Supply chains continue to face tremendous pressure with the ever-increasing demand, bringing forth unprecedented logistics challenges. It is estimated that the shipping rates have more than quadrupled since 2019, and delays have doubled. The cause of these challenges supersede just the pandemic, and we will check whether something can be done to overcome it.
Let us kick off by evaluating the four most prominent supply chain issues and how to get over them.
Scarcity of materials
Consumer demand has skyrocketed to levels never witnessed before. Companies and suppliers are finding it challenging to meet most of these demands amid the unavailability of several materials and parts. That has had diverse consequences, such as furniture manufacturers not getting enough foam and bike manufacturers maxing out on component supplies. The Institute of Supply Management conducted a study in which they found that there was a record-long lead time, rising prices of commodities, higher shortage of vital basic materials, and challenges in moving products across industries.
Supply chain managers can leverage analytics and collaboration to handle the material shortage. Evaluate existing data to understand the trends in critical shortages and their root causes before prioritizing them. When you prioritize shortages, you can spot the inventory that has the most impactful effect on your inventory. Data can reveal the root causes of shortages, after which the organization puts in place specific measures for addressing them. Doing so helps you become forward-looking on how to tackle upcoming issues.
Rising freight costs
Ever since the pandemic hit, the cost of container shipping has been increasing, and this does not seem to stop any time soon. That is attributed to a couple of factors, including the global shutdown of airports and an unprecedented rather than anticipated increase in ecommerce sales. There have been instances where manufacturers are faced with insufficient shipping capacity and a lack of empty containers. The effect of the scarcity is a spike in pricing.
Consider contracting a steady lane volume to keep your freight costs low. A carrier that knows he has a consistent workflow from you is bound to explore his network for better rates. That helps you pay less and get efficient service at the same time. Additionally, since capacity is an issue these days, carriers are more likely to prioritize your shipment because you are loyal and have reliable freight volume.
You can also keep your freight costs low by shipping during off-peak days whenever possible. Friday is one such day for shipping consumer goods considering the majority of customer products are normally in store by Thursday. Mondays are equally off-peak days since carriers would be consolidating freight on this day. Your decision on timing the shipment, of course, depends on the type of cargo.
Challenges in forecasting demand
Supply chain forecasting forms the backbone of understanding current demand and future supply. It entails combining historical purchase data and matching it against customer buying trends to predict the overall look of sales flow. However, most business leaders find it incredibly challenging to generate accurate demand forecasts. That becomes more complex when you factor in the risks and external challenges impacting the end-to-end supply chain. Things can easily go wrong when unable to get stats.
The first step to resolving this problem involves ensuring you have a forecasting system. A calculator or spreadsheet cannot give you the results that you can use to make a strategic decision or forecast. This would be the right time to adopt an SCMS solution that incorporates advanced analytics to have a stable foothold in the rapidly changing market. A good forecasting software allows you to integrate all your supply chain management under a single platform.
Changing consumer behaviors
Consumer behaviors define how manufacturers handle their supply chain. Unfortunately, these have changed significantly in the last decade and continue registering new trends. That makes it difficult to establish an agile supply chain that can leverage the power of automation to seamlessly meet accelerated demand. Whereas there is an increase in demand, and this is a good thing for the merchant, the resultant infrastructural disruption is a major point of concern.
The most effective way to deal with the changing consumer behaviors is to invest in forecasts and automation. Solutions offered through technologies like machine learning empower you to have a model of how consumer behaviour would change over a particular period. Even though adopting this technology may seem expensive, it proves cost-effective in the long run.