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How to overcome the biggest risks for the supply chain

by James Gherardi on 01 Oct 2018
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The supply chain is recognising that having an influence on responsiveness and increasing efficiency are amongst their biggest challenges, according to BIE research.

The results of our Supply Chain Risk Survey 2018 revealed that the three biggest challenges faced by the supply chain over the last three years were also the top three challenges anticipated for the next three years;

  • Increased customer expectations
  • Increased volatility of customer demand
  • Increased cost pressure

What strategies does the supply chain need to adopt to overcome these challenges?

Understanding customer expectations

Consumer buying behaviours have evolved significantly over the last ten years. Amazon has transitioned from primarily selling books to the ‘everything store’, where you can get just about anything from electronics, to clothing and pet supplies delivered next day, and even in some cases the same day. And customers can do all this without even having to visit the website, thanks to Amazon Dash buttons and Alexa.

The supply chain is aware that customer expectations are shifting. But how they are changing is less clear. Many organisations will have a set of assumptions about customer needs and wants. But how accurate are they?

Committing to offer next day delivery for customers means you are bound to a vast inventory and an extensive logistics network. But is next day delivery what your customers want? Have you asked them? Perhaps what they really want is a guaranteed delivery slot within a given period. In which case the investment you’ve made into guaranteeing next day delivery is redundant.

Organisations need to be savvier in terms of finding out what their customers want, getting rid of the parts of the business that are too expensive to serve, and concentrating on what they do well.

Keeping pace with ever-changing demands

Customer expectations don’t just shift and then come to a standstill - they will continually evolve. Organisations need to consider how the customer dynamics are going to shift over time.

With these ever-changing customer expectations, businesses need to develop increasingly flexible supply chains that can quickly adapt to unanticipated changes in demand and supply. In that sense, they should be taking heed from the likes of Zara and devising business models based on having a shorter supply chain that’s reactive and responsive to different trends in the market.

But how do you reduce that time to market? How do you support your supply chain to do that effectively? And how do you fully integrate your supply chain across the whole organisation?

We talked in a previous post about how technology is the enabler in reducing the time to market. By automating many of the repeatable data-heavy processes, such as demand forecasting, the supply chain can focus on managing customer expectations. It will free them up to become more involved in the early stages of product development. This means understanding what your business currently manufactures, what’s involved from a packaging perspective, and who the end customers are.

By replicating this new product framework every time, you can shorten the time to market. Even if you’re creating highly customised products, the core units will still be the same.

Solving all problems in one go

If this kind of thinking is fully incorporated within the supply chain early on, it will solve all three of these big challenges.

Shortening the time to market allows you to meet increasing customer demand. This, in turn, will help you mitigate the volatility of customer demand because bringing a new product to market will enable you to shift away from the old. Finally, you’ll reduce the cost pressure because you’re introducing standardisation as much as possible across the raw materials that you’re using.

Supply Chain Risk Survey Report 2018

Topics: Supply chain

James Gherardi

Written by James Gherardi