Supply Chain Trends, Issues, and Challenges

For the past 15 to 20 years, many companies have realized the strategic importance of streamlining their supply chains. Whether firms seek to increase revenue or reduce costs, supply chain management plays a key role in either. Increasing globalization, a more informed marketplace, and the continuous introduction of new technologies will continue to challenge companies to further strengthen their supply chains such that they can better serve their customers.

Worth anticipating are some key trends and issues in the coming years:

Forecasting and Communicating Demand

Firms have implemented several approaches on understanding and managing demand. Likewise, various forecasting tools are readily available for most organizations to apply. Capturing true demand, however, continues to be a major issue. Internally within the firm, the Marketing and Sales functions are normally tasked to sit down and agree on projected demand numbers and forward the same to supply chain management. As many companies have implemented ERP (Enterprise Resource Planning), the demand numbers provided by Marketing & Sales drive the purchase, production, and inventory plans. While this seems straightforward, the dynamics of the marketplace, such as changing customer preferences and greater competition, cause variability and thereby uncertainty in demand, making forecasting difficult. The ongoing trend therefore for most firms to tailor their forecasting and communication structures such that they can sense and capture demand in order to put together an appropriate response.

Reducing Cost

Fluctuating commodity prices and the increasing complexity of the supply chain continue to put upward pressure on the cost of finished products. In turn, higher costs force selling prices to rise which would have a detrimental impact on demand. Understanding the key drivers of cost and identifying and eliminating those which do not add value are significant challenges for supply chain practitioners but the benefits to be gained would go a long way towards competitive advantage.

Improving Customer Service

One key role of supply chain management is order fulfillment. As geographic markets expand, the challenge has always been on how to serve customer orders no matter how widely dispersed the market is while at the same time delivering what the customer wants and when he wants it. While information technology has allowed anyone to place orders through various communication channels, delivering the physical product to the consumer often requires a sophisticated but synchronized network that needs synergy between the various supply chain functions such as procurement, manufacturing, and logistics.

Collaborating via the Extended Supply Chain

Cost pressures and challenging growth objectives are forcing companies to go outside their “four walls” to work with customers and suppliers to improve systems and procedures which would reduce cost and increase their ability to serve the final consumers. This is known as the extended supply chain and it encompasses consumers, middlemen, and vendors up to the third (3rd) tier. By understanding how consumer demand flows from the consumer to as far as 3rd-tier suppliers, inefficiencies can be identified and addressed. This is an interesting issue in supply chain management in which even as the concept has been around for a long time, practice and actual implementation have been far in-between and wholly confined to large global players.

Managing Supply Disruptions

High-profile supply disruptions in recent times have caught the attention of business executives. As supply chains become more complex and spread out geographically, they become more prone to factors beyond anyone’s control. Natural calamities, political upheavals, and even mundane changes in local regulations have led to major supply disruptions in virtually every industry. In some cases, disruptions have caused companies to lose market share to competition. How materials are sourced and where facilities are located are no longer trivial issues but key areas which can make or break a firm’s supply chain.

Competing for Talent

Globalization and consolidation have spurred companies to operate in new territories and invest in new businesses. The pursuit of talent, particularly for supply chain management, has never been so competitive. Supply chain managers are required to have both the soft and hard skills to manage the technical as well as the relationship aspects inherent and requisite within operations. Attracting and retaining the best supply chain talent has become a challenging priority for human resource managers.

Well-managed supply chains bring about better business results. Companies aspiring for greater heights need to be aware of current trends, issues, and challenges if they aim to be leaders in their respective industries.

About the author 

Jovy Jader

Mr. Jovy Jader is a Management Consultant and Regional Speaker on Supply Chain Management. He has directed and implemented Supply Chain Management projects both local and international which have resulted to company-wide improvements in revenue, working capital, total cost, and service levels. Mr. Jader was formerly with Procter & Gamble Philippines and Coopers & Lybrand/PricewaterhouseCoopers.

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