The word supply chain is becoming quite a common topic today in the business, marketing and logistics industry. Even though disruptions in the supply chain, leading to delivery delays, are much less than before, their repercussions are still quite significant.
Disruptions in the supply chain usually influence everyone in the goods and services network, both globally and locally. Disruptions in supply chain resilience have effects as far as manufacturers, and even suppliers of raw materials and components. Shippers, carriers, wholesalers and, ultimately, disruptions in the supply chain may affect consumers, causing delivery delays.
Luckily, there are many effective strategies to foresee these disruptions and mitigate their consequences. The initial step usually involves comprehending the various causes behind these issues and developing an effective plan to reduce their impact.
What is a Supply Chain?
A supply chain consists of many interlinked parts that become whole when contributing to the final product purchased by a customer. The supply chain involves everything from obtaining raw materials to the production of a final product and transportation up to final delivery.
Supply Chain Management vs. Business Logistics Management?
Though you use logistics management and supply chain management interchangeably, logistics forms are a single component of supply chain operations management. Logistics usually involves the coordinating and transit of goods and services from origin to destination or customer. Proper supply chain and logistics management ensures that companies can reduce costs and deliver their packages faster.
The Supply Chain Includes the Following Components
- Analysing and planning all aspects and processes involved in creating the supply chain.
- Sourcing raw materials and transporting them to the production and distribution site.
- Manufacturing and production of the products.
- Distribution of the final product delivered to warehouses, wholesalers or retailers. This is usually part of logistics.
- Distribution of products to customers.
- Reverse logistics which involves the process of returning a defective or unwanted product.
Disruptions in the Entire Supply Chain Causing Delivery Delays
Any disruptions in the supply chain could potentially negatively impact the suppliers, manufacturers, and the customer, which often stems from delivery delays. Though you usually overlook segments causing delays, understanding where these disruptions occur could significantly improve forecasting.
What is a Disruption in the Supply Chain?
A disruption in the supply chain is any significant interruption in the interconnected network of manufacturers, suppliers, transporters, wholesalers, and retailers which could hinder the normal flow of goods and materials.
For manufacturers, disruptions lead to delays in shipping, extended delivery times, imbalances in inventory levels, increased operational costs, and ultimately, higher prices for consumers.
Supply chain disruptions usually arise from two main categories:
- Internal Risks – Risk associated with processes within the supply chain. A business can easily manage these risks because they are within the company’s reach.
- External Risks – They are beyond the control of the company, and not easily mitigated. In the very complex landscape of modern supply chains, companies will face both types of risk, each with its own unique challenges requiring tailored strategies for mitigation.
Some Internal Risks Include:
- Unsuccessful or no planning and forecasting of risks, resulting in under or overproduction, high levels of unsold inventory, or a lack of inventory.
- Internal changes in the business, such as reorganising, causing key staff members with vital knowledge to leave.
- A lack of contingency plans for worst-case scenarios, such as using risky suppliers, especially those in unstable countries.
- Manufacturing errors where orders are wrong, resulting in too many or too few items shipped.
- Shipping Errors cause delays and higher costs, such as other factors such as the miscalculation of package sizes in the warehouse.
External Risks to Consider are:
- External Business changes where your supplying companies may be affected, which indirectly affects your company.
- Information and security threats such as ransomware, or cyber-attacks that target supply chain systems.
- Price Fluctuations in the case of a shortage of consumer products or raw materials which spikes consumer demand, higher transportation costs, or increased labour costs.
- Transportation delays are when shippers or carriers are unable to deliver supplies or products on time, or at all. Factors that could cause this are usually labour strikes, transportation breakdowns, bad weather or a shortage of drivers.
- Economic, political and environmental factors that are out of the control of any company. World events and serious weather fluctuations could easily cause shortages and even higher food prices, or transportation disruptions.
Taking into account the external and internal elements that could potentially disrupt the supply chain, it is vital to have an effective supply chain management system in place to avoid these specific disruptions.
How to Manage Supply Chains Effectively to Avoid Disruptions
To effectively manage their supply chains and mitigate disruptions, manufacturers implement strategies that tackle both internal and external risks. They focus on what they can influence and also on what they can address during uncontrollable risk factors.
Here are a few methods to consider:
Implement Risk Management and Reactive Management
One well-known framework to cope with supply chain risks is the so-called PPRR model: prevention, preparedness, response, and recovery. The PPRR approach works in reducing actively controllable risks by the manufacturer through planning contingencies in the event of unforeseen supply chain disruptions, taking actions on those plans to reduce the impact of an interruption, thus returning one’s supply chain to complete capacity as soon as possible.
A reactive supply chain strategy is appropriate when responding or merely meeting the needs or requirements of its trade partners. On the other hand, an efficient reactive supply chain strategy targets efficiency optimisation and cost management associated with the total delivered price of finished goods.
While the risk management strategy of supply chains can prioritise sources of external risk including geopolitical tensions, extreme weather conditions, and labour force shortcomings, it also requires attention to internal vulnerabilities.
Supplier Diversity
The dependence on one supplier may lead to risks in case the supplier fails. Diversification of suppliers could allow a stronger resilience, though often presents challenges that may even affect the relationships established with current business partners. For example, “If that manufacturer moves to three suppliers, the incumbent supplier may raise prices because of lower order quantities, and the new suppliers may demand commitments of future businesses to feel valued.
