Supply chain management is a key component in the production flow of goods and services. It helps move raw materials from various suppliers to businesses that sell directly to consumers. Besides manufacturers, supply chains also include stockists, distributors, retailers, and warehousing services.
It is important for all these elements to work in unison to ensure customer experience isn’t broken.
In 2021, 93% of sellers lost revenue due to supply chain disruptions. Orders were delayed, inventories were running low, and businesses were losing money as they ran out of stock.
In this article, we will explore the key issues in supply chain management and how to overcome them.
- Common challenges in supply chain management for small and large businesses
- Detecting and mitigating supply chain issues in advance
- Key digital transformation elements for businesses to practice
But first, let’s talk about why is supply chain management a challenge.
Why is supply chain management challenging?
As mentioned earlier, there are multiple stakeholders involved in the supply chain. If there is a delay caused by any one stakeholder, that’s going to have a ripple effect on others. Hence, it is important to have a single platform to manage these stakeholders with a manufacturing CRM.
In our conversations with multiple small businesses, tech-providers, and manufacturers, we identified what makes supply chain management challenging.
Here are a couple of factors:
- Small businesses rely on third-party vendors a lot in their supply chain process. Delays caused by any one element, disrupts it all.
- It is always good to be over prepared. But businesses often don’t have the right technology to capture data and predict demand trends.
- There’s always a margin of error or delay due to unforeseen circumstances—a war breaking out, or a natural calamity shut down operations. Accounting for these is also challenging.
- And then there’s the human element, judging buying patterns and consumer demands.
- It is also not possible for new businesses to invest in an expensive technology stack of just “go-to-have” tools.
Let’s dive deeper into the challenges of in supply chain management faced by different scales of businesses.
10 Key Issues in Supply Chain Management
Challenges in supply chain management are related to both external and internal factors in manufacturing businesses. This section will elaborate on these and the implications of these issues.
1. Navigating material shortages and scarcity
Post the pandemic, lots of small suppliers and manufacturers have had to shut down operations. Retailers and distributors are dealing with inflated prices, material shortages, and are not able to match demand.
A good example would be the chip shortage for Xbox—it lost 13% year-on-year to the rising price of new components.
- Inability to meet consumer demand
- Loss in profit margins
- Revenue losses
2. Battling port congestion
Overseas businesses are dependent on markets like India and China for their inventory as they offer cheaper labor and higher margins. But we all remember what happened at the Suez Canal in 2021.
Port congestion can happen due to any of these reasons—ships run aground, traffic queues at ports, and delays in shipment loading/unloading can cause a business to lose days if not weeks.
- Delays in shipment
- Higher freight charges
3. Inability to forecast demand
This is one the most challenging yet internally manageable issue a business needs to overcome. It requires for you to stay on top of consumer demand and meet expectations before trends change. You need to minutely track how quickly or slowly your SKUs (stock-keeping units) sell.
After the pandemic, there was a radical shift in consumer demand. Businesses had to pivot and meet expectations all while trying to stay afloat. It is important to capture buying patterns with accuracy.
This is when managing merchant lifecycle on one platform can help businesses track performance in real time and build trend reports.
- Poor customer experience
- Inefficient inventory management
- Increase in warehousing costs
4. Lack of supply chain visibility
It is necessary to have visibility on how raw materials and products are moving down the supply chain. Businesses need this tracking mechanism to create a lead time on when the product reaches the market and finally to the end consumer.
Manufacturers have deployed field teams to collect order requests as well as build supplier relationships. Field team interactions and conversations need to be mapped in a detailed manner to create end-to-end team visibility, identify inefficiencies, and take corrective action in due course.
- Inability to forecast demand
- Inefficiencies in field team processes
5. Handling supply chain fragmentation
Manufacturers have multiple suppliers and distributors to manage their flow of products. This helps with price advantages and quality control. But adding more players in the mix proves challenging to manage supply chains.
Problems arise to a lack of data management. How do you ensure that materials are getting delivered on time or track quality of products received from different suppliers? Using different systems causes siloes and a breakdown in communication.
- Reduced productivity of suppliers
- Breakdown in supply chain processes
6. Changing consumer attitudes
Businesses that can predict consumer trends tend to stay ahead of the curve. But it is one thing to gauge the change in expectations and another to keep up with it. That’s where most businesses fail to accommodate.
Change in demand leads to additional purchase orders, getting approvals, identifying and onboarding vendors to help supply the quantities, overstocking, resource and capital waste. It essentially is a supply chain and procurement nightmare.
- Slower vendor onboarding
- Revenue loss due to demand mismatch
7. Mitigating risks in supply chain
At one end of the spectrum, we have businesses relying on an army of suppliers while at the other end, certain businesses can afford to have only a handful. Cost implications also force them rely on outdated technologies like excel sheets to manage supply chain data.
Mitigating external risks such as shifting consumer demands or predicting shortages becomes challenging for a small-scale business. Use of dated technology also hinders the ability to scale.
- Inability to drive down cost of production
- Inability to pivot in time
8. Managing Suppliers and Compliance
It is important for the entire team to speak the same language with external stakeholders. But, creating standardized communication that can be shared with suppliers can get challenging.
Dealing with third parties involves a lot of back and forth. It is important to avoid a “your word against mine” situation. But teams have their own processes, conversations happen offline, and maintaining compliance and liability can lead to internal tiffs.
