Supply Chain Complexity: What Is Causing Supply Chain Complexity?
Posted on Dec 29, 2023 at 10:12 PM
Companies need help understanding the actual costs of supply chain complexity. It is challenging to know the effects of these complexities on day-to-day operations, material availability, and critical customer service and satisfaction.
Below, we will address the hidden causes of these complications and how we can effectively manage these risks. Read on.
What Is Causing Supply Chain Complexity?
Various factors cause supply chain complexity, often resulting from rising customer expectations, expanding products and services, and tailored experiences.
These factors force brand owners and businesses to support more unique customer orders across their supply chain.
This means that companies must cooperate with partners & suppliers and manage inventory best, with more profound control over all goods and product supply steps. This is to remain competitive in the market and achieve profits.
All brands are looking to grow their business and maintain their current and potential customers in the future. Undoubtedly, this is achieved after great effort, but the opposite of what they wish, i.e. becomes more complicated. It is worth noting that the global supply chain challenges and solutions are large and numerous.
There are several underlying reasons for the increasing supply chain complexity. Such as:
-
Growth in Supplier / Partner Relationships:
Good relationships between suppliers and partners are critical to expanding the footprint with current customers and reaching new ones. However, managing, negotiating, evaluating, and improving all these relationships brings the complexity to an advanced level.
-
More Milestones to Manage:
Expanding customer bases and product lines is essential for brands as it lengthens the supply chain. In other words, more steps are needed to complete orders, whether made-to-order manufacturing, order splitting and consolidating, or multilateral international shipments. All of these increase the supply chain complexity.
-
Vastly Different Orders:
It used to be that supply chains were very similar for a range of customers. However, with increased product lines, various shipping options, and expanding supply and geographic distribution of customers. This model has strained efficient order fulfilment.
Today, companies must consider their business strategies and be more flexible to accommodate each customer order and ensure it arrives on time, at the lowest possible cost.
-
Inventory across multiple parties:
Along with the need to cooperate with suppliers, there is a complex inventory problem. Inventory—especially that which is not used – can make or break profitability.
Today, inventory is not only stored internally by manufacturers and warehouses but also by suppliers and partners. This increases complexity, so a way to control and monitor that inventory must be secured in real-time.
-
Data Availability:
There is an endless amount of data and information available across the supply chain to use toward more informed decisions. However, trying to understand it can be overwhelming and supply chain complexity.
How to Manage Supply Chain Complexity?
All companies are keen to strengthen their Certificate supply chain risk management and reconsider their policies and nature of work to reduce complications. Here are the most important ways to manage supply chain complexity:
Supply chain processes in all companies need to be standardised. Complexities create situations where supply chain managers have to improvise. However, supply chain management must be meticulous, standard, and stable. This is where standard operating procedures come in handy.
For companies looking to expand into the global scene, having standard operating procedures would also be helpful. To implement the SOP should include the following:
-
Removing extraneous steps from the company's supply chain
-
Increase employee efficiency
-
Improve productivity and bottom line of the company
-
Keep the company competitive in the global market.
-
Optimise All Financial Decisions
A company's financial structure should be optimised to improve its financial processes. They should be tight enough to stand the test of time and flexible enough to allow the integration of innovative solutions as technology advances. It would make the supply chain efficient and also keep the business competitive.
-
Automation
Introducing automation into a company’s current supply chain management processes is a significant solution for complexities. The world is already being driven by technology with Artificial intelligence (AI) and robotics, and the industrial sector is not left out. Automation has found its way into production, warehousing, and supply.
It saves time and costs, helps you track orders, and makes enquiries across multiple supply channels.
-
Real-time Inventory Management
Most companies manage real-time inventory manually, but more is needed. Integrating the latest monitoring and management technology and software to manage inventory is essential and can minimise a company's financial disasters. It gives a complete overview of operations and keeps track of all inventory levels. Real-time inventory management offers seamless flexibility and scalability in the long run.
-
Always Leverage Data
Collecting vast amounts of information is much more common in this era of software solutions. A company can beat the supply chain complexity by generating actionable reports. There are also AI-driven solutions that help companies with data analysis and process.
From there, they can leverage this data to predict and project the resources needed for the supply chain. This minimises the wastage of both time and resources and improves efficiency.
In Conclusion,
Supply chain complexity is crucial, as they are constantly at risk. But the biggest challenge is understanding that complexity in depth and the impact of its presence on the company's work, objectives, and ability to compete, as well as whether customers will continue to appreciate this company and be willing to deal with it.