In other cases, a manufacturer would want to add a national supplier for an international one simply to minimise the risks involved with trade and shipping across international boundaries. This will imply increased costs.
Similarly, single sourcing would be necessary when one cannot get away from the particular offerings of a single supplier. To attain what experts call “continuous sourcing,” manufacturers must combine imagination with relationship management and view all this as a given aspect of business life.
Transparent Supplier Communication and Relationships
By enhancing communications with suppliers, manufacturers can effectively minimise disruptions and manage their suppliers. Usually, a designated individual or team will oversee supplier relationships and place regular calls, whether quarterly, monthly, or more frequently. This provides an opportunity to address issues and collaborate on solutions.
Thus, it is crucial for manufacturers to articulate all their expectations clearly in the supplier contracts and to conduct regular supplier reviews. often many companies invest in an advanced system to monitor supplies and inventory. This measure ensures that accurate, up-to-date information informs discussions with partners.
Employ a Customer-Centric Approach
In a customer-centric supply chain model, we treat the customer as the first concern and their view dictates what happens. The customer needn’t necessarily adapt to your manufacturing processes. The supply chain in this regard will be clear and communicated proactively so that customers can access information without having to go through support.
This customer-centric approach takes the focus off of the product and puts it back onto the users who rely on it, which goes against the defaulting product-centric approach taken by most businesses. The strategy will set your company apart in this competitive landscape and will give you distinct advantages to navigate shifting market demands and high-escalating customer expectations.
Use Technology
New technologies are also fast making supply chains more resilient in the event of disruption. For example, sophisticated logistics applications help manufacturers match freight loads to transportation capacity faster and more precisely than manual means ever could.
Another example is when companies can integrate data across all the supply chain systems, then optimal planning and order management can take place, thus improving the flow of inventory and giving an effective improvement to their entire supply chain model.
Supply chain management systems are among the key instruments of operation efficiency, strategic decision-making, and overall performance improvement. Providers not using their technological resources have to skip insights that may underline inefficiencies and opportunities for optimisation.
Increase Supply Chain Visibility
A lack of visibility and inadequate access to critical information in the supply chain places many manufacturers at a greater risk of disruption. Visibility in the supply chain gives way to tracking the movement of components, subassemblies, and finished products right from suppliers to shippers. In an integrated system that collects data and also distributes it through key points of the supply chain, enabling easy tracking of procurement, production, shipping, and other operational functions becomes possible for the manufacturer.
The insight into the operations of a supplier helps manufacturers understand which orders are in production and which are in the process of shipment, setting expectations better, and avoiding surprises. Similarly, insight into the sustainability practices of a supplier facilitates the course through which a manufacturer can check on the legal, reputational, or financial risk their partnerships may be introducing.
Invest in Back Up Inventory
Backup inventory, also referred to as buffer or safety stock, is necessary in giving the important pool in which manufacturers and supply chain stakeholders hedge against risk in interruptions of supply or sudden surges in demand.
It is true that carrying additional stock incurs extra costs and eats into precious warehouse space. Still, it is a sensible method by which companies can meet customer demand without a sharp fluctuation in market prices. This reserve becomes vital to avoid shortages of daily necessities like food and medications.
Invest in Agile Supply Chain Managers and Staff
Effective global supply chains require long-term accurate forecasts and strategic planning, for example, a factory may order its production several months in advance. Of course, this structured approach has to be flexible enough to respond to an unexpected challenge that suddenly crops up: a supply shortage, a quality issue, or even equipment failure.
Many companies have already started using cloud-based tools to gather real-time data and, accordingly, revise their plans day by day or week by week. The human capabilities-increased ability of supply chain managers to make on-the-spot decisions, for example, is also crucial for more efficient planning and scheduling. In such a case, advance notification of a labour strike given to the logistics manager might avoid disturbances through rapid switch-over to a substitute supplier.
Monitor Supplier Performance
An unreliable supplier is a serious operational risk. As a manufacturing firm, you identify problems as they occur, assess the impact of problems, offer constructive feedback, collaborate on solutions, and assess if these performance problems are sufficient to terminate the relationship through close attention to supplier performance.
Buyers can judge this performance from suppliers based on their adherence to contracts and their efficiency in operations, such as the quality of work, lead time, delivery times, and delivery precision. Manufacturers often evaluate their business processes, including defect prevention and regulatory compliance, and their financial soundness, considering risks of bankruptcy or profitability.
To Conclude:
Shipment delays are often inevitable, especially when there are disruptions in operations from start to finish. Given that fluctuating lead times may sometimes be unavoidable, effective risk management across all areas of the supply chain is vital to maintain reliability as a service provider.
Thus, the next time that you receive a message of impending delivery delays, you should have a better understanding of all the factors that may have contributed to the postponements of your orders, sales, or shipments.
What are transportation disruptions?
Transport disruption refers to any serious delay in transport because of factors such as traffic congestion, inclement weather, or transport security issues.
What are operational disruptions?
Operational disruptions occur when a natural disaster, hack attack, or other event affects your business.
How does inflation affect supply chains?
Inflation could have a potential impact on supply chain issues. When prices rise dramatically, it will affect profits and negatively impact the business.
