Supply chain struggles never used to make headlines. That changed over the past few years as the COVID-19 pandemic and then the Russian invasion of Ukraine strained the supply chains for everything from chicken tenders to precious metals — resulting in empty shelves, delayed order shipments, reduced profit and frustrated retail customers.
Now, supply disruptions and uncertainties have many retailers scrambling for alternatives to the lean global supply chains. However, changes like sourcing more goods regionally will not be enough to adapt to the “new normal” of constant change. To keep up with rising demand, you need to set aside outdated supply management tactics and adopt longer-term solutions that help you get ahead of potential problems instead of reacting to them after it’s too late.
Traditional Supply Chains Aren’t Built for Disruptions
Retailers are well aware of the limitations of traditional supply chain management tactics. However, knowing how to overcome those limitations is a different story.
Companies with supply chains that span the globe often struggle with standardizing their processes, partly because different locations use different systems of record. These disparate systems make standardization difficult, as does the integration of systems from acquired companies.
Retailers have also been hobbled by the limited nature of their supplier relationships, which often begin and end with the signing of a contract. In the past, companies could get by with anemic supplier relationships, but now, these short-term procurement relationships are unable to accommodate the complex problem-solving that today’s supply chains require.
For example, the global automotive industry lost $210 billion in 2021 due to a lack of semiconductor chips. A key reason automotive manufacturers were hit so hard was their over-reliance on just-in-time (JIT) inventory systems, in which raw materials arrive when production is scheduled to begin, leading to excess inventory upstream. This system isn’t designed for adaptability, so when manufacturers couldn’t rely on chips to arrive on time, they were forced to continue without them. Now, major manufacturers like Ford and General Motors have tens of thousands of cars sitting in storage, waiting to be finished.
This inability to adapt harms both your company and your suppliers. More importantly, it harms your customer, who doesn’t care who your supplier is. All they know is that shipping delays require them to look elsewhere to meet their needs. To avoid this outcome, your business needs to use intelligent planning and analytics technology to develop its own modern supply chain management solutions.
3 Ways to Modernize Your Supply Chain Management Processes
While problems in the supply chain will eventually course correct, companies will regret not adapting their processes to deal with future disruptions. To create a modern supply chain, your organization must be willing to poke holes in systems it’s had in place for decades. Here are three steps you can take to strengthen your supply chain for years to come:
- Build mature relationships with your suppliers.
Long-term planning and short-term adaptability are impossible without mature relationships with your suppliers. Companies often struggle to fix complex problems with suppliers they’ve only communicated with via email. Although certain sourcing and transportation problems can be remedied on the fly, mature relationships enable businesses and suppliers to effectively overcome roadblocks.
The road to a mature business-supplier relationship begins at the executive level. Your organization’s senior leaders need to ask tough questions of potential suppliers, including: How will we effectively share data? How can we reduce the risk in our relationship? How should we communicate when problems arise? The more preliminary work your company’s leaders do, the stronger your foundation when problems inevitably occur.
However, a strong foundation is only the beginning. Businesses and suppliers should also commit to strengthening the relationship over time by communicating about potential problems.
The value of robust supplier relationships can’t be overstated. As shortages and delays become more common, the ability to maintain consistent product supply is a valuable way to differentiate yourself from competitors — and that makes your suppliers a key part of your company’s value proposition.
- Develop concurrency across your supply chain.
Mature relationships open up new possibilities for data transparency across every stage of the shipping process, which is especially important when you consider the long timeline of the supply chain. You may not feel the impact of a supply chain decision for days, weeks or even months, depending on how long it takes your shipment to arrive.
With an elongated process, gathering relevant data and making it accessible across teams is essential. When a vehicle arrives at your warehouse or a shipment sits in a port a day longer than expected, both your business and your supplier need to know in real time. Small supply chain problems can escalate into big ones when data is incomplete or only in one party’s hands.
This real-time visibility is known as concurrency, and it’s the key to avoiding costly delays when things don’t go according to plan. And the explosive growth of ecommerce makes concurrency more important than ever — there’s nothing more stressful than overcommitting on orders without the inventory to back it up. Accurate data prevents this scenario by enabling interconnectivity between businesses and suppliers.
- Plan for future variability.
The most important change your business can make regarding its supply chain management deals involves your mindset. Historically, companies only accounted for materials after they arrived at their warehouse. But your company can no longer focus exclusively on the shipments you see in front of you. When it comes to modern supply chain management, it’s not just what you know, it’s what you can predict.
Intelligent planning allows you to centralize your data across locations and make rapid adjustments when deliveries don’t arrive as expected. The ability to access comprehensive data from your supplier and throughout your supply chain will improve future decision-making.
For example, a fashion retailer like Zara works in an industry where demand fluctuates throughout the year as new trends emerge. Even before the pandemic, Zara recognized the need for adaptability and adopted a mixed approach to its supply chain, one in which basic items like T-shirts are sourced from China and Indonesia and trendier items are sourced locally, where lead times are shorter. This kind of self-awareness results in improved planning and a more predictable supply chain.
Revamping Your Supply Chain Approach Takes Time
Organizational change doesn’t have to happen all at once. To get started, determine how long inventory management takes at just one of your warehouses or develop contingency plans with just one of your suppliers. Experiment with your processes and evaluate them for inefficiencies.
This evaluation process can be made easier by using the right tools. Taking advantage of an intelligent planning and analytics platform will give you a top-down view of your current supply chain that allows you to better plan for the future. If you’re proactive in making improvements, over time, a new supply chain will begin to emerge — one that’s built to handle adversity and remain resilient for years to come.
David Food, supply chain aficionado with over three decades worth of insight into the ever-changing industry, currently serves as the Head of Supply Chain at Board International, where he champions decision support platforms with advanced intelligent analytics that enable executives to make informed, effective decisions for supply chain empowered businesses. Using his expertise, he provides future insight on supply chain strategy, systems and solution usage to catalyze change in the supply chain and improve team processes. An innovator at heart, Food is passionate about how companies can leverage emerging technology to disrupt the status quo.