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.” Liam Launders, 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.
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:
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:
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:
How to avoid it:
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:
How to avoid it:
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
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:
How to avoid it:
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:
How to avoid it:
“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.