How to Reduce Supply Chain Risks
Natural Resources Defense Council (NRDC) estimated that up to 40% of the food produced in the US is wasted, which results in a $218 billion annual loss. The experts consider that to a great extent it’s due to the problems within the supply chain. The specialists often lack adequate data for effective decision-making. Thus, approximately one-third of fresh food is spoiled prematurely, and it results in the increased costs for the farmers, shippers, retailers and, of course, consumers.
In fact, 85% of the studied global chains experience minimum 1 supply chain disruption risk a year, but the organizations which manage the risks proactively spend 50% less to cope with disruptions.
The leaders of the industry realize already that a business is just as strong as the chain of suppliers it deals with. A smart businessman should nowadays recognize and take efforts to figure out the factors which may cause strong risks and know how to manage them in a proper way.
It’s no brainer that supply chain management involves many changing factors. The complexity of the contemporary environment makes data analytics usage critical for detecting scams, waste, billing inconsistencies, and risk forms of the supply chain.
Types of supply chain risks
Though the scale of risks is variable — some are common to global trade, competitive, compliance and associated with emerging sanctions and tariffs risks, for instance: others are unique and specific to the industry, location of operation, or partnerships. Risks may include growing labor costs or shortages, lack of carriers’ capacity, loss of competitive edge, higher product prices resulting in reduced margins, etc.
Actually, the top 3 global risks recognized by the experts are:
- uncertainties in the trade flow;
- climate change combined with dangerous weather conditions;
- cybersecurity failures.
These are the three main aspects which are going to shape the 2019 risk landscape. Then follow the civil unrest, which may lead to disrupted highways, and access roads to industrialized areas as well as seaports and border crossings. Other threats include raw material deficiencies, extra costs, safety scares, anti-pollution measures, and severer environmental regulations.
However, managing vendor interactions, creating strong financial protocols, and being aware of the local challenges can help in keeping risks under control. At the same time, proper risk management can benefit in gaining an advantage over competitors, brand protection, and stimulate business growth.
Supply chain optimization through software solutions
The appearance of innovative supply chain software solutions, with embedded analytics and machine learning, is nowadays transforming supply chains due to a strategic opportunity to impact the bottom line.
Such solutions provide logistics operators with the opportunity to switch transport means dynamically reacting to the events in real-time, the possibility to use more cost-effective and greener alternatives — barges and railways, whenever it’s appropriate, and at the same time preserve the option of switching back to trucks. It de-stresses and de-risks the supply chain and brings costs down for transport operators and their customers.
Gartner digital supply chain survey states that 62% of supply chain specialists anticipate that in two years at least half of their corporate revenue will be generated digitally. However, only 25% of them admit that the digital processes are run properly in their companies, meaning substantial work should be done by the rest 75% of business entities. The present moment is the right time for swift, and bold actions, and the enterprises which put off modernizing their supply chain risk falling behind and losing their competitive position.
Transportation management system (TMS) and risk management
While the companies want to become digital, the disconnect with current technology architectures is still great. To gain success businesses should nowadays improve agility and become more customer-centric, and the basis of an agile supply chain is a dependable information system, capable of logistics risk management.
A perfect example of such a solution is a TMS — transportation management system. The Logistic Management’s 11th Annual Software User Survey has already stated that TMS is one of the top three software solutions which are planned by the shippers for purchase or upgrade over next year. So TMS is not anymore a «nice to have» instrument but an essential component of supply chain risk management strategies for large and medium-sized businesses. Data analytics function implemented in the software solutions of such kind allows having insights not only into the financial transaction data but also into operational details so the specialist can understand where the potential risks lie. A major requirement for such a supply chain software development is quick and powerful automated scheduling algorithms which are able to monitor the whole supply chain and modify the route for each shipment automatically choosing the best option.
The present-day Transport Management Systems deliver the details of:
- histories of shipment;
- forecasts of demand;
- options and provisions of the carrier;
- freight-in-transit.
All these details can be shared in real time and automatic alerts can allow the shippers to identify the root causes of problems to take measures for improvement. Due to this fact Transport Management Systems have become essential elements of supply chains, which are nowadays vulnerable to a greater number of disruptions and less tolerant of delays. Besides, some industries have to overcome the pressure of peak season demand and in case of disruption, any business needs to restore its shipping network to normal operation as soon as possible. That’s why supply chain management software is an inevitable tool, able to provide the accurate details at the right time allowing to take weight decisions with regards to the risk profile of the business and the time period under consideration.
The welfares of supply chain management software
The types of supply chain management software can be variable, however, most of them can bring quite obvious benefits to your business.
Through the digital solution you’ll be able to:
- integrate and automate your main data flows;
- eliminate manual data entry;
- avoid human errors;
- reduce manipulation jobs;
- transfer info faster;
- save time and save money.
Mobile technology will bring you additional advantages of gathering real-time data, which will result into
- fewer errors;
- better productivity;
- reduced inventory;
- better traceability;
- improved operational performance;
- better-quality customer service;
- more effective decision-making;
- decreased costs.
Proper software for your business should combine automated data integration, visualization, and analytics, allowing demand planning, and contractors coordination. It will also let you monitor KPIs, and provide you with a better comprehension of the possible supply chain failures. So the proactive actions could be taken in advance.
Supply chain software and the workforce gap problem solving
Managing risks proactively is more cost-efficient than reactive actions. That’s why we come to another possibility the technology provides us with. The estimated growth of demand for supply chain staff in the last decade is going to constitute 26% but it’s almost impossible to meet it since the middle management talent gap in the supply chain is now 61%. Almost one-third of the employees have either reached or approached retirement.
Such a labor-force shortage results in the loss of an incredible amount of expertise costing companies about $350,000 for a single supply chain employee training. However, this problem can be solved using technology, which allows insights to spot bottlenecks in the processes. At present, tons of data are generated every second and automating the process of analysis can speed up decision-making and considerably diminish training costs.
About 70% of the project time is spent on data cleaning. Custom supply chain management software analytics features can lessen the workforce gap problem and let specialists focus on realizing key strategies instead of wasting time on data cleaning and analyzing. By transferring analytics to software, risks can be predicted more effectively.
Conclusion
Nowadays it’s critical to continually adapt to the emerging innovative technologies to lead the competition. You can find certain free supply chain software solutions, but though they may look great from afar, they often fail to be the best for your business.
Stfalcon team being experienced in the supply chain software development is eager to offer the expert opinion and help to anyone interested in the matter. In case you consider investing in a logistic service or startup study our latest whitepaper “How Modern Digital Trends Reshape Logistics” and make sure you take only the right decisions.
Originally published in Stfalcon.com.
