Overcoming the challenges of a global supply chain
Modern supply chains are more global than ever before, exposing businesses everywhere to a broader range of risks and challenges. But overcoming them can result in a supply chain that’s more resilient, agile, and efficient than was previously possible.
The modern world features a more complex and interconnected network of businesses trading internationally than has ever been seen before. And it’s arguable that this very feature of modern global economics has been a key driver in global trade’s journey towards being ever-more efficient from a consumer perspective.
However, the global nature of our supply chains also exposes businesses to new risks and challenges that must be conquered. And, worse still, these supply chain risks, thanks to their global scale, can have disastrous ripple effects when they come to fruition.
In 2020, we saw the Coronavirus pandemic ravage supply chains. Across the entire global economy, manufacturers were crippled, suppliers left unable to fulfil orders, and buyers left without adequate stock. This was a timely event – displaying some of the most critical challenges modern supply chains present when times of crisis hit.
Potential supply-side catastrophes aren’t the only challenge that global supply chains present, though. Even when operating under normal conditions, these giant supply chains are complicated, challenging, and delicate – requiring consistent, concerted effort and solid mitigation strategy planning before they run efficiently.
Understanding and planning ahead to beat these potential global supply chain challenges when they occur should be near the top of any businesses’ priority list, but where do you begin?
Understanding global supply chain challenges
The first step is to build your knowledge. To be prepared to overcome the potential challenges that global supply chains present, you first must understand them. While not exhaustive, these are some of the top challenges to be aware of:
- Lead times – Customers increasingly expect lightning-fast order fulfilment and delivery times, but global supply chains typically work to much longer timeframes. If you’re reliant on raw materials from halfway around the world for your manufacturing process, for example, next day delivery isn’t exactly feasible using a traditional demand-led supply chain model.
- Risk exposure – Reliance on suppliers from a broad range of countries spanning the world also means you’re exposed to a broad range of risks. From natural disasters to macroeconomic difficulties, countries all face their own internal challenges. If you do business with suppliers from countries that, at some point, face a particularly challenging time, you might find your own business is affected too.
- ESG compliance – Compliance with widely-accepted environmental, social, and governance principles is an increasingly important consideration for modern businesses, as consumers themselves become more concerned with the impact their buying choices have. But accounting for ESG concerns when you’re dealing with suppliers from a diverse range of countries with different laws and standards can be a difficultly.
- Supplier relationships – Strong supplier relationships are one of the cornerstones of a healthy supply chain, but those relationships can be harder to forge when dealing with suppliers from other countries. Not only is there often a language barrier to conquer, but you also must contend with time zone and cultural differences.
- Visibility – Global supply chains are, as we’ve already mentioned, complex. This isn’t just a factor in how efficient they are, though, it’s also something that affects how much visibility you have over the different steps of the chain and how your goods or materials flow through them. This lack of visibility can make it more difficult to plan ahead, meaning that business disruptions resulting from risks are more likely.
Overcoming global supply chain challenges
So, with a rough understanding of what the primary challenges that global supply chains present are, it’s time to talk about what you can do to prepare for and mitigate against them. In short, the best way to strengthen your global supply chain and ensure it is strong enough to overcome the challenges it faces revolve around two core features – its resiliency and its efficiency.
Supply chain resilience is the term used to describe how robustly your supply chain can hold up against threats becoming reality. A resilient supply chain will be less affected by crises than a weak one, meaning that typical business operations can continue sooner, and revenue is less at risk.
There are a broad range of ways you can make your supply chain more resilient, but the key ones include:
- A renewed focus on inventory management, reconsidering your approach to holding buffer stock that can allow you to continue to meet customer demand throughout a supply chain breakdown.
- A diverse approved supplier base, with failsafe suppliers on-board for key goods or materials meaning that normal operations can continue if a key supplier is unable to meet their obligations.
- Proper supply chain risk planning carried out far in advance of any supply chain disasters, with the aim of devising and implementing mitigation strategies that can help the supply chain to continue functioning as best as possible throughout future events.
Supply chain efficiency, on the other hand, is less focused on preparing for disaster and more about making the most of your global supply chain when everything is going well. An efficient supply chain will be more capable of conquering the everyday challenges that global supply chains present. Ways of making your global supply chain more efficient include:
- Better implementation on automation throughout the procurement process, resulting in internal efficiencies that can minimize costs, flag threats, and reduce the number of errors that occur.
- Improved visibility over the entire supply chain, allowing for easier identification of bottlenecks and inefficiencies as they arise and providing a clear view over where your inventory is at every stage of the process.
- A more sophisticated approach to supplier relationships, resulting in stronger relationships with key suppliers that can make it easier to troubleshoot or resolve issues when they inevitably come up.
Solutions to make a global supply chain work better
Overcoming the issues and challenges that a global supply chain presents isn’t easy, but it’s made significantly easier when you have software on your side to help with the task of increasing resilience and efficiency.
Taulia offers a suite of solutions that can make every stage of the procurement process easier to manage and more efficient, from supplier management software to an AP automation platform.
Before you go, you may be interested in this resource:
Strategies for optimizing the financial supply chain