Supply Chain Problems and Symptoms
According to APICS Supply Chain Issues (2016) report, the researchers at Michigan State University and APICS have identified the six most common problems in today’s supply chains;
1. Capacity/resource availability
6. Cost/purchasing issues.
It important for organizations in every industry to understand the common symptoms of these problems to be able to react effectively. The most common symptom would be stock outs or high inventory levels. High inventory levels can create additional inventory holding costs and administration costs. High inventory levels are mainly caused by overly optimistic and inaccurate forecasting. Although forecasts are never hundred percent correct, it is important to select the right forecasting method to increase the accuracy. On the other hand, too conservative forecasts can result in stock-outs. This situation can have even worse effects than having high inventory levels. Stock-outs may create additional ordering costs and can decrease the customer satisfaction rating. Additionally, stock outs mean missed sales opportunities, which can also significantly damage an organization. Increasing the communication and data flow is essential for any effective supply chain. It is important for organizations to establish an information flow throughout the supply chain. High return rates and increasing costs are some of the other symptoms associated with supply chain problems. Organizations should establish metrics to carefully track the return rates, and customer satisfaction. Customer satisfaction surveys can be an indicator of some of the supply chain problems. Organizations should establish their supply chain based on feedback of information to be able to deal with communication-based supply chain problems. There are some other symptoms that can be seen on the financial ratios. One of the most common problems is the facility selection. Selecting the optimal facilities locations have always been a topic of research. Organizations should consider their business model, market conditions and talent availability when considering facilities locations. Furthermore, these supply chain decisions are connected with many other departments of the businesses, therefore, must be considered within the overall strategy of the organization.
Troubleshooting the Supply Chain
There are several reasons that may cause disruptions or show weakness in a supply chain. The good news is that within reason, they can all be avoided. One symptom of a problematic supply chain could be a company implementing (Brady, 2014) more than one forecast. Why is this problematic? To put it simply, a company using more than one forecast means that more supply is allocated to these now multiple demands. If finished goods are allocated to more than one forecast, the possibility of shortages exists across multiple fronts, the possibility of an item being out of stock is more likely across these multiple fronts as well. To counter this, a company should create one forecast for each customer. This way finished goods are not spread across multiple forecasts or allocated to multiple customers.
Another symptom of a problematic supply chain is that the company who supplies the finished good lacks the inability to respond (Brady, 2014) to issues that occur in real time after the item is shipped. This symptom is particularly problematic as it shows the customer that the company has lost visibility of their item after it has been shipped from the warehouse. Then to add to it, the company also shows that they do not know how to respond to the lost item, either. This can damage the relationship with the customer and potentially cause a loss of business for the supplier. To mitigate this symptom, the supplier should maintain contact with every link in the supply chain from the company that is used to ship the good, all the way through to the last link, the customer, keeping them apprised of any delay in shipment, any potential shortages or issues that arise with the production of the finished good. Doing this will foster something of a trusting atmosphere between the supplier and the customer, and while the customer may not be happy because of the delay, they will know what is causing the delay, as opposed to them being in the dark, and not knowing what is going on with an item or multiple items that they are paying for, and trusting a company to provide in a reasonable time frame.
These symptoms of a problematic supply chain can occur, but they are avoidable, and can be corrected should they occur, is good for both the company and the customer.