The basic network of people, raw materials, companies and stakeholders that create a product and ultimately deliver it to the consumer is called supply chain.

As simple as it sounds, supply chain is the building block of any product related business and any discrepancy among parties involved can create disruptions in it. The parties involved are mostly producers, sellers, storehouses, means of transportation used, packaging and storage centers and retailers.

The disruptions in this network can originate from problems with any of the parties involved mentioned above, or through miscommunication within any of them. These breakdowns can cause not just delays but sometimes huge costs need to be borne by the businesses and stakeholders. Hence the health of the supply chain is critical to the standing of any business.

Reasons for Supply Chain Disruptions

1.   Natural Disasters and Pandemics

The reason that we all have seen business downfalls and supply chains crumbling down is surely the pandemic. With transportation halted, lockdowns, employees getting sick and ultimately warehouses closing down, pandemics are said to affect supply chains in the worst ways. Long term effects of pandemic are inflation, less creation of jobs, which ultimately leads to less investments and businesses closing their operations.

Similarly, natural disasters can play havoc with supply chains. Earthquakes and floods destroy roads and halt air traffic leading to unannounced delays and sometimes wastage of supply. Distribution centers are affected to a great extent by flood waters as the stored stock can be destroyed within no time.

2.   Inefficient Logistics

Any delay from the supplier side can disrupt the supply chain and retailers might have to pay the price in the shape of losing customers. Delay in supply might be due to faulty equipment which ultimately breaks down, congestion due to orders i.e. too many orders but less production etc.

In the case of an international supplier, if the supplier country suffers from earthquakes, political instabilities, strikes or floods, the supply chain may suffer breakdown due to unannounced and prolonged delays.

3.   Global Inflation

In this era of economic instability, inflation and sky high pricing of all energy resources is the talk of the town everywhere. Mounting oil prices and utility charges have caused numerous supply chain disruptions around the globe, with distributors and suppliers going on strikes leading to delay in shipments.

4.   Wars and Insufficient Trade Routes

Owing to the recent wars and political conflicts among countries, many trade routes have been shut down temporarily or completely, leading to perishing of supplies within the warehouses and distribution centers due to unavailability of transportation. Import tariffs and taxes have also worsened for some countries, leading to more costs and less convenience for the trade parties, leading to inefficient supply chains.

5.   Quality Issues

Sometimes the products or supplies delivered are of sub standard quality or not according to the customization demanded by the retailers.

This might waste the whole consignment or supply, leading to wastage of resources, extra transportation costs and overall delay in the delivery of exact product as wanted by the end customer.

As per US statistics of 2023, 11% of all orders are wasted annually due to orders that do not match the end consumers’ demands, in the food and beverage sector alone.

What can be done?

Although the above mentioned factors are frequent and with every passing day, owing to increasing demands of customization, resource shortage and other issues, supply chain disruptions are on a constant rise. Still, there is some hope left, thanks to the era of information technology and AI backed solutions coming forth. Some of the ways these disruptions can be minimized are:

1.   Transparency of Supply Chain

Today, when numerous businesses have shifted online, supply chain visibility is not only easier but also accurate. Checking on the orders, informing customers when the order is ready and safe delivery of order, all are monitored through integrated databases.

This does not leave room for mistakes as many businesses use techniques like Interacted Voice Responses for contacting customers once the order is ready, or reaching them out for after sales service etc.

When all stakeholders can clearly monitor what activities are undertaken at each step of the supply chain, disruptions can be minimized by combating overstocking or understocking.

2.   Diversification of Suppliers

Relying on a single supplier in this uncertain business world of today is surely a disruption in itself.

A company should always look for backup suppliers which can be reliable upon any problem or conflict, e.g. if the main supplier is international one, the company can augment it with a domestic supplier so that in case of downtime with the main supplier, the side supplier can be used for keeping the stock intact.

3.   Buffer Supplies

Companies should make adequate plans for buffer supplying, or sometimes overstocking of products that are more in demand, so as to pre plan for any sudden supply chain disruption. This is also called safety stock, and it might take extra warehouse space or additional transportation costs when required, but it also saves retailers from sharply increasing prices in times of shortages due to supply chain disturbance.

To do this more accurately, businesses need data mining technologies that can advise how much stock should be backed up as per annual or monthly demands.

For this, digitized companies today use stock management software, which keeps them ahead in risk mitigation by forecasting needed stock levels, informing how much inventory is left, buffer stock information, tracking stock in between transport locations and preventing product perishment and obsolescence.

4.   Monitoring Performance at Every Link

When businesses make sure performance of every preceding unit is coherent with the previous unit, supply chain breakdown will automatically be minimized e.g. the product is readied by the supplier, goes to the vendor who stores it in favorable conditions in the warehouse, from where it travels safely to distribution centers and finally reaches the retailer, all in due time.

This can be done only when all units of a supply chain are working knowing that the other units are dependent on them.

Similarly, by using technologies such as RFID, data analytics and IoT sensors, businesses can easily locate in which the products are currently being held and when they are expected to move to the next supply chain unit.

5.   Risk Mitigation Plan

Most companies use the 2P2R model which stands for prevention, preparedness, response and recovery. According to this model, suppliers take adequate actions to avoid uncertainties in the first place, prepare for uncertain circumstances through contingency plans, implement preset plans once the disruption hits, and try to return the supply chains to normal modes as early as possible.

Conclusion

To conclude, it should be emphasized that supply chains are the backbones of any business anywhere in the world, and need to be protected from any disturbance or breakdown. Careful strategies must be applied to avoid any circumstances causing these disruptions and for that digitalization at every level of the chain is a must. It will not only speed up operations but also cut costs and help retailers and suppliers manage their businesses in the most optimum way. Timely decisions and efficient forecasting can surely help businesses take effective measures against supply chain disruptions.