Supply chain managers face issues on a daily basis, and almost all require direct attention and a quick response. These problems can vary in severity and complexity. With such importance placed on stable and reliable supply chains today, these issues are now top of mind. After all, supply chains lie at the core of successful business operations, and issues will undoubtedly impact a business’s bottom line.
In this blog, we break down some of the major issues facing supply chain managers.
Before we begin: what is supply chain management?
Supply chain management is the flow of goods and services between organizations and consumers from the point of origin to point of consumption.
It also includes movement and storage of raw materials, works-in-progress, inventory, and finished goods. Supply chain management often involves systems engineering, logistics, procurement, operations management, and sales.
Effective supply chain management is important because it can reduce costs, time, and waste in the production cycle. It can also improve inventory management, enhance customer satisfaction, and increase cash flow.
Now, let’s take a look at some of the bigger challenges of supply chain management and how you can manage your supply chain more effectively.
1. Managing customer expectations
One of the challenges of effective supply chain management is managing customer expectations. Supply Chain Managers are service providers. They provide services for indirect procurement requests, project and manufacturing requests, and outside customer requests. Consequently, Supply Chain Managers need to deploy efficient workflows to make sure requests are fulfilled on time, every time.
When efficiency is business priority number one, Supply Chain Managers can begin to deliver on customer expectations. For example, you can receive information in a fast and accurate manner and see through the timely fulfillment of resourcing, planning, sourcing, and shipping.
To correctly manage these expectations, though, it requires the right tools. You must use appropriate spend control software and, of course, maintain transparent communication with customers.
With the right spend management platform, you can enter requests and approve orders from under one roof, and without needing to follow-up with the requester (which will delay orders). Ultimately, this gives you supply chain visibility and lets everyone (not just yourself) track orders through to invoice payment.
2. Managing suppliers
Along with managing customer expectations comes managing suppliers. Good relationships with your suppliers are key to managing your supply chain effectively. In an ideal world, you’ll proactively engage with suppliers through Supplier Relationship Management.
It’s up to you to know how many suppliers are needed, how to handle delays, and how to receive orders. And each step requires clear thinking and a unique process that slots in with your business’s overall spend culture. On top of these duties, you’re also responsible for finding suppliers with consistent and reliable service, and at a price that doesn’t hurt your bottom line.
But here’s the thing: there is always a supplier that ends up experiencing issues. To resolve these challenges quickly, you need access to reliable data at a moment’s notice. This way, you can catch scheduling, quality, and delivery issues before they occur and proactively engage and communicate with suppliers about problems to align their expectations.
3. Maintaining quality and sustainability
One of the challenges of global supply chains is the concern about the quality and sustainability of products that are made in other countries. This is particularly true when components of a product need to meet regulatory standards.
Quality is a critical factor in maintaining your company’s reputation. It ensures the materials you receive meet the specifications requested and that they’re fit for purpose. In addition, you need to ensure ethical sourcing and do your part to reduce your impact on the environment.
In short, you’re responsible for ensuring suppliers and their products maintain environmental and quality standards. To do this effectively in today’s globalized supply chain, you’ll need a tool to assist you. For example, third-party inspection services and software tools are designed to collect and monitor supplier safety and environmental information.
4. Access to data
In a modern-day supply chain, access to your supply chain data is one of the most important requirements. Access to data can help you manage your supply chain more effectively. Without this, you can’t begin to make educated improvements to your supply chain or reduce risk.
Some common metrics to improve supply chain efficiency include:
- Cycle time: Request-to-approval, approval-to-purchase order, invoicing-to-invoice payment.
- Consolidation of items/vendors: A common area for identifying cost savings and reducing the number of suppliers to manage.
- On-time delivery reporting: Knowing which orders are outstanding both from a finance perspective and a supplier delivery management perspective.
- Budgetary controls: Ensuring spending occurs within budgeted amounts.
Having a tool in place that captures these metrics helps you better manage your company spend and improves your reporting. It’ll also assist you when it comes to risk mitigation.
5. Risk mitigation
Mitigating risk can be challenging for any supply chain manager. While risk is a broad topic, there are some common supply chain risks that supply chain managers should keep top of mind. These include:
- Reliance on one supplier for most of your purchases: Companies that are too reliant on one supplier are vulnerable if that supplier can’t meet demands. Be sure to diversify your supply chain as much as possible to ensure business continuity.
- Failure to prepare for force major events: These became very real when COVID-19 started affecting the delivery of goods and services globally. Do you have a backup plan?
- Tracking supply data on spreadsheets or outdated technology: Losing your supply chain data due to corrupt servers or damaged computers is disastrous to ongoing operations.
- Controlling escalating costs: Do you know how much you’ve spent in the past? Can you forecast what you’ll spend in the future? Is there a critical cost commodity in your product that can be hedged? This knowledge is critical when it comes to negotiating costs with suppliers.
- Accommodating multiple changes in channels to market: Ensuring your supply chain gets the right goods to the right place at the right time is critical to the success of any organization.
- Managing inventory: Inventory is expensive to procure, expensive to sit on, and, in the worst-case scenario, expensive to write off.
The key to managing and mitigating risk is through good planning. Spending the time to identify, quantify, and create mitigations is a great first step to reducing your supply chain risk.
The ever-increasing complexity of supply chain management
As supply chain management becomes more interconnected and complex, a supply chain manager’s job is also getting more complex every day. A well-executed and efficient supply chain can create a huge competitive advantage for an organization.
When supply chain managers factor in all the challenges and risks inherent to their supply chain and ensure the company has the best quality supplies at the right price, you can begin to reap the rewards and unlock growth.
With enough knowledge and the right spend management tools, you can mitigate many critical risks. And when a company’s supply chain management operates smoothly, you can become your company’s unsung hero.