6 Challenges Facing Global Supply Chains
Learn how to overcome supply chain challenges by building resilient, adaptable ecosystems to evolve, optimize, and pivot in real time.
What are the Challenges in Supply Chain Management?
With tech evolving at increasingly rapid rates and a long list of mortal threats looming just over the horizon, supply chain businesses really do have a lot to worry about.
Constant disruption is no longer the “new normal,” it’s the status quo.
And, while AI has gotten scary good at predicting possible outcomes (and impersonating humans, automating tasks, and taking very specific actions in real time), no algorithm can truly predict the future. That data just doesn’t exist yet.
The usual advice for coping with our current supply chain reality is, orgs must prepare for future obstacles (and opportunities) by focusing on resilience, agility, and adaptability. That’s pretty spot on – but, it’s important to understand what you’re up against before you start making any concrete plans.
Here, we look at six high-level challenges shaking up today’s global supply chains – and what you can do to get ahead of them.
1. Poor Supply Chain Visibility
Poor visibility is easily the biggest threat facing any global supply chain. That’s because many of the very worst supply chain problems – cyber threats, theft, decisions informed by bad data, an inability to respond to threats – can be traced back to poor supply chain visibility.
Without accurate, real-time insight into all SCM activities, problems fall through the cracks unnoticed. Because you can’t find and fix them early on, they might only resurface after they’ve snowballed into full-blown emergencies.
At that point, the damage is done. You might have a bunch of malware floating around in your system. Maybe you’ve lost customers or exposed them (and your employees, suppliers, and partners) to a data breach. Or, maybe you have a handful of employees that have been stealing from you for years.
You could even be facing steep fines, reputational damage, and financial losses.
You’re also looking at a challenging road ahead as you reestablish business continuity and attempt to repair relationships and restore public trust.
Obviously, these are worst-case scenarios.
But, it’s important to understand that even the most mundane visibility issues have real consequences. For example, poor visibility prevents you from making the everyday decisions that support positive customer outcomes. That makes it harder to guarantee delivery within a specific timeframe or process returns and refunds in a timely manner.
Or, you might end up ordering more stock than you can sell, forcing you to resort to steep discounts to free up warehouse space. If you’re selling perishable items, overordering means throwing away unsold products – and paying for their removal.
While it’s easy to see why visibility is such a crucial part of supply chain management, it’s not always easy to achieve.
Improving visibility starts with analyzing your current supply chain to identify bottlenecks, silos, and missing information. From there, you’ll want to look for potential solutions. So, that might mean overcoming silos by investing in an all-in-one platform that facilitates collaboration and access to critical SCM data.
Or, if you’re missing information you need to make smarter decisions, you might focus on improving data management practices, then investing in tools that provide deeper insights into high-impact areas. Say, production processes or inventory availability.
2. Ever-Evolving Customer Expectations
Customer expectations have always been a moving target. It’s just that now, needs and preferences evolve almost as fast as the tech that’s constantly redefining conditions, setting trends, and forcing B2B consumers to either adapt or, well, die.
Part of what’s happening here is that all customers (B2Bs and B2Cs) have been conditioned by brands like Amazon, Uber, Netflix, Airbnb, etc. to expect fast, convenient services and seamless experiences from every company they interact with.
Across the board, customers expect faster delivery times, personalized support, and more customized products. This puts pressure on supply chain orgs to keep up with behemoths like Amazon with on-demand service and 2-day delivery windows, even if they’re just a small mom-and-pop with limited resources.
That said, it’s not always about pushing your supply chains to the limit trying to compete with giants. Many times, customers are simply looking for more “modern” experiences. So, that might mean offering online portals where they can manage their accounts/access self-service options.
Or – it might mean digitizing your processes so that you can process payments, track orders, and interact with customers, colleagues, and suppliers from a single source of truth.
But – ultimately meeting customer expectations starts with visibility. If you can’t manage your supply chain, analyze customer sentiment/behavior, or ID specific ways to improve your business, you can’t give customers what they’re looking for.
3. Cybersecurity
Recent high-profile attacks like Colonial Pipeline and JBS USA can give you a sense of how much is at stake when it comes to protecting supply chains. Both companies spent millions on ransom payments, then suffered additional financial losses due to forced downtime, reputational damage, and recovery costs following the attack.
Supply chains are uniquely vulnerable to cyber attacks for a few key reasons.
For one, it’s because even the most basic supply chain might include millions of moving parts.
With global supply chains, you’re looking at a situation where there might be warehouses and fulfillment centers on multiple continents, vast supplier networks with a direct connection to core operations, and a business model that hinges on the movement of goods between all these different places.
Every network, app, device, and physical asset is an opportunity for hackers to gain entry to your system. The more variables that you add to the mix, the harder it is to keep bad actors from infiltrating your system.
Another issue points back to poor visibility. See, because global supply chains are so complex, it’s really difficult to prevent data leaks, breaches, and internal threats.
For example, if one person in your network clicks a malicious link in their inbox, viruses can spread through the entire system (and your customers’ and competitors’ systems), allowing hackers to gather data that could be used to harm your entire operation.
