In the global trade landscape, supply chains can be compared to silent engines that drive businesses and ensure the functioning of the cutting-edge economy. However, like any intricate mechanism, supply chains are not immune to challenges and collapses. Even minor delays have the potential to destabilize the entire operational system. Therefore, it is essential to predict possible failures and, if there is no chance for correction, to know how to overcome a crisis with negligible losses. This is the issue that today’s article will be devoted to.
It is common knowledge that startups are more vulnerable to various threats than we can imagine. On the bright side, a thoroughly planned inventory management can mitigate the risks and lead a younger entity from the thorns to the stars. Even with no experience, it is possible to build up a successful logistics strategy, leading you to the zenith of fame as a founder.
What causes supply chain disruption?
- Global Events and Their Cascading Effects. In the age of globalization, various large-scale events are at the heart of business growth. A prime example is the COVID-19 pandemic, which has severely impacted production, distribution, and demand in most countries. Economic downturns such as recessions or depressions can suddenly stop consumer demand, causing significant disruptions in logistics networks. Under such challenging circumstances, new entrepreneurs often get lost and don’t know how to respond to global events.
- Transformations in consumer behavior and market dynamics. Supply chains are directly affected by consumer behavior. Rapid and unforeseen changes in demand can lead to shortages or surpluses, requiring businesses to adapt quickly, which is practically impossible in the case of fresh business ventures.
- Technical Hitches: Technology has a pivotal role in supply chain management. However, over-reliance on legacy technologies creates risks, especially when these systems no longer meet modern business needs.
- Geopolitical Issues: As we gear up for business expansion, there could be multiple issues arising. Tighter border controls can impede the free movement of goods, while customs regulations can delay or even stop shipments altogether.
- Environmental Factors: The environment contributes substantially to the success of supply chain dynamics. Natural disasters, from earthquakes to hurricanes, can have both immediate and long-term detrimental effects on transportation.
Larger threats cannot be ignored either. For example, the impacts of climate change, especially in industries such as agriculture. As humanity becomes more environmentally conscious, the demand for sustainable supply chains is expanding. By closely collaborating with a supply chain software development company, it is possible to achieve unsurpassed quality during the early stages of your business development.
Major logistics troubles
In most instances, common supply chain issues include:
- highly volatile market conditions;
- organizational chaos;
- outdated technologies;
- poor financial management.
Let’s take a closer look at these typical concerns and explore how to overcome them promptly and effectively.
Highly volatile market conditions
In today’s highly volatile market conditions, several common trends have emerged. These include declining disposable income, shorter working hours, higher fuel and energy bills, and rising prices for most goods.
In response to highly volatile market conditions, companies at the early stages of development can adopt a digital approach to supply chain planning. By leveraging the power of AI, start-ups can effectively manage market fluctuations. Implementing an effective sales and operations planning (S&OP) process that engages all levels of the organization in logistics network planning can provide valuable insights.
Organisational chaos
YUAN ZHENG/Avalon/Avalon
Inefficient supply chain approaches can have detrimental effects on business operations, particularly at the dawn of their development. Some common trends that contribute to inefficiencies include overly ambitious expansion plans, faulty post-COVID strategies, and a lack of a resilient approach to supply chain crises.
When expanding into a new territory, consider establishing a new warehouse or distribution center (DC) to support operations. It is worth establishing strong ties between warehouses and stores to ensure efficient inventory and distribution management.
Outdated technologies
As businesses continue to recognize the limitations of using Excel as their primary planning tool, they are embracing new trends that offer more sophisticated, effective, and comprehensive planning solutions. In our opinion, a dedicated demand planning solution generally performs better than ERP modules, provides easy integration for consistent results, and supply chain-specific features that will allow you to create the most consistent plan for the future, especially at the early stages of planning.
Poor financial management
To ensure effective financial management and optimize revenue in your supply chain, there are multiple strategies to cope with the problem. The best advice is to monitor Key Performance Indicators (KPIs) and review key metrics such as average days inventory, net inventory value, stockouts, and excess inventory. This helps identify areas for refinement and make data-driven decisions for a fruitful start.
Supply chain issues are common, but their impact can vary for each business. It’s vital to focus on what fits your specific needs and use an automated process that allows you to opt for tactical solutions even at the initial stages.
