By Shubham Yadav, Founder – StrategyConnect.
All supply chains were hampered during the pandemic. Supply chain management issues plagued the world, leading to food shortages, medical emergencies and many more difficulties.
This article discusses the worst pain points of supply chain management and how they can be resolved.
Supply Chain Challenges During the Pandemic
The pandemic caused challenges to maintaining a stable supply in the world economy. Since modern-age goods and services follow a global chain for delivery, disruption in any corner of the world caused complete immobilization down the supply chain.
Here are a few optimization challenges faced by supply chains during that period.
Worker Availability
Illness, quarantines, lockdowns, non-availability of public transport and communitywide infections caused a shortage of workers. Ensuring worker safety and proper health-friendly protocols during work led to a reduction in work staff, which impacted delivery schedules.
Supply Disruptions
The unavailability of labor caused by lockdowns led to a shortage of raw materials, which slowed production and therefore deliveries. This led to inflation in essential goods such as medical equipment, life-saving drugs, food grains and other essential items. In a survey of 200 senior-level supply chain executives, conducted by Ernst and Young, it was found that Covid affected around 72% of businesses negatively. These businesses were involved in consumer products, life sciences, retail, automotive, industrial and technology.
Shifts In Consumer Behavior
Due to travel restrictions, quarantines and the fear of getting infected, consumers started spending more on online shopping, doorstep deliveries and OTT-based entertainment (Netflix, Prime Video, etc.). Forbes estimated a 70% jump in internet usage and a 12% jump in streaming services within the first couple of months.
Current Supply Chain Challenges
The current world economy had not even fully recovered from the pandemic-caused supply chain disruption when another geopolitical calamity posed another set of challenges.
Demand Volatility
Covid made a lot of governments spend trillions of dollars in the form of economic-aid packages. IMF (International Monetary Fund) estimated net global fiscal support was around $9 trillion, about one-ninth of global GDP.
Shipping Disruption
The current supply disruptions are caused by active and potential military conflicts. The risk of conflict increases the insurance costs for cargo, which increases the cost of raw materials and finished products.
Fuel Costs
Rising fuel costs have led to increased costs of transportation and affect margins. The price chart of crude oil from the Brent Crude Index on Trading Economics for the past 10 years shows prices of oil have cooled from $120 per barrel, but they are still high as compared to pre-pandemic levels. The closure of several airspaces and ports makes it compulsory for ships to take a longer route or arrange for alternate modes of transportation.
Data and Analytics
Many organizations still struggle to effectively gather and analyze data due to a lack of expertise, noise in data, quality of surveys, etc.
What is the solution?
With effective management, supply chain leaders can ensure that they anticipate disruptive factors in advance. With advanced data collection and analysis systems, we can anticipate shifts in consumer behavior and identify demand patterns accurately. For example, route planning using the statistical “transportation problem” can help us employ existing knowledge to make supply chains more efficient.
Here are a few solutions that can ease the pressure of global supply chains, make them streamlined and increase efficiencies.
In-Depth Assessment
Large corporations or business associations can employ a group of top-knowledge experts to conduct a comprehensive assessment of the existing supply chain processes, identifying pain points and areas of improvement. Advanced tools like Tableau, Google Data Studio, R-Studio, Python’s PANDAS Library, etc. make it easy to visualize the supply routes, the distance between them, the shortest delivery routes, etc.
Data-Driven Analytics
Modern computers have made it possible to analyze large volumes of supply chain data to uncover insights and trends. By employing advanced analytics tools and techniques, you can identify patterns, optimize inventory levels, forecast demand accurately and streamline supplier relationships, all of which contribute to improved operational efficiency. Leaders can employ AI (artificial intelligence) to automate the process of analyzing data that is fed continuously. This can help in the detection of anomalies much faster than any other method.
Route Planning With Advanced Technology
I’m sure all of us as leaders in supply chain have witnessed the transformative power of technology in optimizing supply chain operations. We can collaborate with our business peers to identify and implement innovative supply chain management systems, route planning and real-time tracking solutions. Supply chain routes can be effectively planned with techniques like dynamic route plans, multi-stop route plans, etc.
Supplier Relationship Management
Businesses can focus on fostering collaborative partnerships, negotiating favorable terms and establishing performance metrics that will share the responsibility and reduce workloads. An association of businesses can share responsibility through collaboration and data sharing while reducing the duplication of efforts. An example, the International Organization of Motor Vehicle Manufacturers does several statistical studies on safety, emissions, fuels, etc. Through effective supplier relationship management, businesses can reduce lead times, improve product quality and mitigate risks.
Continuous Improvement And Risk Mitigation
Continuous improvement becomes essential in a highly dynamic world like ours where economic and military conflict add new troubles to supply chains. There is an increasing risk of recession and inflation. By monitoring key performance indicators, conducting regular audits and implementing proactive risk management strategies, businesses can ensure that the supply chain remains optimized and resilient in the face of challenges. If there is sufficient past data available, machine learning algorithms such as Regression can help us identify factors that need the most attention.
Conclusion
The world will remain unpredictable forever. It is up to us to deliver to the expectations of our stakeholders. With data, technology and a little collaboration in supply chain management, the world can bridge the gap between the existing world and a perfect world where there are no food shortages, medical emergencies or business disruptions due to supply chain issues.
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