Research from the McKinsey Global Institute found that industries across the country experience supply chain disruptions lasting at least one month approximately every 3.7 years. Unfortunately, shorter disruptions are reported far more frequently. Several factors, most of which are unpredictable, contribute to the frequency and longevity of these disruptions impacting the global supply chain.  

Read also: Here’s What It Takes to Be Agile During Global Supply Chain Disruptions

Factors That Contribute to Disruptions 

Flooding, earthquakes, hurricanes, and other natural disasters can significantly impact supply chain processes. Unfortunately, the frequency and severity of these weather events have increased, leading to more frequent disruptions. 

Geopolitical tensions, tariffs, and trade disputes are also known to cause major disruptions in the supply chain. Geopolitical conflicts can result in higher costs for trading goods across borders. Additionally, economic downturns and market fluctuations can negatively affect supply and demand, causing disruptions at every level of the supply chain. 

 Quality issues, problems with supplies, and other supply-related risks can cause severe disruptions in supply chain processes, especially when organizations are highly dependent on critical suppliers. Regulatory changes also negatively impact the supply chain; changes in regulatory requirements can slow down supply chain processes as companies adjust their operations to comply with new standards and laws. 

More companies than ever before rely on technology for various aspects of their supply chain processes. Unfortunately, disruptions can occur due to malfunctions and system failures. Additionally, logistical challenges, accidents, and infrastructure issues frequently cause delays and disruptions in supply chain operations.  

Problems with Frequent Disruptions 

Reports from the Richmond Federal Reserve show that around 55% of firms experienced lost or delayed sales due to supply chain disruptions. This accounted for approximately 5% of their entire sales revenue in 2021. Smaller companies reported an average reduction of around 7%, while larger firms saw around a 4% reduction for the year. To avoid these issues, it is imperative that companies build resilience and agility into their operations to help mitigate the impact of such disruptions. 

Why It Is Important to Act Now 

Moving forward in a post-pandemic era, companies across the globe must improve their supply chains to remain agile. Ensuring resiliency can help companies better manage disruptions, enabling them to continue their business processes despite short- and long-term delays. 

Additionally, evolving consumer expectations have led individuals and organizations alike to expect faster and more reliable deliveries. Optimizing supply chain operations can lead to significant cost savings, which is vital during uncertain economic times. 

Steps to Take to Prevent Disruptions and Address Challenges 

The following are strategies that can effectively help companies address supply chain disruptions and challenges:

1. Implement advanced analytics and AI systems: Real-time monitoring systems can help companies proactively identify and respond to disruptions by flagging issues early. Utilizing advanced analytics and AI systems ensures timely detection and effective mitigation of potential disruptions.

2.Align business goals with supply chain goals: Aligning business goals with supply chain goals through technology and automation helps reduce manual errors, optimize operations, and enhance data-driven decision-making. This alignment results in a more effective and efficient supply chain, capable of meeting the demands of a dynamic market environment.

3.Sense market demand: Harness data from systems like ERP and POS to forecast future demand patterns. This approach enables companies to conduct demand-variability analysis for accurate buffer estimation, minimize stockouts, reduce inventory levels, and increase inventory turns.

4. Supplier risk management and diversification: Diversification can help mitigate risks commonly associated with relying on fewer suppliers, ensuring a more robust and resilient supply chain. Prioritizing suppliers who deliver on-time and in-full at reliable rates allow companies to adjust ideal recommended stock levels for each location based on seasonal and cyclical trends. Additionally, tracking service levels based on supply and demand predictability enhances the ability to manage inventory efficiently. 

5. Collaborative planning: With the growing awareness of flaws in traditional, siloed planning and decision-making, businesses must transition to intelligently optimized operations that transcend today’s business complexity. Time, effort, and budgets are finite resources, demanding rapid trade-offs and compromises as organizations reimagine their operations to drive profitability while ensuring stability and continued growth. Collaborating with customers and suppliers can help align goals and expectations from beginning to end, ensuring everyone remains on the same page. Optimizing the product and customer mix based on profit margins can generate free cash flow, further enhancing operational efficiency and financial stability. 

6. Lead sustainability with better margins and higher profits: Adopting and implementing sustainable processes can help reduce waste, optimize transportation, and create a more eco-friendly and resilient supply chain. These processes enhance near-term on-time, in-full (OTIF) potential and optimize product mix to maximize profit margins, focusing on top-performing products. By integrating sustainability into supply chain operations, companies can achieve both environmental and financial benefits. 

It is imperative to leverage technology, invest in continuous improvements, and take a proactive and collaborative approach toward establishing a more agile and resilient supply chain. Enhanced agility can help improve customer satisfaction and operational efficiency while ensuring organizations are in a strong position to navigate the uncertainties ahead. 

 Author Bio

Anita Raj is a seasoned technology thought leader and product marketing expert for building impactful go-to-market strategies for targeted markets such as Europe, the U.K., and the U.S. As the vice president of product marketing at ThroughPut Inc., Anita is responsible for the vision, strategy, and execution of go-to-market and product marketing initiatives, including value proposition, product launches, customer marketing, and product life cycle marketing.