Worried about uncertainties in supply chain? This is what you need to know
Several external and internal factors impact the supply chain function of any business. As there are several economic, market-based, manufacturing-led, supplier-focused, and other internal/external factors that can impact the performance of the supply chain, there is an element of uncertainty that exists in the system.
For instance, no one had imagined that the global supply chain would come to a standstill as COVID-19 greatly impacted day-to-day business. As a result, embracing uncertainty and building a supply chain mechanism that can withstand the element of uncertainty in the framework is important.
Here is all you need to know about managing uncertainties in the supply chain:
What is uncertainty in the supply chain?
Supply chain uncertainty can occur at any point in time in a network that is negative or positive and is due to external or internal factors. It refers to the supply chain's change in balance and profitability that was impacted by potential and unpredictable events. To become a successful supply chain analyst, it is important to consider that uncertainty will always be present when making forecasts and predictions.
A good supply chain analytics course will always cover the topic of uncertainty in a supply chain. A robust supply chain management online training can help us deal with it following a data-driven approach.
Uncertainty in the supply chain can increase cost pressure and reduce profitability in no time. As a result, a supply chain analyst is expected to handle the element of uncertainty and ensure that the supply chain continues to function at the expected pace so that there is minimal impact on business.
How to handle uncertainty in the supply chain?
Different approaches can be adopted to handle uncertainty in the supply chain. Here are some key activities that you can adopt to handle uncertainty in the supply chain:
Use historical sales data
As they say, businesses operate in a cycle. We can use this to our advantage by analysing the historical sales data and taking cues from it to understand what can be expected in the future.
We can opt for forecasting, predictive analytics, and other such solutions to understand the context of the historical sales data and what steps can be taken to improve efficiency.
This approach can help us manage certain uncertainty in business operations and be prepared for the future. It is important to realise that high forecast accuracy is critical to a business's inventory, transportation, and supply chain costs. At the same time, we can improve the level of customer service by understanding historical sales data and making meaningful changes.
Understand return rate
In addition to sales, it is equally important to understand the return rate of the business. We can again go back to the data points like historical sales, historical returns, customer growth, etc., to understand past trends.
Strategies like forecasting and predictive analytics can be used for planning and creating differentiated return policies in the business.
The return rate also depends on the industry average. Therefore, we should consider the average rate of return in the industry and use predictive models to determine the expected rate of return in the future.
Understand quality concerns
Quality issues in products are among the critical factors that can derail the supply chain for any business.
We can have a quick look at how recalls can put a dent in financials and reputation in no time. We can use a mix of analytics, the internet of things, and social media to understand the next big quality issue for the business.
With the right checks and balances in place, we can reduce the impact of quality issues on the supply chain.
Keep an eye on external factors
Apart from handling the internal factors, it is important to understand that external factors are not in our control.
However, we can keep a close eye on the external factors and understand the global geopolitical and economic scenario to identify the possible supply chain challenges that can impact business.
With a conscious effort to identify and reach such issues, the business has some lead time to handle the next big crisis that does not exist due to any internal factors.
The best approach is to embrace yet not surrender to the element of uncertainty in the supply chain framework. A business should always be prepared for the next uncertainty that may hit from any corner. While we cannot eliminate uncertainty, we can create a framework with minimal impact on business.
In our Professional Certification in Supply Chain Management & Analytics course, you can understand this and many other similar concepts in-depth. Contact us through website chat support to know more about it or walk into any of our training centers in major Indian cities.