These days, business innovators are rightly viewing their supply chain as an opportunity for competitive advantage. For international logistics professionals, the challenge isn't just about moving goods from one point to another but doing so in a way that maximises value, minimises costs, and builds resistance to disruptions in global trade.
Despite best intentions, there are common pitfalls which can threaten optimisation efforts, leading to costly inefficiencies and missed opportunities.
Remember the KFC chicken shortage of 2018? KFC did not perform adequate due diligence on their new supply chain partner, leading to 750 branches running out of chicken.
A press release at the time read, “We've brought a new delivery partner onboard, but they've had a couple of teething problems - getting a fresh chicken out to 900 restaurants across the country is pretty complex!”
This is a perfect example of supply chain optimisations having disastrous consequences if not planned fully.
“Supply chains have always been used to leverage advantages over competition. The now-normalised widespread outsourcing of supply and manufacture to East Asia is perhaps the most obvious example. But optimisation and innovation across the supply chain should be a continuous process.”
Jade Blackburn, Head of Sales, WTA
Companies with high-performing supply chains achieve, on average, 15% lower supply chain costs, according to a McKinsey study. This article will explore five key supply chain optimisation mistakes and provide actionable insights to help you avoid them.
Mistake 1: Underutilising technology
The biggest development in the logistics and supply chain industry over the last five years has been technology. Modern supply chain optimisations need to use technology to maximise their value. The days of spreadsheets for supply chain management are quickly becoming history.
Why it happens:
- Resistance to Change: Many organisations hesitate to adopt new technologies due to fear of disruption and the perceived complexity of implementation.
- Lack of Awareness: Businesses may not be fully aware of the latest technological advancements and how they can benefit their supply chain operations.
- Insufficient Training: Employees might lack the necessary skills and training to effectively use new technologies, leading to underutilisation.
We have seen the meteoric rise of visibility tools, such as the WTA Platform, which offers complete transparency on cost and timing data related to logistics and a single source of truth for all shipment information.
We are seeing a rise in temperature, humidity, light, and shock monitoring in perishable cargo. AI, blockchain, and robotics present exciting fields of opportunity that are still in their infancy.
Forward-thinking supply chain professionals must leverage these tools in any operational enhancement plans.
“In such a competitive world, it is very important to manage technology in strategic manner. For the success of an organisation, continuous integration of technology and improving the existing technology is very critical.”
Purohit, P. (2023). Importance of Technology Management in Improving the Performance.
How to avoid it:
- Promote a Culture of Innovation: Encourage an organisational culture that embraces change and innovation, highlighting the benefits of new technologies.
- Stay Informed on Technological Trends: Research and stay updated on the latest advancements in supply chain technology regularly to identify opportunities for improvement.
- Invest in Training and Development: Provide comprehensive training programs to ensure that employees are well-equipped to use new technologies effectively and efficiently.
Mistake 2: Poor supplier relationship management
Strong supplier relationships are crucial for a resilient supply chain. Working with your supplier to enhance products and processes can benefit both parties.
Develop a partnership instead of a transactional relationship. This comes through increased focus on strategic alignment and better communication, both promoting trust.
Poor management of suppliers can result in delays, increased costs, and compromised product quality.
Why it happens:
- Lack of communication and transparency: Without open lines of communication, misunderstandings can occur.
- Over-reliance on a single supplier: This creates a single point of failure, making the supply chain vulnerable to disruptions.
- Failure to align supplier performance with company goals: Misaligned objectives can lead to inefficiencies and unmet expectations.
How to avoid it:
- Foster open communication: Regular, transparent communication helps build trust and ensures that both parties are aligned on expectations and capabilities.
- Diversify your supplier base: Reducing reliance on a single supplier mitigates risk and ensures continuity in case of disruption. Read our article comparing supplier consolidation vs diversification.
- Implement a supplier performance management system: Regularly evaluate supplier performance against your company’s goals.
Mistake 3: Neglecting demand forecasting
Demand forecasting is a key part of an efficient supply chain. Yet, many businesses fail to invest adequately in this area causing unnecessary costs or extremely dissatisfied customers.
