A sudden increase in customer demand, a delay in shipping, and/or a supplier who cannot fulfill their order are examples of events that may cause disruption to a successful business operation. A company’s ability to react to these types of disruptions is typically determined by the strength of its supply chain network.
Rather than just moving merchandise, companies must have a process in place that will allow for changes, reduce risks and provide customers with relevant updates.
The Ripple Effect of One Delay
Imagine if one of your suppliers doesn’t provide you with a critical part by the due date. As a result, production will slow down, the inventory in your warehouse will decrease, and you will have to delay fulfilling some of your customers’ orders.
The way a problem can affect every part of the supply chain of a company. The operation of each step relies upon the flow of product and data that occurs prior to that particular step.
The impact may include:
- Higher shipping costs from urgent deliveries.
- Stock shortages are able to lead to sales loss.
- Missed delivery targets.
- Extra work for warehouse and customer service teams.
Three Ways to Build a More Reliable Network
Create Backup Options
Having a single source of supplies or a single shipping method leaves your company vulnerable. If you work with multiple sources of supply and have other shipping options, then your team will have many more possibilities available to them should issues occur.
Improve Visibility
Businesses require accurate data concerning inventory levels, ship dates, and performance metrics of their suppliers. Tracking systems and shared access to relevant information allow companies to identify potential delays in a timely manner so that the delay can be resolved prior to becoming larger issues.
Place Stock Where It Is Needed
When a business keeps inventory near its major customers, it can lower the amount of time it takes to deliver products. On the other hand, adding more warehouse space can be costly. To determine where storing inventory will create the greatest benefit for the business, use demand data to make that decision.
Measure What Matters
If there is no definition of what constitutes a successful performance of a business network, then it cannot grow. To assess the quality of a business network, several critical performance indicators must be considered.
| Measure | What it tells you |
|---|---|
| On-time delivery rate | How often orders arrive as promised |
| Inventory turnover | How quickly stock is sold and replaced |
| Cost per shipment | How much it costs to move each order |
| Supplier lead time | How long suppliers take to deliver |
| Order accuracy | How often customers receive the right items |
These measures help teams find weak points and track progress over time.
Make Better Decisions with Planning Tools
Organizations can use supply chain planning software to evaluate several possible conditions (e.g., changes in product demand, shipping rates, and/or warehouse capacity). Organizations will then make a decision about whether they want to change their current transportation routes, increase their number of warehouses, and/or find new suppliers before committing to anything.
This supports better and smarter decisions, as well as reduces the chances for costly mistakes.
Prepare for the Unexpected
A strong supply chain network will function well under less than ideal circumstances. It is built upon the use of accurate data, the ability to adapt its plans as needed, and long-term partnerships with its suppliers that allow it to continue to move product.
Business continuity planning through regular risk reviews and preparation will allow companies to reduce disruptions to their operations, maintain consumer trust and remain stable while experiencing challenging times.
