The Role of Supply Chain Management in Global Business: Key Challenges and Solutions

A few years ago, supply chain risk was considered a niche business term, but it has now emerged as a central topic of global discussion. The COVID-19 pandemic acted as a catalyst, revealing the significant vulnerabilities within many supply chains. As businesses recover from these disruptions, their primary focus has shifted to optimising their supply chains. Many companies are currently facing increased costs due to economic factors such as recession fears, inflation, and higher expenses for fuel, energy, and labour. According to recent Gartner research, leading supply chain professionals are turning to advanced, cloud-based solutions to navigate these challenges effectively. These modern tools provide critical capabilities, such as real-time cross-business data analytics and forecasting, which offer a competitive advantage. Let us understand more about the role of supply chain management in global business in today’s article:

Supply Chain Management: Key Challenges

In recent years, leading businesses across various sectors have advanced their processes through the adoption of cutting-edge technologies like automation and cloud computing. However, many supply chain providers have not yet updated their legacy systems or utilised modern digital tools. The shipping and logistics sector's continued dependence on outdated technology for inventory evaluation, order management, and material shipping has led to global supply chains that are inflexible and susceptible to disruptions.

E-commerce Growth

The pandemic accelerated a global surge in online shopping, a trend expected to continue due to the convenience it provides. Consumers now have access to a wide range of products online, often at competitive prices, and from the comfort of their homes. This shift has significantly increased demand in the logistics sector.

Centralised Inventories

Many businesses have transitioned from centralised in-house servers to decentralised cloud servers, benefiting from greater agility, security, and flexibility. Similarly, decentralising inventory can enhance shipping and fulfillment processes. For instance, if all inventory is stored in a single location that experiences a natural disaster or other disruptions, the entire supply chain can be compromised.

Limited Data Visibility

Modern businesses generate substantial data from various sources, including transactions with manufacturers, retailers, distributors, and inventory partners. Traditional supply chain practices often lack the capability to leverage this data effectively. Without comprehensive data visibility, businesses cannot make informed decisions or anticipate future needs.

Patchwork Logistics

Employing multiple third-party supply chain providers can result in a fragmented supply chain that may not meet specific business requirements. These providers often enforce long-term contracts and offer inflexible services, which can hinder a company’s ability to adapt quickly to supply and demand changes.

Mitigation of Supply Chain Issues

The nature of risks businesses face is continually evolving. However, so too are the advanced digital technologies that assist companies in refining their strategies for managing supply chain risks. Here are some ways by which businesses can mitigate supply chain issues:

Enhanced Visibility and Transparency for Hard Goods

Companies should implement advanced Supply Chain Management (SCM) software and Internet of Things (IoT) devices to enable real-time tracking of goods, inventory levels, and supplier performance. They must develop a transparent supply chain where information is readily shared among all stakeholders, enhancing trust and collaboration.

Diversification of Suppliers and Regions

Organisations should avoid over-reliance on a single supplier or region by diversifying their sourcing strategies. This approach mitigates risks related to geopolitical tensions, natural disasters, or other disruptions that could impact supply chains.

Adopting Agile Supply Chain Strategies

Implementing Just-In-Time (JIT) inventory management and lean manufacturing techniques can help minimise waste and improve responsiveness to market changes. Companies should also develop flexible supply chain models that can adapt quickly to shifting demands and conditions.

Investing in Technology and Innovation

Businesses should leverage blockchain technology for secure and transparent transactions, Artificial Intelligence (AI) and machine learning for predictive analytics, and robotics for automation. Additionally, utilising cloud-based SCM solutions can enhance scalability and operational efficiency.

Focusing on Sustainability and Ethics

Integrating sustainable practices and materials into the supply chain is essential. Companies should conduct regular audits to ensure adherence to ethical standards and engage in circular economy practices to reduce waste and environmental impact.

Robust Risk Management and Contingency Planning

Regular risk assessments should be conducted to identify potential vulnerabilities within the supply chain. Developing comprehensive contingency plans for critical disruptions, including alternative suppliers, logistics options, and maintaining emergency inventory buffers, is crucial for resilience.

