The impact that supply chain performance has on the overall business efficiency is often underestimated. It is vital to note that the mounting SCM mistakes could have big implications for companies in the long run. Recent studies show that the supply chain accounts for over half of the total cost of production. Successful management of the supply chain necessitates the ability of a company to recover quickly from disruptions. SCM is even more complex today than it was a decade or two ago. So it is critical for companies to remain vigilant, steer clear of common mistakes and appreciate the benefits of proactive management. If your business is falling victim to any of the common supply chain mistakes mentioned below, corrective action will undoubtedly deliver improvements in cost, revenue, customer service, and numerous other business performance factors:
Prioritizing functions by spend
This is one of the most common mistakes in supply chain optimization. This practice had been successful until the proliferation of outsourcing over the last 15 years, which has created SCM with multiple layers throughout the world. If a company’s supply chain relies on a single source, then they are now more likely to experience disruptions. The fundamental challenge here that supply chain managers face is the requirement to wait until all parts are present before shipping the product. Supplies without an alternate source can become a single point of failure for the supply chain. Managers in supply chain sustainability must take into consideration the financial impact of losing a part when they consider only a single source for that particular part.
Hurried launch of new systems and protocols
Companies often tend to ignore the importance of testing out the limits of new products and protocols. It is essential to get advice from an outsider on any blind spots you may have overlooked before sealing big deals or contracts. Considering an outsiders’ opinion will ensure your company won’t get disrupted or run into problems while launching a new product with multiple suppliers.
Lack of supply chain visibility
The lack of clarity across various dependencies in the SCM is a challenge for companies. Managers are often unaware where their parts are coming from, which means they are unable to determine their actual supply chain, undermining supply chain optimization. For example, a part that a manager believes is dual-sourced might turn out to be single-sourced one or more levels up the supply chain. Take the instance where Nestle fell into trouble because they did not know that fish used for their Fancy Feasts product were harvested using forced labor. The solution for this problem requires supply chain managers to establish a priority of correction based on the parts of the supply chain that have the highest financial impact. This prioritization strategy allows managers to deal with catastrophic disruptions in the supply chain, as well as localized problems.
Poor accountability framework
Typically companies don’t assign the responsibility for supply chain disruptions to anyone at the operational level within the procurement organization. The lack of accountability, in this case, results in confusion when the action needed to restore the SCM falls outside the scope of normal activities. For example, Recently Target corporation cut ties with Welspun India, a producer of cotton sheets because the sheets weren’t made from Egyptian cotton, as advertised. When Welspun lost 50% of its value, the company tried to blame its suppliers, rather than taking responsibility for the error. Effective leadership during a supply chain optimization is as crucial in responding to a crisis as the supply system itself. This requires the upper management to scrutinize supply managers carefully by appointing a leader who has the proper training, tools, and infrastructure that will allow the CEO to control the crisis rather than the other way around.
To know more about the common mistakes to avoid in supply chain management