Top 5 supply chain challenges of today and how to overcome them

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In the ever-evolving world of supply chains, organizations face challenges at both macro and micro levels.

December 11, 20237 mins
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From geopolitical tensions and labor shortages to disrupted logistics and extreme weather, the supply chain environment remains volatile and uncertain. Yet, while these broad challenges are often beyond their control, leaders can take concrete steps to address more immediate, actionable issues like cost predictability, vendor management, scalability, risk, and visibility. By focusing on these aspects, organizations can bring stability and certainty to their supply chains.

Let’s examine five key supply chain challenges and explore how you can adapt and overcome them.

#1 - Cost

Inventory and transportation are among the largest supply chain expenses. Fluctuating customer demand and material availability create challenges in predicting freight, warehousing, and labor resource needs, leading to unpredictable costs.

When inventory is high, for example, you may need to temporarily scale storage space and then ratchet down again once supplies subside. You don’t want to get caught paying for warehouse space you aren’t using, even for a short while. This creates unnecessary expenditures.

To best control costs, you need predictable and controllable space and resources to effectively manage inventory and demand fluctuations.

The question remains - Should you build, lease, or outsource? When building or leasing your own warehouse space, you lay out significant capital and may end up paying for empty shelves. The same goes for legacy third-party logistics (3PL) providers who are rigid with their space allocation and contract terms.

On the other hand, if you choose to outsource needed space on a short-term contract basis from a more flexible 3PL, you are in control and can avoid paying for bare shelves and underutilized labor resources. This approach grants you the option to scale up and down as needed and conserve financial resources.

#2 - Vendor management and quality

Many traditional 3PLs fail to align with their clients’ long-term business goals, locking customers into long-term contracts with minimal flexibility. When faced with product damage, delays, staff shortages, or changing market conditions, clients may struggle to adapt to and overcome the resulting challenges with their existing logistics partner.

Some 3PLs may also struggle with service-level agreements (SLAs) and turnaround times, communication gaps, order surges, inventory visibility, and strict inventory security requirements. Your supply chain operation cannot afford any of these issues.

You want a vendor that caters to your specific needs and is actively, accurately, and efficiently.

  • Managing your inventory
  • Handling and shipping goods on-time and undamaged
  • Offering real-time visibility and reporting
  • Supporting your short and long-term, and evolving business objectives

These features put you in the driver’s seat, which is where you want to be during times of supply chain uncertainty.

#3 - Scalability

When your warehousing and logistics requirements change, you want a vendor who can effectively and efficiently change with you. Seasonality, industry trends, and evolving consumer demands can make it difficult for you to accurately predict your space and resource needs today, tomorrow, and into the future. A fixed network of warehouses and labor resources can make it difficult to keep up with these ever-changing conditions.

On-demand logistics solutions—offering the ability to scale up and scale down—are the name of the game today. An agile 3PL should have an on-demand menu of offerings with the ability to adjust and include add-on services as needed.

Imagine a 3PL partner who offers both short and long-term storage, seasonality and product launch services, e-commerce, business-to-business fulfillment, unloading and palletizing, reverse logistics, and even disposal. This type of flexibility makes your 3PL a true supply chain partner and extension of your own team.

#4 - Risk

You have significant investment sitting in your inventory and can’t afford to jeopardize any of it.

A 2023 survey by PWC found that “86% of supply chain executives and leaders feel that their company should invest more in technology to identify, track, and measure supply chain risk, including 35% who strongly agree.”2

2“PwC’s 2023 Digital Trends in Supply Chain Survey”, PWC, Feb. 2023.

One way to start mitigating risk is ensuring that your product distribution and fulfillment function have security and chain-of-custody protections in place, providing peace of mind that your inventory is safe. If and when problems do occur, these protections will provide you with the opportunity to identify what went wrong and why.

Whether in-house or outsourced, you should maintain a highly secure network of facilities with enhanced security procedures and thoroughly trained and vetted employees who view the protection of business assets as a top priority. Measures can include facility boundaries, audible alarms on exit doors, visitor signs, electronic security and surveillance systems, and employee checks. When a 3PL partner is willing to invest in these precautions, they are one you can trust.

#5 - Visibility

“Seeing is believing” is perhaps never more important than when you are talking about valuable product inventory. Visibility into where your assets are located, where they are being shipped, and most importantly, when they will arrive to your retail locations or customers is a critical component of any supply chain function.

It is important that 3PLs, who not only store your inventory but offer services like fulfillment and product returns, provide real-time visibility. This is where a robust warehouse management system (WMS) comes into play. Sophisticated solution providers offer integration of their system into yours so that your organization can track your inventory’s movement through the supply chain. This end-to-end visibility allows you to make the most informed decisions possible.

Taking charge in the face of change

While the supply chain landscape presents challenges beyond our control, taking charge of actionable factors is imperative. By focusing on cost predictability, vendor management, scalability, risk, and visibility, organizations can achieve the stability needed to navigate supply chain volatility. Partnering with a flexible and adaptive 3PL allows organizations like yours to secure their inventory, efficiently deliver goods to customers, and maintain a robust supply chain in an ever-changing world.

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