4 Common Pitfalls in Supply Chain Management (And How to Avoid Them)
Brian Hoey - February 06, 2018
Murphy’s Law states that whatever can go wrong, will go wrong—and nowhere is that more true than in the world of global supply chain management. Risk is simply a fact of life in almost all business spheres, but automotive industry manufacturers in particular frequently deal with incredibly complex supply streams that face a near-certainty of disruption. Managing complex relationships between suppliers, shippers, and production processes can lead planners to the brink of numerous potential pitfalls, but, luckily, in the era of Industry 4.0 there are more tools than ever designed to alleviate the pain points of the past.
One of the most common pitfalls in supply chain management is the creation of planning siloes. Planning siloes result from a lack of visibility within an organization, leading to decreased agility and an increase in the potential for disruptions occurring within one’s own production stream. From a supply chain planning perspective, this can manifest itself as inefficient inventory management, for example, or inflexible transport schedules that can’t take into account the requirements of production planners across the aisle.
Avoiding planning siloes is not necessarily an entirely straightforward task, but an important step is increasing cross-operational visibility. This can be done by transitioning away from pen-and-paper supply chain planning towards digital solutions designed to connect disparate points on a given company’s value chain. In this way, planners can gain a more holistic understanding of supply streams, demand requirements, and production processes and thus make better informed decisions, both in terms of what resources are available to them and what impact their decisions might have elsewhere in the product life cycle.
Lack of Transparency
Related to the question of planning siloes is the question of transparency more broadly. If we look outside the realm of planning and take an example from day-to-day productions operations, for instance, we can envision a scenario in which managers on the job shop floor, faced with an unexpected supply stream disruption (e.g. a late delivery), can’t make an informed decision on how to adjust machine use and resource allocation without being able to access information on current inventory levels relative to demand, up-to-date transport information pertaining to the delays, and existing delivery timetables.
Unfortunately, transparency isn't something that arises on its own. As with planning siloes, distinct steps have to be taken to boost intra-organizational visibility. Here, the concept of the lean supply chain can be useful. By driving towards a less complex value stream overall, companies can facilitate more holistic, and therefore more responsive planning functionality across all levels.
Poor Risk/Disruption Planning
To reiterate, supply chain planners can rest assured that something, somewhere in their value stream is likely to become a problem. There are many problem-specific steps that can be taken to mitigate the effects of specific disruptions, but the real pitfall here is not the disruption itself, but being taken by surprise by an event that could have been predicted and planned for. There are a number of steps that can be taken to make any given supply stream more adaptable to risk and uncertainty:
- Improved forecasts: planners can use Industry 4.0 principles to better understand trends in demand and predict potential supply shortages, truck or machine breakdowns, and other rapid changes.
- Plan B and “what-if” scenarios: once potential supply shortfalls, for example, have been identified, a company’s next task is to create contingency plans that enable them to continue delivering the right products to the right locations at the right time. This can be as simple as selecting alternative transport routing options in advance, but it can also serve as an opportunity to employ advanced analytics and others solutions to create various planning scenarios and track their potential effects across the entire supply chain.
- Sales & Operations Execution (S&OE): often, manufacturers will lose agility and flexibility because of a gapping between operational planning and day-to-day operations; S&OE can help bridge that gap by focusing of daily or weekly fluctuations in demand.
By this point, you may be noticing a recurring theme throughout this blog post: that many of the most common pitfalls in managing a global supply chain result from poor visibility or a lack of transparency. Shadow IT, i.e. IT solutions that have been implemented without input from an organization’s actual IT department, is in many ways a textbook example of how poor visibility impacts overall business health. Without a coherent IT structure that connects, rather than divides, different functions with a company, it can be incredibly difficult to adapt to surprises in the supply stream or changes in demand with the agility that they require. More than just resulting in planning siloes, Shadow IT can ultimately present problems for vendors and customers who are unable to connect with a given company in a sufficiently straightforward manner.
As with so many of the pitfalls on this list, the key to avoiding Shadow IT is increasing visibility. More specifically, Shadow IT can be avoided by adopting a Postmodern ERP mindset. In this way, companies can:
- Connect disparate IT functions into a cohesive, interoperable whole
- Boost connectivity and digitization
- Improve the quality and availability of mission critical information across operations
As the global supply chain becomes ever more connected, manufacturers will have to match that improved connectivity within their own organizations. By prioritizing visibility in this way, planners can get the most out of Industry 4.0 concepts, turning new technological advancements into significant value-added opportunities.