How to Manage Uncertainty in Supply Chain
Change is inevitable, and the past two years have proven that nothing is set in stone when it comes to business. The global health crisis severely impacted our economy, making companies and businesses struggle with disruptions and uncertainty in their supply chains. Whether you are a small new business or a big established company, risk and issues with supply remain a constant threat.
Managing uncertainties in the supply chain is a critical responsibility. It is then important to learn how to manage uncertainty in your supply chain to retain your competitive advantage as an organisation.
What is Supply Chain Management?
At the heart of any business that offers products is supply chain management. But what is supply chain management?
Supply chain management is the process of actively managing the different supply chain activities. These activities include planning, controlling, executing, and delivering a product from raw materials to production to finished products.
The goal of supply chain management is to run the supply chain as efficiently as possible, maximise customer value, and attain a sustainable competitive edge. These goals are interrelated and bring forth each other. That is, efficient supply chains result in greater customer value, which eventually leads to higher customer satisfaction and competitive advantage.
Whether you have an efficient supply chain contributes to your performance as a business. Supply chains involve multiple organisations. Effective supply chain management is well connected and puts communication at the centre. Efficient supply chain management meets or exceeds customer expectations and prevents and responds to uncertainty competently.
In the end, the entire company reaps the benefits.
What are the Key Issues in Supply Chain Management?
To help decide on actions to prevent key supply chain problems, you should be aware what the key issues in supply chain management are. Let’s explore these;
Supply Uncertainty
Uncertainty of supply may be manifested in the:
- Availability of materials
- Cost of materials
- Quality of materials
- Availability of alternative supply sources
- Supply lead time and unforeseen delays
- Supplier relationship
Process Uncertainty
Uncertainty of process is related to the:
- Availability and quality of machinery
- Processing times
- Disruptions of internal operations
- Labour changes and issues
- Personnel qualifications
- IT problems
- Customer service
Demand Uncertainty
Demand uncertainties may appear in the form of:
- Demand forecast errors
- Changes in customer orders
- Variations in product specifications of orders
- Competitor actions regarding your marketing promotions
- Fast-changing markets
- Customer demands
When supply, process, and demand are uncertain, greater supply chain flexibility is needed to maintain supply chain efficiency and provide better customer service.
What is Demand Forecasting in Supply Chain Management?
One essential component of supply chain management is demand forecasting. Demand forecasting is a process that allows you to estimate or predict customer demand for a product. You do this by looking at prior sales data and other relevant and contributing factors.
Demand forecasting is important because it drives most, if not all, decisions related to the supply chain. It is the starting point for basic supply chain processes, including material planning, purchasing, and manufacturing, and more critical activities like financial planning and risk assessment.
Essentially, forecast accuracy enables you to prevent under- and overstocking, minimise costs, and better operational efficiencies. Errors in forecast can result in a surplus or shortage. A surplus is costly and uneconomical, while a shortage may affect delivery times and the overall customer experience.
How to Solve Supply Chain Issues
No matter the industry you are in, your business is exposed to and constantly challenged with supply chain issues and uncertainties. When this happens, the way you manage and solve these problems can help determine your business’ position regarding customer value and among competitors.
Here are helpful steps businesses can take on how to solve supply chain issues, mitigate the impact of supply chain uncertainty, and ensure quick delivery of products.
Risk Management
A good supply chain strategy includes risk management, a process that identifies, assesses, and mitigates the risks of your supply chain. Many organisations use the PPRR Risk Management approach—Prevention, Preparedness, Response, and Recovery.
Supplier Audit and Performance Reviews
Include performing a financial and operational audit of the most critical suppliers in your supply chain strategy. Choosing a stable supplier is imperative, especially if your supply chain is growing. Both supplier audits and performance reviews reveal potential risks, enhance communication, build relationships, and improve customer satisfaction. It is recommended that you carry out supplier performance reviews at least quarterly, or at most semi-annually.
Constant Monitoring of Operations
Execute supply chain plans efficiently while constantly monitoring your operations. It also includes monitoring the costs of raw materials, energy, and labour, as well as looking out for any warning signs that may pose risks to the efficiency of your supply chain, such as shipment delays and early payment requests.
Supply Chain Automation
With modern technology advancing even more, our markets are changing on a daily basis. Every change has a corresponding risk that may bring uncertainty to a supply chain, making it challenging for a business to adapt.
Companies then need to be more flexible to stay efficient in these changing times through supply chain automation. Supply chain automation offers a myriad of benefits, including improved accuracy, increased productivity, lower costs, streamlined processes, and enhanced efficiencies.
Cario Can Automate Your Supply Chain & Help Manage Uncertainty
In today’s digital world, the automation of your supply chain operations is vital to your business. As Australia’s leading expert in the freight industry, Cario provides a single solution to the issues and problems related to supply chain management.
Freight can be too complex, costly, and manual. Cario envisions making freight and supply chains simpler and smarter for businesses by providing a multi-carrier platform that enables them to simplify processes and access real-time data whenever, wherever.
Cario automates freight decisions and enables you to take control. If you’re looking for ways to control freight costs, make your operations more efficient and transparent, and delight your customers, Cario is the perfect software for you.
Take control of your supply chain the simpler and smarter way! Contact Cario now to learn how to manage uncertainty in the supply chain and take your operations to a higher level.