Benefits of Supply Chain Management in Global Business

Global supply chain management involves planning and coordinating the entire supply chain as a cohesive unit to achieve optimal customer service while maintaining cost efficiency.  It allows companies to streamline their business processes through international networks, enabling rapid responses to unforeseen market conditions. This optimisation improves transport strategies, reduces costs, and minimises waste, facilitating quicker market entry for products. Small and medium-sized businesses also gain advantages, particularly those with niche technologies or specialisations, by accessing multinational markets and suppliers.

What is Risk Management in Supply Chain?

Supply chain risk management (SCRM) involves identifying and addressing potential vulnerabilities within a company's supply chain. The primary goal of SCRM is to mitigate the impact of these risks on a company’s operations, reputation, and financial performance. This process entails taking strategic actions to identify, assess, and manage risks across the entire supply chain.

A supply chain encompasses all raw materials and processes involved in the production and distribution of a product. Consequently, any disruption within this chain can significantly affect a company's bottom line. An effective SCRM plan evaluates both routine and exceptional risks throughout the supply chain. By implementing targeted processes based on this evaluation, the plan aims to reduce vulnerabilities, improve inventory management, and ensure the continuity of business operations.

Importance of Risk Management in Supply Chain

Supply chain risk management (SCRM) is crucial for maintaining operational stability and ensuring business continuity. Natural disasters—such as earthquakes, hurricanes, and floods—can severely disrupt supply chains. Similarly, political and economic events, including wars, geopolitical instability, trade disputes, strikes, and fluctuations in currency valuation and fuel prices, pose significant risks to global business operations.

Effective inventory management depends on robust supplier partnerships. Any financial instability, capacity constraints, or other issues within a supplier’s operations can introduce instability into the supply chain.

Implementing a comprehensive SCRM strategy is essential for companies to build resilience against uncertainties. Proactive SCRM enables businesses to avoid or minimise disruptions, reduce costs, improve quality, and enhance customer satisfaction. Additionally, SCRM helps ensure regulatory compliance, protect brand reputation, and promote sustainability, making it a vital component of effective SCM.

Role of Transportation Management in Supply Chain

Transportation within a supply chain encompasses the movement of products from their initial point to their final destination. This process starts when materials are transported to a warehouse and continues until the customer’s order is delivered to their doorstep. Given transportation’s critical role, warehouse managers must carefully analyse transportation within their supply chains. This analysis is crucial for achieving lower overall costs, as transportation can represent up to 60% of total operational expenses—a substantial portion of a company's supply chain costs.

A Transportation Management System (TMS) is a specialised supply chain platform designed to aid businesses in planning, executing, and optimising the physical movement of goods, whether incoming or outgoing. It ensures that shipments comply with regulations and that proper documentation is maintained.  A TMS offers visibility into daily supply chain operations, trade compliance information, and documentation, ensuring timely delivery of freight and goods. It also streamlines the shipping process, simplifying the management and optimisation of supply chain operations across land, air, and sea. TMS is pivotal in supply chains, impacting every stage from planning and procurement to supply chain and lifecycle management. The extensive visibility provided by an effective TMS enhances transportation planning and execution, resulting in improved customer satisfaction and increased sales.

Final Thoughts

As businesses adapt to post-pandemic realities and economic challenges, optimising supply chains has become paramount. Modern technologies, including real-time analytics and forecasting tools, provide significant competitive advantages by enabling businesses to address supply chain risks proactively. Issues such as e-commerce growth, personnel shortages, centralised inventories, limited data visibility, and fragmented inventories require innovative solutions to maintain resilience and flexibility in global supply chains. To mitigate these challenges, businesses must invest in technologies like SCM software, IoT devices, blockchain, AI, and robotics. Diversifying suppliers, adopting agile strategies, and focusing on sustainability are also crucial for enhancing supply chain robustness. Furthermore, effective SCRM is essential for maintaining operational stability and continuity, protecting against disruptions from natural disasters, political events, and cyberattacks.