at stake. Additionally, manufactures also benefit in sustainable practices by reducing negative impacts in the environment. According to the BCI Supply Chain Resilience Report 2023, natural disasters and adverse weather are among the top five supply chain risks. Eco-friendly practices address the issues related to delays in logistics due to bad weather and material scarcity due to pollution. Sustainability practices are also cost-efficient in the long run; fewer materials used leads to lesser cost to produce a product, durable materials leads to less waste and improves brand reputation, adjusting packaging size to the actual item size leads to cheaper shipping cost and less unnecessary packing.
Environmental, social, and governance (ESG) have become the center of most business strategies nowadays. Sustainability involves: creating awareness on current environmental and social issues, clarifying sustainability objectives, identifying pain points in their operation, assessing risk and opportunities, and planning sustainable practices that aligns to company goals. Sustainability goals should also be smart, manageable, attainable, relevant, and time-bound combined with collaboration among members. Implementation of various practices such as: Supplier Code of Conduct, visibility and transparency, ethical sourcing, green packaging, sustainable transportation, etc., contributes to sustainable supply chain practices.
Supply chain management can be quite challenging nowadays but staying informed in current demands and improvements will help your business stay relevant. Fostering strong partnerships with suppliers is one of the most important aspects in supply chain management. Good relationships create healthy collaboration which lowers cost, reduces miscommunication, delays, and quality issues, and increases innovation performance. Leveraging data and consistent monitoring enables you to build better strategies. Data is one of the most important factors in supply chain management, reliable data helps you create a reliable plan. Appointing a supply chain expert to gather and analyze data gives you an advantage in planning and risk management. Have multiple backup plans in place and consider multiple suppliers and manufacturing partners to ensure continuous operation whenever problems arise. Efficiency can also be improved by taking advantage of the latest technologies such as business intelligence tools and supply chain management softwares. Integrating sustainable practices also leads to minimizing cost, maximizing profits, and maintaining a good business reputation.
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