Supply chain issues include using historical trends, outdated information, lack of understanding of supplier capabilities, and lack of communication. Real-time tracking of sales, maintaining supply chain metrics, reviewing supplier capabilities, and personal relationships can help prevent these issues.
Supply chain refers to the activity of moving material from its raw state to the final customer. Common supply chain issues include using historical trends, using outdated information to make decisions, lack of understanding of supplier capabilities, and lack of communication. Due to the complicated nature of supply chain management, many professionals fail because they do not use effective supply chain principles.
The most common supply chain problems are usually caused by using historical trends. The broad economic downturns in the late 2000s, for example, clearly showed that even long-established organizations like General Motors shouldn’t rely on past performance to predict future sales. The best alternative is to track actual sales as they occur so that the supply chain network can react quickly to any changes in consumer behavior. This is particularly useful in a retail supply chain where the product being sold is somewhat generic and can be sourced from many different retailers, as demand may be perishable.
Making decisions using outdated information is another of the most common supply chain issues facing supply chain operations. Understanding real-time inventory levels, financial ratings, and cash flow is critical to making sound supply chain decisions. Maintaining supply chain metrics for all of these categories should prevent companies from making material mistakes in the people they work with as both suppliers and customers. If the company does not use a meaningful enterprise resource planning (ERP) system, the supply chain manager can still obtain much of this information by examining financial data such as customer and supplier credit ratings, receivables outstanding (AR) and accounts outstanding (AP).
Understanding a supplier’s capabilities is one of the supply chain issues that is the hardest to manage. Not knowing what a supplier can do severely limits a company’s ability to respond quickly to changes in demand. Effective supply chain managers will periodically review lead times, standard capacity, rise or burst capacity, and prototype and quick turnaround capabilities with their suppliers to determine if the supplier’s capabilities are sufficient for the needs of the company. By knowing whether a particular supplier can support the positive aspects of demand in a very short time frame, the supply chain manager will be able to better predict when products can be shipped to the end customer.
Lack of communication is also one of the most common supply chain problems. Suppliers and customers require constant monitoring and at least some level of collaboration to ensure supply meets demand. While there is almost information overload in today’s highly automated information flow environment, successful supply chain managers have learned that there is no substitute for face-to-face communication. By developing personal relationships with suppliers and customers, the entire supply chain process becomes a team effort. When things don’t go as planned, it’s much easier to discuss opportunities for improvement if a relationship already exists.
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