Why it happens:
- Lack of advanced forecasting tools: Many companies rely on outdated methods that don’t leverage modern technology, missing out on the power of AI and machine learning.
- Inadequate historical data analysis: Without thorough analysis of past data, businesses can't identify patterns and trends that could indicate future demand.
- Ignoring market trends and external factors: Economic indicators, seasonal changes, and market shifts are often overlooked, leading to inaccurate forecasts.
How to avoid it:
- Invest in sophisticated forecasting software: Tools that utilise AI and machine learning can significantly improve forecast accuracy by analysing large datasets and identifying patterns.
- Incorporate external factors: Use comprehensive data, including economic indicators and market trends, to create a more holistic and accurate forecast.
According to some case studies, optimisation solutions have shown a range of benefits, including a 30% reduction in inventory.
There are several ways to build demand forecasting into your supply chain optimisation. We have highlighted them in the infographic below.
Source: Red Stag Fulfilment
Mistake 4: Inefficient inventory management
With similar consequences to neglecting demand forecasting, Inventory management is a critical and often overlooked area of supply chain optimisation.
Particularly after industry shocks like the COVID-19 supply chain crunch and the Red Sea diversion, businesses have been extremely risk-averse in their inventory management.
However, overordering and inefficient practices can lead to excess inventory, increased holding costs, or no stock and customer complaints. This problem is estimated to have cost businesses $1.9trn globally in 2022.
Why it happens:
- Inadequate inventory control policies: Poorly defined policies over stock level communication can lead to inconsistent practices and inefficiencies.
- Failure to use advanced inventory management systems: Many companies still rely on outdated systems that don’t provide the necessary insights for efficient inventory management.
How to avoid it:
- Implement real-time inventory tracking systems: Technologies like RFID sensors and the Internet of Things can provide real-time tracking data, helping maintain accurate inventory levels.
- Establish clear inventory control policies: Develop and enforce policies that standardise practices and ensure organisational consistency.
- Utilise advanced inventory management software: Modern software solutions can provide detailed insights and forecasts, helping optimise inventory levels and reduce costs.
Mistake 5: Overlooking sustainability practices
According to research, 90% of a company’s emissions come from the supply chain. Making sustainability practices a critical aspect of modern supply chain management.
Any supply chain optimisations must account for upcoming regulatory changes. At the very least, they must be adaptable to incoming legislation, whatever form it may take.
Overlooking sustainability can lead to regulatory issues, increased costs, and damage to brand reputation.
Why it happens:
- Perception that sustainability is too costly: Many businesses believe that implementing sustainable practices will increase costs.
- Lack of understanding of sustainable practices: Without knowledge of sustainable methods, companies fail to see their long-term benefits.
- Inadequate environmental impact measurement: Without measurement, it’s challenging to set goals and track progress.
How to avoid it:
- Invest in energy-efficient solutions: From transportation to warehousing, energy-efficient technologies can reduce costs and environmental impact.
- Source materials from sustainable suppliers: Partner with suppliers prioritising sustainability to reduce the overall carbon footprint.
- Measure and report on environmental impact: Set clear sustainability goals and use metrics to track progress and demonstrate commitment to stakeholders.
“We’re seeing increased interest from both clients and prospects in the CO2 emission tracker, which is built into the WTA Platform. As regulation tightens, there is a increased need for businesses to act responsibly in this area or face additional costs.”
Anthony Bour, IT Director, WTA
Optimising your supply chain is a continuous process that requires vigilance, investment, and a willingness to adapt to new technologies and practices. By avoiding these common mistakes, businesses can enhance efficiency, reduce costs, and build a more resilient supply chain. Remember, the goal is not just to meet current demands but to anticipate future challenges and opportunities, ensuring long-term success.
Focusing on technology, supplier relationships, demand forecasting, efficient inventory management, and sustainability can ensure that your supply chain is robust and efficient for global trade.
Embrace these strategies, and we believe you will see significant improvements in your supply chain performance, contributing to overall business success. For expert guidance on that, from a company which has been in this business for 110 years, get in touch.
