Supply chain logistics are continuously changing; it's safe to say that 2020 brought about upheavals that most consumer goods companies aren't used to. Now, in 2021, there are new difficulties that businesses must address to remain competitive in the eCommerce industry. As a result, a shift to online retail, increased consumer confidence, pent-up demand, and accumulated savings add to a massive opportunity for digitally native firms.
To keep everything going smoothly, the contemporary supply chain must develop to meet new demands and supply chain difficulties, and supply chain managers must plan. Consumer demands, more routes to market, international complications, and other issues contribute to considerable supply chain network challenges.
This article will look at what's driving some of the most significant developments in the supply chain. Then take a look at the supply chain challenges in 2021 and discuss supply chain management challenges and solutions.
What Is A Supply Chain?
A supply chain is a collection of companies, people, actions, information, and resources involved in delivering a product or service to a customer. The transformation of raw materials, natural resources, and components into a finished product and delivery to the final client are all part of the supply chain.
A typical supply chain starts with the ecological, biological, and political regulation of natural resources, [clarification needed], and includes several production links (e.g., component construction, assembly, and merging), before moving on to several layers of storage facilities of ever-decreasing size and increasingly remote geographical locations, and finally reaching the consumer.
What Is Supply Chain Management (SCM), And What Are The Challenges Of Supply Chain Management?
Supply chain management is the management of products and services movement, and it includes all procedures that transform raw materials into completed goods. It entails deliberately simplifying a company's supply-side operations to increase customer value and obtain a competitive advantage in the market.
Supply chain management faces many challenges, so now we will discuss supply chain management challenges and solutions.
Challenges Of Supply Chain Management
The COVID-19 epidemic is wreaking havoc on the supply chain environment, posing new and unexpected challenges to productivity and profitability. The following are the top supply chain difficulties that product-based enterprises around the world will encounter in 2021.
Demand Forecasting Is Difficult
Demand forecasting has added a new layer of complexity to many firms' supply chain management during a worldwide pandemic. COVID-19's arrival disrupted innumerable merchants' and suppliers' projections, leaving them unsure how much inventory to carry or make at any one time.
The difficulty has arisen from attempting to enhance client demand estimates while relying on gut sense rather than data-driven study in many cases.
Scarcity Of Resources
Since the epidemic began, inadequate inputs have been a worry due to unprecedented consumer demand. Corporations and suppliers are struggling to meet this demand because many parts and materials are in short supply. We've heard anything from furniture makers encountering foam shortages to bike manufacturers losing payment terms due to overworked component suppliers when interacting with growth-stage firms in our network.
In reality, according to a recent assessment done by the Institute for Supply Management (ISM), there are "record-long lead times, widespread shortages of crucial raw materials, rising commodity costs, and challenges in transferring items across industries." Given these limited resources, a company's ability to maintain growth dramatically relies on its ability to weather downtime and ramp up for peak seasons.
Freight Prices Are Rising
Throughout the epidemic, the demand for container transportation has surged significantly, contrary to original forecasts. In addition, due to the increased need for raw materials and manufactured consumer products in these global lockdown measures, there has been an increase in import demand for raw materials & fake consumer goods.
And, because the demand was far higher than expected, there was insufficient shipping capacity and a record-breaking shortage of empty or available containers.
Consumer Behavior Is Changing
During the pandemic, consumer attitudes and behaviors changed dramatically, such as lowering delivery times and raising the bar for a great customer experience. The difficulty has a flexible supply chain that can use automation to maximize fulfillment and easily accommodate rapid demand. Multichannel order fulfillment services and inventory management software are outstanding illustrations of supply chain flexibility.
Transformation To The Digital Age
Digital transformation and IoT can be mixed blessings when it comes to supply chain operations. Still, some technologies, such as artificial intelligence, drones and robots, electric cars, and on-demand delivery, can improve how we approach the old supply chain.
However, even though these systems/services are designed to make eCommerce processes more efficient and cost-effective in the long term, deploying them across a company's existing supply chain is difficult.
Supply Chain Volatility's Impact
Volatility and complexity cause issues at one point in the supply chain; their effects can spread across the entire system. Therefore, supply chain managers must address these issues as soon as possible to avoid delays, backlogs, bottlenecks, and other problems.
Tariffs are being imposed throughout trade channels due to political circumstances and protectionism, resulting in higher taxes, delays, and customs processing times. This means that international shipping would be slower, and competitors in different nations would benefit from reduced tariffs.
Port congestion is increasing as the volume of commodities imported from other countries grows. In addition, port officials and operators charge groups to hold goods at the port, exacerbating these problems.
Predicting problems before they occur, forming solid contracts, and relying on excellent relationship management, teamwork, and priority to reduce the damage will all play a role.
Solutions To Overcome Supply Chain Issues
As you can see, the pandemic has posed some unique supply chain problems, which eCommerce merchants are still dealing with daily. But, the good news is that there is a slew of options for resolving significant concerns and avoiding inventory shortages in the future. And, while there is no one-size-fits-all strategy to supply chain planning, a combination of a few methods may yield the most full and thorough results.
In Your Supply Chain Plan, Diversify Your Sourcing
Increase your supply chain's choice and abundance by expanding your sourcing options, possibly geographically. It's easier to become more flexible and adapt to a continuously changing market by cultivating many supplier connections (i.e., during a prolonged pandemic that alters the entire global economy). In addition, diverse sourcing is often the key to a brand's success. It allows them to quickly locate goods and materials while maintaining revenues, expanding their consumer base, and increasing innovation.
Determine Alternate Ports Of Entry
Regardless of unanticipated events or a sudden rise in customer orders, hedge your risks by finding other ports to meet your fulfillment demands and stay on schedule. The sister ports of Los Angeles and Long Beach have become the cornerstone of Transpacific trade as DTC brands become increasingly reliant on Asian imports. Given that these ports handle nearly 25% of North America's ocean freight, a backup plan in case of congestion or other inefficiencies is prudent.
Maintain Your Company's Liquidity
Protect your company by obtaining financing on a flexible basis. Having cash on hand, after all, can mean the difference between meeting demand and running out of product. With sharp inventory ebbs and flows expected in the coming months, it's a good idea to explore a flexible line of credit that may be utilized to stock up on evergreen or perennial high-demand commodities and pay for priority manufacturing/shipping, or even air freight.
Use The Services Of A Freight Forwarder
To oversee and track the shipment of your goods, work with a freight forwarder — or many. While freight forwarding businesses are responsible for moving goods from one location to another, they can also help shippers organize the entire process and negotiate the best pricing and fastest route.
A freight forwarder's enormous understanding of the supply chain, as well as their capacity to address unforeseen problems in real-time, benefits retailers who work with them (such as delayed goods or rerouted services). Furthermore, by combining the shipments of smaller shops, freight forwarders can negotiate at scale.
Improve The Forecasting Of Demand
Using automation to calculate these KPIs on your behalf is by far the most effective technique to improve forecasting. To avoid stockouts or inventory shortages, eCommerce vendors strive to balance their inventory levels, warehousing expenses, and client demand. Thanks to automatic inventory notifications, forecasting tools, and cash on hand, merchants can stock up with confidence based on projected product demand and sales. Furthermore, prioritizing forecasts can help to streamline inventory counts and cut down on unnecessary overhead costs.
Planning, acquiring raw materials, production, delivery, and returns are the five significant parts of supply chain management. The planning phase focuses on creating an overall supply chain strategy, while the other four aspects focus on the critical criteria for putting that strategy into action. To establish an efficient supply chain and prevent costly bottlenecks, businesses must build expertise in all five areas.