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The document outlines several challenges that companies face in managing their global supply chains. Key challenges include selecting strategic global suppliers, reducing supply chain costs while meeting customer demands, ensuring high product quality and safety, implementing lean initiatives, consolidating suppliers, accessing new technologies, reducing operating costs, managing omni-channel selling, responding to changing customer preferences, expanding into new markets, balancing trade-offs, dealing with increasing complexity, and fully understanding supplier capabilities. Taking proactive steps to address these challenges will help companies better serve customers, operate efficiently, and grow profitably.
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- 1. Challenges
- 2. Globalization of Manufacturing Operation With the globalization of manufacturing operations, having a global procurement network that can support and react to your supply chain needs is important. According to many chief procurement officers, selecting a strategic supplier that provides manufacturing locations with consistent global quality and a reliable local service, is a challenge. One of the biggest challenges that companies are facing is how to reduce their supply chain cost. In order to satisfy customers’ price expectations, companies have opted to relocate manufacturing to low cost countries around the world in an effort to reduce direct and indirect costs and to minimize taxes. But, having global suppliers contributes significantly to complexity that comes from extended delivery lead times. Customers not only want lower prices, but they also want their products on time.
- 3. Safety and Quality Products The pressure on manufacturers to produce high-quality products that are safe is an increasing challenge. The number of product recall cases is growing each day. It can damage a company’s reputation and is expensive to its bottom line.
- 4. Shorter Lead Time, Less Inventory and Better Throughput With shorter product life cycles and changing market demands, companies are forced to embark on a lean journey. It is important to note that the supply strategies in a lean environment support the operations strategy. The challenge is always to find not just a lean concept, but a working lean solution.
- 5. Supplier Base Consolidation Consolidation of the supplier base can bring many advantages. It eliminates supply base variances and overheads, especially in the supply of C-parts. The challenge is to find a supplier with solutions and experience in supplier-based consolidation processes.
- 6. Access to Latest Technology Access to the latest technology in various fields by having the right experts has proven to be a great support in new product development.
- 7. Operating Cost Reduction The need to continue to reduce costs while improving customer service and supporting expansion in new markets and product lines. Most of the respondents say operating cost reduction is “very important”. Indeed, reducing operating costs remains the most frequently chosen goal over the next five years—as it was over the past three—followed by customer service. Improving service is one of top goals for supply chain management.
- 8. Omni-Channel Selling The need to manage the “complexity of ‘omni-channel’ selling and customer fulfillment”. More than half (55 per cent) said the demands of e-commerce and mobile-enabled consumers are increasing the number of stock keeping units they have to support. Building new distribution centers, and having direct-to-customer fulfillment capabilities could help.
- 9. Volatility of Customer Preferences As stated above, global supply chains are complex. Add to that product features that are constantly changing, and the challenge is even greater. A product is released and customers rapidly pressure companies to come up with the next big thing. Innovation is important since it allows companies to stay competitive in the market, but it’s also a challenge. To enhance a product, companies have to redesign their supply network and meet complex patterns of market demand in a way that’s transparent for customers.
- 10. Market Growth Another factor that presents a challenge is the pursuit of new customers. The cost of a developing a product, from R&D to product introduction, is significant. Therefore, companies are trying to expand their distribution to emerging markets in order to grow revenues and increase market share. Companies all around the world are expected to expand in their home and foreign markets. The introduction to new markets is difficult due to trading policies, fees, and government policies.
- 11. Managing Trade-Offs Balancing cost to serve and customer service is important to their companies’ supply chain strategy and balancing centralized production against proximity to customers is important. Management who make decisions about supply chain trade-offs got to be well informed.
- 12. Continued Complexity As more technologies, processes and “red tape” continue to be layered onto their operations, companies increase their costs of doing business and create confusion about what must be done to realize the corporate objectives and vision. This is especially true of companies with multiple business or operating units. Companies must be vigilant about finding and stamping out unnecessary complexity wherever it exists—for instance, identifying ways business or operating units can share common processes and technology platforms, or having suppliers provide a “reverse report card” that grades the companies they work with on how easy it is to do business with them and illuminates areas that could be streamlined.
- 13. Lack of Understanding In most companies today, suppliers are key extensions of the business model and play an important role in enabling companies to meet customer demands. That’s why it’s critical for companies to know the full range of capabilities and offerings suppliers can bring to the table, as well as any shortcomings among suppliers that could disrupt the business. The last thing a company wants to do is promise customers an increase in response time or the launch of desired new products without being sure key suppliers can support those initiatives. When selecting new suppliers, companies should be rigorous in evaluating all aspects of suppliers’ business (including financial stability and how well suppliers’ cultures mesh with their own). But the work shouldn’t stop there. Companies should conduct regular audits and assessments on an ongoing basis to make sure suppliers are keeping pace with their business.
- 14. Lack of Understanding In most companies today, suppliers are key extensions of the business model and play an important role in enabling companies to meet customer demands. That’s why it’s critical for companies to know the full range of capabilities and offerings suppliers can bring to the table, as well as any shortcomings among suppliers that could disrupt the business. The last thing a company wants to do is promise customers an increase in response time or the launch of desired new products without being sure key suppliers can support those initiatives. When selecting new suppliers, companies should be rigorous in evaluating all aspects of suppliers’ business (including financial stability and how well suppliers’ cultures mesh with their own). But the work shouldn’t stop there. Companies should conduct regular audits and assessments on an ongoing basis to make sure suppliers are keeping pace with their business.
- 15. Doing business today is hard, and it’s unlikely to get any easier. Small and midsize companies that are aware of these supply chain challenges—and take proactive steps to address them—will be in a much better position to capitalize on their supply chain’s ability to serve existing customers better, operate more efficiently, penetrate new markets and, overall, grow more profitably.