One vulnerable endpoint can bring down your entire system. So, you’ll need to make sure that A: you have full visibility across your entire SC network. And B: that all endpoints are protected from all possible angles – ideally, using the Zero Trust framework’s multi-layered approach to cybersecurity.
You can find more info re: putting together a short guide, “world-class ransomware strategy”.
4. Inventory & Raw Materials Shortages
According to data from Supply & Demand Executive, material shortages were among the “most disruptive elements” for 2021.
At the time, many experts and SC leaders predicted the shortages were temporary — a post-COVID after-effect that would shake itself out within a few months.
Sadly, they were wrong. Two years later, the global economy is still struggling with scarcity issues — and the extra expenses, long-wait times, and financial & reputational damage that come with the territory.
Luckily, you can overcome material shortages by embracing a few key strategies moving forward:
Prioritize Supplier Relationships. Take steps toward improving supplier relations by prioritizing collaboration/communication, and treating suppliers as true partners, rather than email contacts that facilitate transactions.
Diversify Your Supplier Network. While deepening supplier relationships should always remain a top priority, you want to avoid putting all of your eggs in one basket. Long-term, you’ll want to continuously build out your network and establish terms/relationships with 2nd, 3rd, even 4th-tier suppliers. It’s important to start this process ASAP — you’ll need to vet suppliers, evaluate the quality of their materials, and determine how those materials impact the quality, price, etc. of existing products. That way, there won’t be any surprises down the line.
Level Up Your Inventory Management Game. Focusing on inventory management can help you better anticipate and respond to potential shortages well in advance.
Continuously Monitor SCM Trends. Basically, you want to make sure you always have your finger on the pulse of the latest SCM tech. This isn’t really a strategy, you just want to ensure you’re ready to implement new SC automation/orchestration/analytics/etc. tech that might make it easier to manage supplier relationships, predict demand, etc.
5. Skills Gaps & Talent Shortages
Another major challenge is long-term skills and labor shortages. Already, many organizations are struggling to hire and train enough workers to carry out basic supply chain tasks, let alone scale operations or adapt to changing conditions.
The bigger challenge is, orgs are having trouble finding (and keeping) employees with the digital skills they need to leverage technology to create a competitive advantage or prepare for future disruption.
In part, it’s hard to find people that have adequate experience in, say manufacturing or logistics, and know how to work with big data, AI, ML, low-code dev tools, and turn real-time insights into action.
But – even if you manage to hire enough of these unicorns to support your current business requirements, you’ll need to develop a strategy that ensures their skills remain relevant in the long-term.
That might mean rethinking your approach to recruiting so you’re actively screening for people who have the right mindset. So, you might start looking for certain traits like curiosity, problem-solving, or an agile-like approach to improvement, instead of focusing too heavily on hard skills or formal credentials.
On top of that, you may need to rethink training and upskilling programs and invest in solutions that support learning and facilitate successful outcomes.
This is a tall order, particularly for orgs that haven’t quite transitioned away from legacy tech and manual processes.
6. Forecasting & Planning
So much of your supply chain management strategy depends on your ability to accurately anticipate and prepare for future demand.
Demand forecasting enables you to give customers exactly what they want. It allows you to drive profits and fuel growth. And, it helps you navigate uncertainty and make plans for literally hundreds of future scenarios.
Demand forecasting and planning is also incredibly hard to pull off. There are many different variables that complicate the forecasting process – and could undermine the accuracy of the insights used to inform so many vital decisions.
Those variables include things like:
- Seasonal demand fluctuations
- Evolving end-user needs & expectations
- Regulatory changes
- New vendor requirements
- Shifts in the competitive landscape
- Changes to the product catalog
- Sustainability initiatives
- Sourcing challenges
Forecasting and planning challenges are nothing new. But, external forces like pandemic-era supply chain disruptions, inflation, and ongoing economic uncertainty are making matters worse. And – that’s before you consider the impact technology is having on the competitive landscape and customer expectations and preferences.
Overcoming this challenge starts from a familiar place: getting your data in order.
It’s about establishing visibility, then making everyone can access the insights they need to effectively do their jobs.
You’ll also need to invest in robust analytics solutions, as well as AI and automation capabilities that make it easier to operationalize forecasting insights, detect anomalies, and take action as needed.
Finally, you’ll need to prioritize supplier relationships. It’s not enough to invest in high-tech reporting tools. Overcoming demand planning challenges is a collaborative process that requires input from stakeholders across the entire global supply chain.
Final Thoughts
The only way to get ahead of supply chain challenges – both now and in the future – is to build resilient, adaptable ecosystems that allow you to evolve, optimize, and pivot in real time.
That means, you need a comprehensive roadmap, the “perfect stack,” and the right people and processes to carry out your master plan – committing to incremental improvement cycles that, done right, outlast their time with your company.
Velosio is a veteran technology partner with 30+ years of experience helping supply chain clients tackle their biggest challenges.
Our SCM experts provide hands-on support – from the initial stages of planning to selecting, implementing, and optimizing the right digital technologies. What’s more, we offer rapid implementation models and proprietary solutions designed to help you reap the benefits of those investments faster – and catch up to the competitors and customers already setting the pace.
Contact us today to learn how Velosio can assist with your supply chain challenges.