One way that supply chains can improve their resilience and efficiency is by diversifying. Here we have put together some of the key global supply chain benefits.
How to Navigate Supply Chain Bottlenecks
A supply chain bottleneck is a point of congestion that creates delays and will cost your business valuable time, as well as increase your production costs. For your supply chain to run efficiently, it is essential to find a way to navigate these bottlenecks.
What causes supply chain bottlenecks?
Globally, supply chains have endured significant disruption for some time now and certain challenges don’t look to be alleviated any time soon. Labour shortages, capacity crunches, component shortages, burgeoning demand, Brexit red tape and the lingering effects of the COVID-19 pandemic mean that supply chain bottlenecks are difficult to avoid.
Bottlenecks highlight the need for better visibility
The key to managing these bottlenecks is better visibility within supply chains. Real-time, end-to-end visibility is essential for businesses to be proactive, rather than taking action only when something goes wrong and production has already fallen behind schedule.
For example, advance information on lead-time changes would allow businesses to look at alternative sourcing options for components. Even if those components were more expensive, being able to fulfil the order on schedule may be more cost-effective overall.
Some supply chains are increasing their inventory of critical components and using multiple sources for raw materials, both of which are easier to do when supported by the real-time data of increased visibility.
Reducing geographical restrictions
Trade restrictions are one area where bottlenecks can occur and result in significant delays, such as the recent delays at Dover due to Brexit and the Goods Vehicle Movement Scheme.
To combat geographical restrictions, supply chains can look to move away from country-specific products where possible. This makes it easier to shift production to different factories when required, either because demand is higher than usual or because trade restrictions are creating hold-ups at certain borders.
Some businesses may need to locate new factories and distribution centres to improve shipping efficiency. Reshoring and nearshoring are also becoming attractive options for many.
Embracing technology to improve efficiency
Automation technology can also help to combat labour shortages, as many menial tasks can be automated, freeing more workers up to handle the more complex tasks. In other areas, such as the warehouse, AI can be used to make various tasks more efficient (saving time and money), such as optimising routes around the warehouse or even using automated vehicles to bring employees to pick up points.
Resilient supply chains are better equipped to deal with bottlenecks
Many of the long-term solutions for navigating supply chain bottlenecks are the same as those for building a more resilient supply chain, which is essential to deal with disruption effectively.
Practices that improve resilience – such as supply chain diversification, investing in new technology, having reliable backup suppliers for all products, regular risk assessments, and looking at alternatives for hard to source components – can all help to alleviate the stresses caused by supply chain bottlenecks if they are adopted as ongoing strategies.
Reducing the emphasis on spending less, and spending more effectively instead
Supply chain management is no longer about just cutting costs but instead spending effectively to improve resilience and efficiency that will ultimately reduce operational costs and the financial damage presented by bottlenecks.
For example, some longer-term solutions for dealing with bottlenecks could include re-engineering factories, warehouses, and distribution centres to improve their production capacity and boost overall output. Many supply chains with older warehouses and distribution centres need to consider whether it may be worth investing in retrofitting these facilities in the interest of saving money long-term.
While the causes of supply chain bottlenecks are often out of your control, you can limit their impact on your business by working on both short and long-term solutions to make your supply chain more efficient and more resilient.
If you are looking for ways to prevent problems in your supply chain, you can view our services.