6 Emerging Challenges for the Supply Chain and How to Address Them
The past 18 months have exposed major weaknesses in the global supply chain. For many companies, the pressure from the COVID-19 pandemic stretched logistics to their limits, revealing inefficiencies and areas for improvement.
These existing weaknesses are being compounded by new supply chain challenges and changing market conditions. Here are six of the most important emerging challenges for global logistics — and what businesses can do to address them.
1. Lead Time Expectations
Consumers and business clients both expect increasingly quick turnaround times on new orders. In part due to the rise of ecommerce giants like Amazon, many consumers consider it normal for an item to be delivered a day or two after an order is received.
For the global supply chain, however, this is often unrealistic. International shipment can take weeks or months, depending on the complexity of the item ordered.
These consumer expectations aren’t likely to change any time soon. As a result, more effective demand forecasting and supply planning will be essential for businesses. Flexible supply chains that are capable of expediting orders as needed — for example, taking advantage of backup air freight contracts when land or sea would be too slow — will become an invaluable asset.
Strategies that keep goods close to buyers can also help businesses meet these expectations. Distributing warehouse space, if possible, can make it more likely that items are nearby buyers when ordered, making them quicker to ship.
2. Port Congestion
Port congestion, in part caused by the COVID-19 pandemic, remains a major challenge for logistics. Right now, ports around the world are experiencing record levels of congestion, meaning freight shipped by sea is likely to be delayed significantly.
Businesses are experimenting with different solutions to this problem. In the United States, some major retailers have begun chartering their own ships to import goods ahead of the 2021 holiday season. Chartering these ships allows the retailers to unload at less-congested docks, like those in Portland, Oregon.
Most businesses likely don’t have the resources to charter their own cargo ships. Instead, demand forecasting and carrier choice may help companies keep sea freight moving. Staggering shipment containers across multiple vessels may also help businesses avoid the worst of a port’s congestion while also mitigating risks in other ways.
The diversification of sourcing in a supply chain strategy can also help. If port congestion makes it nearly impossible to obtain a good or raw material from one supplier, there may be other suppliers available via air or land freight.
3. Aging Equipment
As they age, vehicles become less reliable and more prone to failure. Regular replacement of fleet vehicles is essential to keep the supply chain running smoothly, but the high expense of a new truck or tractor-trailer means businesses are continuing to use legacy equipment for longer than they would typically.
Vehicle failures can happen suddenly. Even simple issues can cause massive problems when a part that’s been on the verge of failure begins to break down.
Replacing old vehicles with new ones is one way to minimize downtime due to failures. An upgrade is also an opportunity to investigate alternative fuel vehicles and electric trucks.
For businesses that can’t afford the capital expense of a new fleet, knowledge and careful maintenance can keep vehicles running longer. Preventive maintenance and effective upkeep is the best way to extend the lifespan of a vehicle.
For example, the lifespan of tires that are underinflated by just 20% may decrease by as much as 30%. Proper tire inflation can keep vehicles on the road and decrease maintenance costs over time. Other common semi-truck issues, like brake failures, can also be avoided with the right maintenance practices.
Some businesses may also deal with niche-specific maintenance problems. For instance, transporting crops can put significant strain on the suspension of a vehicle or machine, especially its leaf springs.
Regular inspection and maintenance of these suspension components can help logistics companies avoid costly breakdowns and significant downtime.
4. Aging Infrastructure
A similar, related problem is emerging on the state side of logistics. Dated transportation infrastructure is beginning to show its age. In 2021, the American Society of Civil Engineers (ASCE) gave American infrastructure as a whole a C minus. Roadways fell behind even this low average and were given a D grade.
Bridge closures, roadwork, and infrastructure failures can all create serious difficulties for logistics companies. When essential routes are closed for emergency maintenance, companies may have few options for avoiding delays.
As with port congestion, diversification may be the answer for businesses. Distributing risk by partnering with a larger number of suppliers can help businesses create a more responsive and flexible supply chain network.
5. Digital Transformation and Cyber Vulnerability
Data has become one of the most valuable assets available to logistics companies. With the right customer information, a business can more accurately predict demand, anticipate crises, and mitigate risks.
This same information can also make a company much more vulnerable, however. The value of data stored on business networks makes these networks a more attractive target for hackers.
At the same time, digitalization, the adoption of Industry 4.0 technology and IoT devices, and the pivot to working from home have all increased the number of critical business assets exposed to the internet.
The consequences of a successful breach can be massive. Businesses that suffer a breach may pay multi-million-dollar ransoms, lose critical files, or face a badly damaged reputation. Downtime and fines from government regulators can further increase the cost of a breach.
Effective cybersecurity is the best way to reduce the risk of a breach. Investing in IT, developing best practices, and participating in industry conversations on cybersecurity will help businesses ensure that critical assets and digital infrastructure are kept safe from hackers.
6. Rising Freight Prices
Higher shipping costs are likely here to stay. For logistics providers and vendors, this can be a serious challenge. Already, experts are predicting that businesses will hike prices to offset the growing freight costs. The impact will likely be felt in almost every sector of the economy.
Better technology may help businesses adapt to these higher prices. Transportation management utilities that allow businesses to compare carriers and optimize routes, for example, can help them to both navigate around delays and minimize freight costs.
How Businesses Can Adapt to a Changing Supply Chain
The global supply chain is transforming fast. Businesses that want to develop effective logistics strategies will need to manage both old and new supply chain challenges.
Technology and diversification may both be essential. Partnering with a range of suppliers can help businesses distribute risk and avoid emerging issues like port congestion. New technology can make it easier to optimize routes and identify the most valuable carriers.
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