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The Biggest Supply Chain Challenges Today

When supply chains are challenged, it can seriously disrupt the rest of the financial ecosystems. Today we’ll explore leading supply chain challenges, which include global complexity, risk management, sustainability, social responsibility, cyber security, commodity prices and personnel.

1. Globalization

In the age of the interconnected digital supply network, no region of the world is truly self-sufficient. At the supply chain level, one company’s trading partners are often scattered across the world. Transactions are conducted in multiple currencies, time zones, regulatory jurisdictions, operating environments and logistical circumstances. A single tire may have been manufactured in Oklahoma using synthetic rubber from Indonesia, natural rubber from Thailand, carbon black from Germany, silica from Brazil, steel from China, plasticizers from the Texas Gulf Coast and fabric from India.

For leading supply chains today, supply chain technology helps take on the challenge of globalization by serving as a translator between trading partners. Leveraging the digital supply network and tools such as the Universal Business Document, businesses can contextualize transactions among suppliers, customers and carriers.

2. Risk Management

The longer and more complex a supply chain, the more vulnerable it is to disruption. Natural disasters. Political instability. Pandemics. New, unforeseen regulations. Supplier bankruptcies, shortages or quality problems. Sudden customer pivots. Post-pandemic, companies are baking more resilience than ever into their supply chains. This includes risk management measures such as:

  • Re-shoring or friendshoring

  • Diversifying suppliers

  • Improving visibility and collaboration

  • Holding excess inventory

  • Vendor-managed inventory

  • Beefing up contingency plans

  • Implementing more automation

  • Revisiting insurance positions

One basic way to stay on top of supply chain risks is to create a risk management matrix (some call this a risk register) delineating the ways your supply chain could fail. Applying supply chain digitization, artificial intelligence, modeling, machine learning, advanced analytics and other supply chain technologies can help companies stay aware of risks.

3. Sustainability

Reducing the overall CO₂ footprint of your supply chain, across every business function, is now a constant consideration. Supply chain digitization is helping leaders use a number of tools to help protect the climate, including:

  • Improving visibility into supplier/product sustainability KPIs

  • Automating carrier selection and route optimization

  • Planning supplier drop-offs and pick-ups more tightly

  • Streamlining processes and reducing paperwork

  • Retrofitting facilities for more energy efficiency

  • Exploring renewable energy and climate-friendly fuels

  • Optimizing logistics with reduced CO₂ emissions in mind

  • Exercising “lifecycle thinking” to improve product sustainability

Many of these practices demand the kind of transparency and collaboration only made possible by supply chain technology. This is especially true in the face of Greenhouse Gas Protocols for emissions reporting whereby companies must account for Scope 1, 2 and 3 metrics reflecting direct, indirect and supplier emissions.

4. DEI

Another big supply chain challenge today is to ensure strong Diversity, Equity and Inclusion (DEI) performance. With the right systems, culture and metrics in place, supply chains can be a strong resource for DEI results. Rigorous analytics of supplier data can help ensure you’re giving underrepresented businesses a shot.

For suppliers with poor DEI performance, you can also work with them collaboratively to help improve baselines. In addition, interconnected supply chain environments can help ensure you’re in compliance with offshore operations regarding local workers, job creation, community support, etc.

5. Cybersecurity

The threat of cybercrime has risen proportionately with the increase in supply chain digitization and connectivity. You don’t just have to worry about the vulnerability of your own systems, technologies and people; the digital supply chain means also worrying about every trading partner, vendor, platform, etc.

Strengthening supply chain-related cybersecurity is an investment in peace of mind and business continuity. It involves implementing a comprehensive security framework including periodic audits, vulnerability scans and penetration tests. Security policies and procedures must be updated regularly, and continuous training must be performed to harden personnel against social engineering.

6. Commodities

The pressure is on when commodity prices rise. Fuel is especially tricky. Fuel prices affect raw material costs, and the expense of shipping goods to production facilities. As fuel prices increase, so does the cost of moving items around. Higher fuel bills also lead to increased warehouse costs. There’s only so much you can do, but some actions include:

  1. Negotiating supplier contracts with terms allowing for adjustment in the face of changing fuel prices.

  2. Utilizing fuel hedging to lock in current prices and save money over the long term.

  3. Automating the selection of the most fuel-efficient routes and modes of transportation when possible.

  4. Investing in fuel-saving technologies such as idle monitors and aerodynamics kits to reduce fleet emissions.

  5. Analyzing the prospective use of renewable energy when possible.

  6. Balancing your supply chain resilience against the possibility of maintaining low inventory levels via advanced demand forecasting analytics.

  7. Encouraging and incentivizing employees to be mindful of fuel or energy costs when managing supply chain operations.

  8. Keeping equipment in good shape to minimize fuel or energy usage.

7. Talent

Lastly, finding and keeping talent is a challenge—sometimes even creating delays and raising costs. More than 33,000 people work as supply chain leads in the United States; exponentially more in support or specialist roles. The industry increasingly needs people at all levels.

Perception is one issue. Though working in supply chain is fast-paced, important and interesting, it’s not necessarily perceived that way for those not in the know. In addition, the rise of the digital supply chain means many mistakenly assume automation will replace people. Working in the shipping industry is simply not a top-of-mind career path. We need more outreach to younger people. We must also support mid-career professionals with efforts to upskill, reskill and pursue continuing education as the digital supply chain pushes the industry into new frontiers.

Even with high-performance digital supply networks in our corner, there’s no shortage of challenges in our industry. After all, we’re on the front lines helping address the needs of practically every corporation, industry, market, nation and the free market itself. It’s not easy. But, hey, like Jeff Bezos said, “you earn reputation by trying to do hard things well.”