What are four major challenges you can proactively avoid when optimising supply chain design? When updating your supply chain design, it is crucial to be aware of and avoid the following most common pitfalls:
1) Over Emphasis on Cost Minimisation:
Historically, supply chain management has predominantly revolved around cost reduction efforts.
However, even before the pandemic began, this approach was slowly changing. The global disruption
caused by the pandemic highlighted numerous weaknesses in supply chains and served as a wake-up
call for businesses. The lesson learnt was that an excessive focus on cost without consideration of
other critical factors can lead to unpredictable and unexpected consequences. These consequences
cover everything from delivery delays and unsatisfied customers to the huge costs required to fix
disruptions. As the MIT (Massachusetts Institute of Technology) report further highlights,
organisations should shift their focus to designing supply chains that reach diverse global markets,
prioritise value creation and embrace sustainability. This does not mean that cost should be ignored;
rather, it should be considered as one of many influencing factors.
2) Approximation of Tactical Decisions:
Many organisations aim to simplify their decision-making process by prioritising strategic design
decisions over tactical choices such as sourcing, production, supply and transportation. An obvious
disadvantage of moving closer to tactical decisions is the potential for gaps between expected results
and actual performance, which can lead to financial losses. The good news is that there is no need to
choose between strategy and tactics. By incorporating short-term tactical decisions such as sourcing,
production planning, inventory management and transport optimisation into your long-term
strategic framework and leveraging data and computing resources, you can strike a balance that
delivers superior results.
3) Ignoring Risks, Sustainability and Flexibility:
The world is undergoing rapid transformations and this exposing supply chains to increasing risks and
shocks, both internal and external. Regulatory requirements and consumer demand for carbon
emission reduction and ethically produced products are increasing. The potential consequences of
not taking these risks into account are well recognised. Instead of leaving risk reduction,
sustainability and resilience to the final stages of the design process, consider incorporating these
factors from the outset.
4) Underutilising Advances in Supply Chain Planning Technology:
I hope you realise that you need to break free from dependence on spreadsheets to plan, design and
evaluate your supply chain networks. Relying on static spreadsheets leads to missed opportunities,
fragmentation and impedes recovery from disruptions. Such tools also prevent the ability to adapt
quickly to market demands and to visualise and assess the impact of even small adjustments.
Instead, it's time to embrace technology that enables the adoption of flexible models, scenario
testing and adjustments in your digital supply chain before implementing changes in your physical
supply chain.