If your business is involved in the production or other product-centered operations, you will know by now just how crucial a good supply chain is. Any delays in getting products to your customers or to resellers may easily lead to stock-outs, which mean lost money and, more importantly, serious damage to your business’s reputation.
Perhaps you have already noticed a need for improvement in your supply chain—for many manufacturers, the wake-up call is an endless stream of negative publicity from dissatisfied customers. Perhaps, alternatively, you are simply a forward-thinking business owner looking to improve business processes and preempt supply chain challenges. In either case, the challenges you may face will likely revolve around the same issues, which are covered in this article.
One major reason why supply chain management is challenging for many businesses is that it involves multiple stages, each with its own unique challenges. Typically, these stages can be broken into six as follows:
Finding the right suppliers is possibly the most crucial piece of the supply chain puzzle. When choosing a supplier, your considerations may range from the quality of the products on offer to the producer’s ability to deliver the right quantity of products in a timely fashion.
Production is the core of your business. If you get this wrong, the outcome will be defective products that may lead to numerous negative effects such as product recalls and lasting reputational damage. While production is a sensitive process, given that it is entirely within your control, it is easier to implement quality control safeguards here than with other parts of the process, such as sourcing.
Once your food has been produced, the next challenge will be packaging. In many cases, poor packaging can ruin an entire product, so this stage can be sensitive too. Of recent, an increasing number of consumers will expect that your packaging is done in a sustainable, environmentally-friendly fashion, which is just one more consideration to keep in mind.
With perishable goods, in particular, storage can make or break the supply chain. Even with non-perishable goods, adequate storage is a necessity. Adequate inventory control methods, particularly techniques such as just-in-time management, can minimize the need for extensive storage.
For a production-oriented business, distribution will often be done through retailers or channel partners, taking a significant portion of the burden of your supply chain off you. Still, you will be concerned over how these external parties execute their function, as these may have a strong impact on your business.
If and when any significant challenges arise with any of these stages, the potential for the serious interruption to your supply chain will similarly arise. The challenge for supply chain managers, then, is to predict and preempt such challenges effectively.
5 Common Supply Chain Problems
In preempting supply chain problems, you need to know what problems to expect. Fortunately, experience shows that there are a few supply chain challenges that recur more frequently than others. Here are the seven food supply chain problems that we often come across and tips on how to solve them:
An Increasingly Enlightened and Demanding Market
The modern consumer tends to be ethical about some of their shopping choices, and much more likely to carefully scrutinize things like ingredient lists and the material the packaging your product is made off. While this can be a good thing and not a challenge per se, it calls on inventory managers to apply a delicate balance. Consumers are not always willing to pay more for more sustainable packaging.
The need to respond to the enlightened behavior of consumers in most markets is especially true when it comes to food, as consumers will be interested in knowing the sources of all that has gone into the making of the food and other products that they buy from your brand with an emphasis on organic inputs.
Suppose your products have multiple inputs in their value chain. In that case, transparency will be a strong concern for you, and you will need to ensure that you can acquire and share accurate information covering each stage of the production process.
Doing this successfully will lead to a strong brand, and consequently, high levels of loyalty, while the reverse is also true, as your brand will likely be degraded or eroded by a lack of transparency.
There is also the risk that if you are not entirely aware of the various inputs into your value chain, you may lose the ability to respond effectively to any faults which may be discovered from time to time.
Poor Product Safety and Quality Control
Manufacturers are always under pressure to create and distribute high quality, safe products. When they fail, the consequences may range from reputational damage to product recalls and regulatory sanctions to all of the above. Typical factors that may dispose of a supply chain to such failure may include poor storage and warehousing, inconsistent and ineffective transportation networks, poor weather, and even—sometimes, industrial sabotage, a surprisingly common problem.
To avoid the multi-faceted costs of product recalls, manufacturers must focus on maintaining quality throughout their value chain from selecting the highest quality inputs, using the best methods and equipment, and extensive testing.
Poor Communication Between Stakeholders
Supply chains tend to involve multiple stakeholders whose inputs depend on each other to varying degrees. When communications between these actors break down or are ineffective, the supply chain’s health is placed at risk with the potential fallout, including waste, delays, and total failure. These are legitimate concerns for every business, but the problems take on an entirely different scale for businesses that operate globally.
Thankfully, communications tools are abundant such as cloud-based networks, making it possible and easy for the various actors in a supply chain to collaborate, communicate, and resolve potential conflicts.
Uncontrolled Supply Chain Costs
Supply chains of any kind are a cost-intensive enterprise. If allowed to run unchecked, these costs may easily spiral out of control, but effective supply chain management will help to keep them to manageable levels.
The most significant costs that frequently come up in most supply chains will be energy costs, freight, and other logistics, manpower, and technology costs. As each of these is essential, they cannot be done away with but must instead be effectively managed for best results.
The first step to effective cost management is accurate record keeping, which makes it possible to know the cost of each activity. In most cases, this can be effectively carried out using excel sheets, but you might need to rely on some advanced software in many cases.
Knowing your costs and figuring out what can go is only one half of the equation, however. The second half is knowing which costs to cut, and this must be done based on a value-cost evaluation.
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Failure to Track and Control Inventory
Inventory control is a major issue that every producer must tackle. Too much inventory will lead to waste, while too little will impede your ability to satisfy your clients. In both cases, the money will be lost, from wasted goods and from lost revenue, respectively.
There are many inventory management techniques, such as the just in time method, that will help determine the optimal level of spending on inventory. There is also inventory management software that will do this for you with minimal levels of input.
For food supply, in particular, supply chain management can be tricky. Regardless of your operation’s size, you will need to maintain a high level of control over the entire value chain.
How to Fix Common Supply Chain Problems
Now that you know the common problems to expect, your attention will likely turn to fixing them. The best solution is generally to begin by hiring an experienced or well-trained supply chain manager. In addition to this, the following measures will also help:
- Implement an Effective Distribution Strategy – devise a distribution strategy that matches your overall business strategy. This could be having the widest area coverage or simply achieving cost leadership.
- Constant Cash Flow Monitoring – Cash flows can reveal important trends that aid in supplier management
- Use Inventory Control Software – Software simplifies the process and can automate many manual tasks
- Establish effective communication channels – Communication between stakeholders is critical and may help eliminate many potential challenges.
Supply chain management is the heart of any production-oriented business. For many businesses that struggle with supply chain management, the problems can be traced to inefficiency in one or more stages of the process, from sourcing to production, packaging, storage, and distribution.
The most common challenges that may beset a supply chain include keeping up with an enlightened market, quality control, poor communication between stakeholders, uncontrolled production and supply chain costs, and poor inventory control. Using the tips, we have provided in this article, you now effectively predict and preempt these challenges by implementing a strong supply chain framework using the tips we have provided.