Global supply chain disruptions can significantly impact businesses, and to overcome these disruptions, companies need to have a well-developed plan in place. The first step to creating a plan is to identify the risks associated with global supply chain disruptions. Once the risks have been identified, businesses need to develop strategies to mitigate these risks.
Some effective strategies include diversifying suppliers, reassessing product variety, and utilizing the newest supply chain technology to improve processes. By taking these steps, businesses can minimize the impact and better prepare for the future.
Obstacles in Global Supply Chains
The COVID-19 pandemic introduced multiple obstacles to global supply chains. The pandemic has disrupted the flow of goods and services, causing shortages of essential items. Just-in-time production and long supply chains have proven to be particularly vulnerable to those disruptions and have had a ripple effect on businesses and economies worldwide.
In addition to global pandemics, there are many other events that can disrupt a supply chain, including natural disasters, political instability, and transportation problems. Natural disasters can cause damage to factories, warehouses, and other infrastructure. Political instability can lead to trade restrictions or the closure of borders.
Transportation problems can include everything from bad weather to strikes to a lack of available personnel. For example, in the state of Alabama alone, “[Eleven] million people in the transportation logistics industry left their positions in 2021, creating a massive worker shortage,” but jobs in the field are expected to increase exponentially over the next decade. Other states are facing similar shortfalls in the necessary staff.
How to Overcome Global Supply Chain Disruption
Whenever a disruption happens, you need to have a contingency plan that allows your company to quickly adapt – or else be left behind. Here are some ways you can prepare your company for unavoidable adverse events in the future.
Diversify Your Supplier Base
One way to reduce the impact of disruptions is to diversify your supplier base. This way, if one supplier cannot meet your demand, you can turn to others. It’s also important to build strong relationships with your vendors, so they are more likely to work with you during chaotic times.
It’s also important to consider the location of your suppliers. Changing your manufacturing vendors to ones on the same continent as your retailers can help in making your product supply quicker and less expensive to transport. This could mean changing manufacturing from a location in China to one in Mexico or even in the U.S.
Another strategy is to consider the sourcing of your supplies. Instead of purchasing certain parts overseas, investigate the possibility of making those parts via new technologies such as 3D printing, allowing you to switch over to a supplier closer to home.
Reassess Product Variety
Too much product variety can overwhelm the ability of suppliers to produce and deliver components and finished goods in a timely and cost-effective manner. It can also create logistical challenges in managing and storing inventory.
For example, per Willy C. Shih at the Harvard Business Review:
“…one obstacle to meeting heightened demand for toilet paper at supermarkets was that manufacturers had to change over their production lines, because consumers prefer soft multi-ply rolls rather than the thinner toilet paper that many hotels and offices purchase in much larger rolls. Adding to the complexity, different retail chains wanted their own packaging and assortments. […]
Separating demand into many different SKUs [stock keeping units] makes forecasting more difficult, and trying to fill needs by substituting products during periods of shortage causes a real scramble. The lesson: Companies should reconsider the pros and cons of producing numerous product variations.”
The lesson here is that to prevent supply chain disruptions, companies should focus on reducing product variety. Your company could accomplish this by standardizing componentry, leveraging economies of scale, and using modular designs. By reducing the number of SKUs or products offered, businesses can simplify their supply chains and minimize the potential for disruptions.
Take Advantage of Supply Chain Technology
Supply chain software is designed to help you manage your supply chain more effectively. It can assist in automating processes to reduce workload and human error and improve communication. Additionally, supply chain software can help you keep track of inventory levels, generate data on previous customer demand, and forecast future demand.
Having access to this type of real-time data is key to keeping enough inventory on hand to avoid disruptions or stock up on heavily desired items before demand increases instead of after, avoiding possible excess inventory.
It’s important to choose a supply chain software platform that can integrate with your current ERP software, connect and manage carrier visibility, manage complex invoicing requirements, and can allow you to safely and securely communicate with all relevant stakeholders and vendors.
CloudLogix’s robust supply chain software platform offers all of those features and more. Contact us to set up a demo today, and we can show you how our product can help your business overcome global supply chain disruption.