- Losing orders or leads
- Inability to personalize at scale
- Sour supplier relationships
9. Increasing transportation and freight costs
Ahh the nervous system of supply chain—transportation. And because it is so important, even a slight change in costs can disrupt the supply chain. The rising price of crude oil, maritime pollution due to oil spills, and increase in freight costs are a hindrance in maintaining status quo.
- Price increase of final goods
- Lower profit margins
10. Digital transformation and integration
Technology and automating processes are essential shifts a business will have to make as they scale. The ability to manage and track orders online, set up automated workflows, build feedback loops, measure vendor performance, etc prove useful for supply chain management.
But these also increase costs in terms of technology and training. Adoption is a different challenge on its own. So, it gets difficult for businesses to justify the cost and derive a ROI from it.
- Slowdown of business processes
- Loss of productivity
- Breakdown in communication
Supply chain management might seem like a tall order, but being equipped with the right strategies and techniques will help you overcome these challenges easily. Let’s look at how to mitigate and be better prepared for them.
How to overcome supply chain management challenges
Here are 6 actionable techniques that can help you overcome supply chain management challenges. These include the right blend of utilizing technology, people management, and optimizing resources that are already available.
1. Enhancing end-to-end visibility
The first step to enhancing visibility is identifying bottlenecks and pain points for all the stakeholders involved in supply chain.
You can build and map journeys of various processes like –
- Vendor onboarding
- Generating order requests
- Timelines of delivery statuses
With a supplier management platform like LeadSquared, you can digitize onboarding, build a faster approval process, map interactions, track order statuses, and measure performance on the same platform.
Enhancing field team productivity
Automate workflows and notifications
Stay on track with detailed reports
2. Improve demand forecasting techniques
Forecasting can only be as good as the data which is provided. Tracking various components and processes is important but it’ll help your business only if you know which metrics to track. Here are some techniques that will help you improve forecasting: –
Provide clean data
- Whether it is supplier or end-user data, map it using the methodology. Remove duplicates to avoid inflated numbers.
Collect qualitative insights from stakeholders
- The system can only do so much. It is your responsibility to talk to your teams, suppliers to get qualitative insights directly from the field.
- It is important to build a single dashboard view of the most important business metrics. It helps you identify outliers and take corrective action in time.
Pivot wherever necessary
- If you are on top of your numbers and insights, changing course or shifting gears becomes easy as you always keep room for unexpected demand.
Fortify relationships with your suppliers
- It is important to build good relationships with your suppliers as they have access to the ground realities and shifts in the consumer’s mood.
3. Adapting to digital transformation
Using technology to automate processes improves efficiency and drives revenue growth. Relying on Excel sheets or clunky legacy systems might hamper your speed to scale business. Instead, adapting digital processes that don’t require technical expertise, use low-code software to improve productivity, and integrate communications between all the tools will help you carve a niche in the competitive landscape.
Here are a few tools to lay the foundations of digital transformation –
- Using a CRM system to manage and track communication with your leads
- Having a dealer management system to oversee dealer performance and order requests
- A Manufacturing ERP system that manages your inventory, procurement, and post-sales experiences.
Going digital and measuring data has become priority for most industries. Identify and invest in platforms that help you build value at a faster pace.
4. Diversifying sources and alternative shipping ports
As you grow, expanding your supply chain becomes necessary. As a business, you might rely on multiple suppliers for the same product. And that’s great, because diversifying your resources and hedging the bets improves your margins.
Here are market-tested tips you can use:
- Identify suppliers that are inactive or slowing you down. Track their performance closely.
- Don’t cut it too close. Extend deadlines and lead time for deliverables as much as possible.
- Look at the markets you sell best in and try to find local suppliers to cut down on delivery times.
- Look for times or ports that don’t have prolonged congestion times.
- Stay on top of your delivery dates and statuses to improve customer experience .
5. Automating processes to improve efficiency
Suppliers and consumers seek acknowledgement. It has become standard practice to respond to every inquiry or request that comes your way. But doing that might not be humanly possible. That’s where automation helps you beat competition.
Automate service requests, collect information through chatbots, share catalogs using automated texts, send out status updates, and more. Create a sound network of omnichannel communication with your suppliers and customers to build trust.
Improve supply chain management through digital transformation
Digitizing communication, outreach, and onboarding processes has become the norm across various industries. Investing in tools like LeadSquared helps overcome internal supply chain challenges, build stronger supplier relationships, and streamline field sales operations.
How can we help?
- Mobile app to improve field team productivity
- Digital supplier onboarding processes
- Robust integrations with dealer management systems
- Detailed reports to track performance and revenue
Talk to an expert and set up a personalized demo.
Businesses face a multitude of internal and external challenges in supply chain management. These include dealing with port congestion, scarcity of resources, inability to forecast demand, increasing freight and transportation costs, and more.
The most important aspect in mitigating supply chain management issues is to adopt technology and automate processes. This results in improved supplier tracking, predicting demand, and timely diversification to mitigate demand changes.
Here are top 5 strategies for successful supply chain management –
Enhancing end-to-end visibility
Improving demand forecasting techniques
Adapting to digital transformation
Diversifying sources and identifying alternative shipping ports
Automating processes to improve efficiency