Across all industries, countries, and businesses of all sizes, the same supply chain mistakes are made day in, day out. At best they can be costly, at worst they can lead to the total demise of a business.
The larger an industry grows, the easier it is for mistakes to be made. The supply chain industry, estimated at $1.3 trillion and growing, is certainly no exception.
Whether it’s a major error or a missed opportunity, mistakes in the supply chain can cost a business big bucks. Not only can they affect the overall cash flow of an organization, but they also lead to poor customer service and reduced sales, leading to a reduction in profitability too.
Fortunately, many common supply chain mistakes are actually fairly easy to fix once you get to the root of the problem and understand what needs to be done in the future to avoid a repeat.
Here are some of the most common supply chain errors, and what you can do to avoid them.
#1. Ignoring Supply Chain Data:
According to Akhil Oltikar, VP of supply chain solutions at Riverwood Solutions, data is the most valuable asset for a company.
Data is generated every minute in operations and global supply chain management, whether it’s transactions, product testing data, logistics, pricing agreements, material cost or tacit data such as email communications between teams.
Examining the kind of data that can be used to make better future business decisions is essential. This helps companies develop the appropriate strategies for capturing, storing and analyzing data.
#2. Ineffective Cost Reduction:
Struggling to reduce costs is a battle that every organization is familiar with in some way. And as time goes on, once all the easy cost reduction has been gained, it can become increasingly difficult to reduce costs even further.
A simple way to reduce costs in supply chain management is to reduce how many times your products are ‘touched’ or handled between being received from the supplier or factory and eventually delivered to the customer.
The process probably looks something like:
Unloading — Checking — Moving to storage — Being in storage — Order picking — Checking — Packaging — Loading — Delivery
Ask yourself: is your product being handled over ten times during this process? Typically, around six or seven times is the sweet spot.
Why is this important in terms of costs? Every time you touch a product, you incur equipment costs, damage costs, laboru costs, and more. So, think about how you can reduce the number of times your products are handled, whether it’s eliminating unnecessary steps or introducing some automation.
#3. Choosing Too Many Partners:
Unless you are the owner of a billion-dollar brand with extremely tight process controls, support infrastructure, systems and a massive demand for new products, launching a new product simultaneously with multiple suppliers isn’t a good idea.
Why? It can lead to a significant amount of added complexities that may actually increase the risks that you are hoping to mitigate. A multiple contract manufacturer product launch means that the brand owner is now responsible for managing two of everything; a process far more complex than simply doing the same things twice.
Almost all of the time, managing the complexities caused by launching a new product with multiple contract manufacturers will slow things down and cause more problems than it solves.
#4. Poor Customer Service Management:
A solid understanding of customer needs, development of appropriate customer service policies and offers, and effective management of the service offer are among some of the most important elements of good supply chain management.
The impact of not getting this right can be massive; lost sales and wasted money are common problems when supply chain management is overlooked in terms of being a key business value driver.
Many companies are missing out on important opportunities by staying too inwardly focused. For example, there are many companies that believe they know exactly what their customers need. Yet, they have never actually asked their customers to evaluate their supply performance and provide feedback.
Including logistics activity in customer service surveys would lead to more businesses realizing that some customers feel that service in logistics is poor, while others are being over-serviced.
Customer service should help you improve supply chain management by:
— Being focused on increasing engagement and satisfaction
— Offering multiple ways for customers to contact you
— Creating a cohesive experience across all links in the supply chain
— Finding logistics providers that truly partner with your company
— Training customer service representatives to look out for pain points and solve them
#5. Failing to Plan for Business Disruption:
It’s essential for companies to be prepared for any kind of disruptions; this can be achieved by having a solid risk management plan in place. Regularly perform a rigorous analysis of your supply chain network in order to uncover any vulnerabilities and manage risk.
“Many businesses are unprepared for the possible supply chain disruptions that impact their bottom line when they cannot obtain raw materials or have trouble getting finished products across borders” – Jeff Karrenbaur, president of Insight, Inc.
Supply chain disruptions pose a significant risk to businesses of any size. Even the most well-prepared organizations may fall victim to unforeseen factors out of their control, such as geopolitical actions, natural disasters, and cyberattacks.
Some further common supply chain disruptions include:
Price fluctuations: Prepare by regularly analyzing trends and predicting market fluctuations. For price fluctuations caused by unexpected natural events, it’s worth being familiar with shifts in labor due to climate change trends in order to be prepared for a particular commodity’s price to rise or fall.
Unreliable transport or delays: Make sure that you know your transportation partner well; do your homework and be sure to select a company that you know is more than capable of meeting your needs, even if a certain avenue of delivery is disrupted. Make sure that an agility plan is in place.
#6. Lack of Cyber and Physical Security Controls:
Security breaches in the supply chain industry occur more frequently than any of us would like, and many of them appear to be down to a lack of intellectual property security measures in place by some vendors, according to supply chain manager for MBX Systems, Ray Winkel.
To avoid security breaches, it’s paramount that vendors serving the supply chain secure their networks through practices such as:
— SFTP (secure file transfer protocol) for file transfers
— Restricted access to imaging servers
— Using a version control system to track and report any changes to image deployment routines
According to Edna Conway, the chief security officer in Global Supply Chain for Cisco Systems, vendors often overlook security issues and flaws that can result in the disclosure of sensitive customer and supply chain data. This can ultimately lead to business operations being slowed down or in the worst-case scenario, harmed beyond repair.
Security compromises can be kept to a minimum by employing secure supply chain data, measurement and reporting architecture, in addition to a solid understanding of collection points and repositories for any sensitive data.
And, many companies are often unaware of product tampering. Companies should at the very least use seals or locks to protect their products from this risk and enable the easy identification of any tampering. Access control procedures and accountability protocols should be in place in order to track product activity and who is responsible for it throughout the transit process.
#7. Failing to Create Effective Vendor Relationships:
Sue Wilson, VP of supply chain management for Toshiba America Business Solutions, says that price is not the only factor to consider when negotiating with vendors. Companies should also carefully consider several other areas including performance and customer service.
A common mistake when it comes to vendors is choosing a vendor based on who is offering the lowest price alone. Instead, find a vendor that not only offers a price within your business’ budget but is also willing to be a partner and offer a range of solutions in order to assist with any supply chain issues.
This type of vendor relationship is ultimately beneficial to the bottom line as it leads to inventory reduction, better employee performance, and improved efficiency.
More Tips on How to Avoid Supply Chain Mistakes:
Aside from reducing product handling, improving supply chain security, creating better vendor relationships, planning for disruption and prioritizing customer service, you may also be able to achieve supply chain improvement through:
Improving your own knowledge: If you’re a startup or a sole trader, supply chain training is worth the investment. Online degree programs are available at https://online.kettering.edu/programs/masters/masters-supply-chain-management-online. It’s also a must-have if you want to pursue a career in manufacturing.
Business goals: Work out how your supply chain strategy is aligning
Outsourcing logistics activity: Can lead to better efficiency
Reducing cost: Can you reduce the amount your company is paying for freight transportation?
Warehousing: Could the layout be more efficient?
Impact: Consider how other areas of your business such as sales, marketing, and purchasing are affecting supply chain performance.
Has your business been making any of these common supply chain mistakes?