Supply Chain Resiliency
Modern day enterprises are on a quest for stability in an increasingly fluctuating global commercial landscape that is characterized by rapid changes and constantly evolving trends. The logistics of overseeing a supply chain network that spans different geographical and political regions have become more complex than ever. Numerous interdependencies and variables need to be factored into a framework of operations that are constantly exposed to various vulnerabilities and potential hazards.
While error tolerance is a staple feature of most supply chain designs, organizations have also started to acknowledge how crucial accuracy and precision are while implementing business processes in an interconnected network. There have been instances where even minor deviations from prescribed paths of action have resulted in dire repercussions across the entire operational matrix. In such circumstances, enterprises also have to deal additionally with the rising demand from customers to deliver products, services and solutions in shorter time frames and with quicker turnarounds.
The Five Fundamental Constraints
Across the world, experts from the supply chain fraternity coincide on five fundamental constraints that have made a habit of hampering the logistics of their business:
Rising Expenditure
Economies, sectors and industries are constantly evolving and this has left logistics experts with a very narrow margin for planning long term improvements.
When it comes to supply chain management, curtailing expenditures takes precedence over every other logistical objective, including expanding operations and innovating production methodologies.
The prominence of this supply chain objective, which is predominantly efficiency centric, is also reflected in the type of initiatives introduced. It is also an area from which organizations have reaped the most benefits.
Nevertheless, despite being a structured operation that was executed in phases, the implementation of strategies for optimizing supply chain expenditure has become increasingly erratic in recent times. A variety of recent developments have contributed to this including rising costs of
- Utility services such as gas, electricity and transport
- Shipping and truckload rates
- Salaries in labor intensive economies
As a direct consequence, the approach of supply chain professionals to tackle price centric logistical issues has been more reactive than proactive. For instance, plans for distributing goods are adapted depending on the rise or fall in fuel rates. When higher, the distribution logistics are more focused on offsetting the hike in expenditure. Sometimes, even competing commercial enterprises work in conjunction to leverage a consolidated response to a common problem. On the other hand, when fuel rates drop, quicker routes that can accommodate shorter delivery time frames get prioritized.
Erratic price fluctuations and temporal shifts in the financial landscape have become so frequent and fast paced that organizations are left with bare minimum ROI time frames for new and innovative supply chain techniques. There have been frequent instances when design improvements have been rendered obsolete even before they are introduced in the market.
More and more companies are trying to respond to fast paced market fluctuations, erratic economic trends and a turbulent operational landscape through an agile supply chain methodology. Adaptability is the new mantra for dealing with temporal changes.
Perceptibility
Faced with a barrage of information from all quarters that clutter their systems, supply chain experts cannot conceive confronting their daily operational challenges without effective tools that can sift through the morass of data at their disposal and focus on the most essential.
In an age of big data and high speed internet, this might seem like a surprise entry in the list of supply chain constraints. But professionals in the field repeatedly emphasize on the importance of relevant information that aids in making crucial decisions, especially during a business disruption.
Supply chain professionals often overlook how important it is for contextually relevant information to be perceptible and this factor isn’t given much importance. Most logistics professionals tend to focus more on other constraints such as containing expenditure, process efficiency and strategy synchronization. Hence, the number of activities and initiatives that are deployed in this focus area are also limited. To add insult to injury, those who did try to improve operations based specifically on perceptibility metrics met with very little to no success.
Research has revealed several factors that contribute to this scenario, some of which have been listed below:
- Rigid organizational structure and communication protocols
- Lack of prioritization
- General perception that operational perceptibility has very little scope for improvement
- Concerns pertaining to proprietary information
- Conflict of interests
Some organizations have introduced a number of measures to make challenges across the supply chain more perceptible. However, these initiatives have not been regularly updated through an operational culture of continuous improvement.
Crisis Situations
Global warming, climate change, sociopolitical unrest across frontiers and many other factors have made business processes danger-prone. As a consequence, full-fledged business continuity and disaster recovery strategies have become mandatory for corporations to launch projects on a global scale. This is true even from a compliance perspective and the global perception of a supply chain network stands to reap far reaching benefits by adhering to regulatory norms and resiliency standards.
While professionals unanimously agree on the importance of effectively dealing with crisis situations, opinions vary on the strategies that need to be employed. Vulnerabilities across supply chain workflows have grown exponentially in recent times and this has brought risk management on the radar of supply chain management teams.
As interconnectedness and interdependency get more deeply incorporated into essential supply chain capabilities, professionals have to deal with more hazards of greater intensity. Managing such a large number of high impact constraints has become an uphill task.
Though a majority of organizations leverage risk management plans, very few, barely a third of commercial enterprises, use a working model that combines risk management and performance. This is because effective preventive and mitigation strategies aren’t standardized across the sector. Relevant data in adequate numbers for analysis is lacking. Available technologies aren’t effective enough. All these factors cumulatively challenge operations and increase the probability of supply chain disruptions.
Incorporating greener initiatives into mainstream supply chain operations, for instance the efficient use of resources such as water or energy and the effective disposal of wastes and residue, are the additional constraints that supply chain management teams have to work with. Rising levels of particulate and CO2 emissions, global warming and quickly diminishing levels of natural resources have forced enterprises to adopt sustainable business processes across all their operations. This has made expenditure reduction, risk management, profit increase and other mainstream objectives a much more challenging proposition. The probability of supply chain disruptions have also increased.
Sustainable measures typically find expression in the following aspects of business operations:
- Production goals
- Design and packaging
- Utilities such as water, gas, transport and electricity
- Outsourced operations
- Storage and inventory
- Carbon emissions
Often, the design and packaging of company merchandize have to be completely revamped in order to comply with established environment friendly standards. But supply chain sustainability measures are never stretched beyond the realm of primary vendors to include secondary and tertiary providers as well. Studies confirm that sustainability measures such as particulate production or energy usage influence a mere one fourth of commercial enterprises while deciding on transport, storage or distribution service providers.
Client Relationships
Although a high incidence of outsourced operations have made enterprises better acquainted with their third party vendors, sustained interaction with customers, especially those with whom organizations have strategic business tie-ups, still remains a high priority area for improvement.
Servicing customer requirements is an extremely demanding task and a crucial dimension of the supply chain management framework. However, there is a tendency amongst companies to liaise with their external vendors a lot more. This can be witnessed in the collaborative efforts between companies and their third party business associates while conceiving new features and functionalities.
Besides, customer feedback is incorporated into preparation strategies only half the time. This is strange considering the convenience facilitated by connectivity and technology today.
Expense, both in terms of time and budget are usually cited as reasons for not involving clients. But as the drive for greater profits increases, more and more organizations are including customer collaboration in their supply chain management strategies.
International Trade
While the advantages of business operations across frontiers are still immense, many concerns such as growing costs and factors like rigid jurisdiction and bureaucratic red tape that are beyond an organization’s control continue to persist.
The uncertainties involved with the delivery of products are on the rise. The time duration from the moment an order is placed till it is delivered is longer. Many companies have even seen a tangible impact on quality.
Overseas trade has always implied greater profits, which is why companies are willing to take such operational hassles in their stride. However, this increase in margins always goes hand in hand with more expenditure and comes directly in conflict with the organization’s prime objective of cutting costs.
But most of the big corporations have registered improvements in revenue, profits and even performance after taking their operations overseas. This means that the overall outlook on globalization from a supply chain management perspective is still favorable.
The increase in globalized trade has created the need for more cross cultural training to ensure effective communication between business entities that are spread across geographic regions. Many organizations have implemented initiatives that are specifically focused on bridging cultural gaps. Business processes are also being designed from a global perspective.
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