Supply Chain Challenges

What is Supply Chain Efficiency?

Supply Chain Efficiency is an internal standard for measuring performance with regard to how well a company leverages its available resources to meet its goals for cost savings, process optimization, etc. It relates to using available resources (financial, human, physical etc) in the best possible way to meet the customer's demand at the lowest cost. This results in reducing operational costs for materials and packaging and reduces time wastage. Efficiency is all about the extent to which a process uses resources in the best way possible to ensure the fast, smooth running of systems.

Challenges in Supply Chain Management.

Shortage of materials

A shortage, in economic terms, means that the quantity demanded is greater than the quantity supplied. The growing, long term imbalance of supply and demand threatens business performance across the board. Firms unable to insulate themselves against the threat of scarcity will face significant challenges with their financial performance, growth and long term competitive advantage. The importance of raw material availability is obvious to upstream firms that extract, refine, and process material into products. If raw materials become difficult to acquire, market forces may shift demand to other goods and therefore other supply chains.

In the face of an enduring shortage of computer chips, Toyota announced this month that it would slash its global production of cars by 40 percent. Factories around the world are limiting operations — despite powerful demand for their wares — because they cannot buy metal parts, plastics and raw materials. Construction companies are paying more for paint, lumber and hardware, while waiting weeks and sometimes months to receive what they need. In Britain, the National Health Service recently advised that it must delay some blood tests because of a shortage of needed gear. A recent survey by the Confederation of British Industry found the worst shortages of parts in the history of the index, which started in 1977.

Freight price continue to rise

The rate for a single shipping container has skyrocketed over the last 18 months as the coronavirus pandemic disrupted supply chains and trade channels. Prices have been rising across the freight sector, including in parcel delivery, trucking, ocean shipping and warehousing. Most freight-transportation contracts are negotiated annually, although many large shippers may have multiyear agreements with a variety of carriers. The spot price to ship a 40-foot container from Shanghai to Los Angeles earlier this month was 75% higher than the same time last year.

Demand forecasting issues

Demand Forecasting defined as the process by which the historical sales data are used to develop an estimate of the expected forecast of customer demand. Demand Forecasting provides an estimate of the of goods and services that customers will purchase in the foreseeable future.?Demand forecasting forms an essential component of the supply chain process. It’s the driver for almost all supply chain related decisions. Demand Forecasting facilitates critical business activities like budgeting, financial planning, sales and marketing plans, raw material planning, production planning, risk assessment and formulating mitigation plans.

Changing aspect of customer’s requirement

Consumer demand for things like faster delivery times, production-on-demand, and instantly available order status updates has largely been powered by the rise of the internet and its ability to provide such immediate feedback. The impact this increase in consumer knowledge and the ready availability of information is having on the manufacturing world (and other B2C industries as well) can be felt up and down the value chain in myriad ways. The pandemic fundamentally changed the way consumers behave.

Digitalization

Supply chain digitization can have a profound impact on your bottom line, and it’s central to the success of businesses in many different industries. More than 85% of C-level executives anticipate that digitization efforts will enhance cash flow and reduce Days Sales Outstanding. Supply chain digitization (or supply chain digital transformation) is the process of turning analog supply chain processes into digital ones by establishing dedicated master data that aggregates information from across your entire supply chain, as well as information from some external sources (e.g. internal historical sales data, point-of-sale consumer data, socioeconomic data such as unemployment rates, and external data such as Google trends or competitor prices).

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