The business environment of today is fast-paced, and that would be an understatement. Contrary to a time when people physically visited a store to buy all that they needed, contemporary goods and services are a click away.
What makes it possible for remote goods to reach their customers is a close-knit network of individuals, resources, and organizations. Yes, we are talking about the modern supply chain that includes the pathway of products, right from the time of production to final delivery.
One can only imagine the work it takes to manage a global supply chain. No wonder the supply chain management market is exhibiting a CAGR of 11.7% till 2032. Dismally, this process is fraught with disruption risks. In this article, we will discuss those risks as well as three proactive strategies to mitigate them.
The Need for Supply Chain Resilience
In truth, supply chain issues or disruptions have been there throughout the life of e-commerce. However, the problems only escalated and became more frequent in 2020. This had to do with the fact that manufacturers had to shut down factories and suspend work during the pandemic.
To compound this, the sharp fall in consumer demand amid COVID-19 suddenly skyrocketed. Even today, retailers are facing serious issues in the safe and timely delivery of products. Some of the main challenges they are facing, besides the pandemic’s after-effects, include geopolitical instability, rising trade disputes, labor shortages, and natural disasters.
With so many challenges on the horizon, it is imperative to build a resilient supply chain. The good news is that it is also very much possible, as discussed in the next section.
3 Forward-Looking Strategies to Mitigate Key Risks
One interesting thing to note is that McKinsey & Company states both risk and resilience dominate the 2024 supply chain agenda. This means as risks prevail, business leaders and fleet managers are taking concrete steps to mitigate them. Let’s dive into three far-sighted strategies that promise hope.
Gain Greater Supply Chain Visibility
Are you fully aware of the path your products take, right from the time of being raw materials up until they reach the customer in their final form? It is impossible to strengthen the supply chain without greater visibility of the whole process.
Studies have found that 62% of companies only have limited visibility of their supply chain. Many are stuck with just a view of the production process. What about the goods in transit? This is why it is so crucial to map the supply chain. It will provide a clear view of all tiers involved, including the manufacturers and suppliers.
You must also collaborate well with suppliers so that they can share any potential issues. When information is received of possible delays, you can take the necessary steps to deal with them, perhaps by informing the customer beforehand and more.
As far as possible, rely on advanced technologies across all areas, from inventory tracking to logistics. In other words, partner with fleet operators that utilize telematics for supply chain management. This IoT-based technology uses onboard diagnostics to keep track of the vehicle, driver, and assets in real time.
For instance – dash cameras for trucks alert the fleet manager of any unsafe driver behaviors like hard braking, swerving, or rapid acceleration. They will also reveal the road conditions for any potential risks.
Reckless driver behavior can damage the goods inside the vehicle. Similarly, poor road conditions can indicate the possibility of delays. Not only this but Fleet Hoster states that such telematics can even enable optimized routing and fuel-efficient driving behaviors.
Hold More Inventory
Are you terrified of the ‘out of stock’ sticker that affects retailers’ bottom lines? Then, it is time to tackle this risk with the help of more inventory. It all boils down to practical, realistic, and predictive inventory management.
Let’s start by understanding the major reasons for stockouts. These often include an erroneous forecast, a lack of demand planning, inaccurate records, manufacturer holdups, or logistics issues. If they happen once in a while, it is easier to recover.
However, such a business pattern will lead to inevitable loss of revenue and broken customer trust. So, here are ways to manage your inventory better for fewer to no instances of stockouts –
- Monitor and update stock levels regularly.
- Practice cycle counting or checking a small part of the inventory on a periodic basis.
- Maintain reorder points or a specific quantity of a certain product at all times.
- Ensure shorter lead times. It is the time taken between placing and receiving an order.
- Use relevant technologies for better demand forecasting.
- Leverage ‘just-in-time’ principles to always have safety stock in hand.
- Identify stockout patterns to understand the underlying reasons.
- Build strong relationships with vendors.
Diversify Product Sources
It is to be noted that companies with resilient supply chains gain a competitive edge in the market. Their business operations are marked by anticipated delays and little to no cracks/gaps in deliveries. Besides the two mentioned above, another way this happens is through diversified product sources.
With this strategy, you can become resilient even to interruptions like natural disasters and geopolitical conflicts. All of this occurs just because you have other sources as a safety net. The American Express lists one of the primary benefits of a multiple supplier sourcing model to be delivery flexibility.
For instance – you can work with different suppliers on demand forecasts and make earlier commitments or bookings. This will shorten the lead time and help you save costs. Ultimately, your clients will experience fewer occasions when their product is not delivered on time.
Finally, in light of current shaky business grounds, the greatest risk of all is to neglect supply chain visibility and management. The key is a comprehensive solution where every operator has the information and added context along with the tools to resolve supply chain issues. When you’re thus prepared, disruptions may arise but they will not have the final word.