Some things are deemed impossible
If we were to ask you to choose only one factor that’s currently challenging supply chains all over the world, you would be right if you were to say that it’s impossible.
Supply chains are just facing too many problems to only pick one as the main culprit. The COVID-19 pandemic is now a memory but for businesses, its consequences are still far from being gone. On top of that, we have new challenges ready to come and corner global logistics.
So what’s a company to do? Learn everything about it and discover how it can prepare itself for the unexpected.
Ready?
The Current Situation of Supply Chains
We no longer have the word pandemic as part of our daily discussions, unfortunately, that doesn’t mean we live in a problem-free world. Businesses, large or small operate in a global scenario, so if a huge conflict arises in the Middle East or Europe, if water becomes scarce in a small part of Asia, if the temperatures become too volatile to be predicted, then you can bet that there’s going to be an effect on supply and demand levels. That is without counting other factors like issues within the economy and customer preferences changing rapidly due to the appearance of short-lived trends.
Top 8 Supply Chain Challenges in 2024
Inflation
Odds are you have heard about inflation on the news at some point during this year, and while the debate is still ongoing, especially for the U.S. The simple truth is that inflation still is a reality for many countries, for businesses this carries the unavoidable weight of dealing with higher operational prices. Supply chains work with the labor force, if suddenly labor becomes more expensive, then it’s logical that your supplier will want to discuss an increase in their service and product fees. What does this mean? Well, it means that you’ll have to spend more money to buy the raw materials your business needs to function. Fuel prices and air freight costs are in similar situations, so you must have this in mind and start assessing your company’s spending behavior and see if there are some cost-saving opportunities to take advantage of.
Political unrest
Yes, if prices go up, you can always find a way to allocate your resources better and save costs and still purchase your company’s raw materials, but what if you don’t have a way to access the raw materials to begin with? Geopolitical conflicts lead to a shortage of materials, it could be because of the nature of the conflict or because the shipping routes are blocked, whatever the reason, political unrest is seen as one of the leading causes of supply chain disruptions at the global level. Frightening as it sounds, some mechanisms can help businesses to deal with it. First, you’ll need to perform an internal assessment, the purpose of this is to understand what areas of your supply chain could see itself threatened should something happen. Once you know your risk points, you can move on to developing concrete strategies like building a diverse network of suppliers.
Port congestions
This is another challenge that seems to be affecting companies. From north to south supply chain managers are now dealing with the pain that’s having your goods stuck in some remote port with no clear timeline as to when they are going to be delivered. On top of that, there’s also a shortage of warehouses available. Trends like micro-fulfillment centers and autonomous delivery vehicles are the sort of innovations that businesses need to rely on.
Climate change
Heatwaves, hurricanes, flooding, rising sea levels, wildfires…
Disasters that we would only see in end-of-the-world movies are now part of our vocabulary. Climate change is no longer a prophecy for the future, it’s part of everyday news, and for businesses, this means that it’s becoming increasingly imperative to work on more resilient supply chains. Of course, you might not be able to fully foresee when the next natural disaster is going to happen but you can data analysis to spot the most exposed points of your supply chain.
Raw materials shortage
This one in theory is a consequence of some of the challenges already mentioned, but as becomes more prevalent, it has acquired a problematic nature on its own. Delays, increased costs, and overall frustration are what both companies and their customers are facing. And it’s completely understandable, how can you sell a product if you don’t have the necessary materials? Complicated, right? Complicated but not totally impossible, first of all you must be aware of your suppliers’s performance and market trends. Establishing strong relationships with multiple suppliers can give you more options and help you secure the materials you need. Additionally, consider diversifying your raw materials or exploring alternative sources to reduce dependency on a single supplier.
Labor shortage
Yes, you read that right, another popular headache in the supply chain industry is the absence of a sufficient workforce. The reasons go from potential employees seeking better work/life conditions to an aging population. Nobody expects this situation to go back to normal anytime soon, so companies must be willing to negotiate and implement work conditions that satisfy current demands.
Shifting customer demands
Whether social media has more pros than cons is still yet to be seen, for businesses, the debate is closed. Social media has had a huge impact on the way customers behave, things that were popular yesterday, and this morning are left forgotten. making it tough to keep the right inventory levels and meet expectations. When demand spikes unexpectedly, you might face stockouts, leading to frustrated customers. On the other side, if demand drops, you could end up with excess inventory. So what’s the solution here? Keep trying, mix precise data with a bit of intuition based on historical information from recent and past purchases.
Increase in regulations
Our world needs to be more regulated, which is especially accurate for areas like our environment and social issues, however, ESG regulations can present a challenge for your supply chain as businesses increasingly face pressure to meet environmental, social, and governance standards. Keeping up with these regulations can feel overwhelming, especially when they vary by region and industry. However, prioritizing ESG compliance can be positive for your brand reputation, as customers everywhere align their preferences with sustainable practices.
