Since the early days of COVID-19, companies across the globe have suffered massive supply chain disruption. This has resulted in an epidemic of unfulfilled orders, product shortages, inventory glut, operations headaches, as well as a dramatic impact on customers. But what if the coronavirus isn’t all to blame for the supply chain dilemma?
Sure, these issues were certainly exacerbated by the pandemic. However, supply chain consultants saw the writing on the wall long before coronavirus. In the past, experts have warned about the perils of mangled supply chains both within businesses and across all industries.
It might seem like COVID-19 catalyzed the global disruption in the flow of goods, especially if your company only started to face severe challenges mid-pandemic.
But the pandemic itself did not destroy our supply networks. Decades of widespread mismanagement did. The pandemic only revealed and worsened the state of global distribution.
So what can you do to recover from a sourcing and/or distribution crisis? And how can you save your organization from a similar situation in the future?
Our top 3 industry insights to navigate — and avoid — supply chain disruptions are:
- Use Enterprise Resource Planning (ERP) technology to its full potential
- Improve your vendor management protocol
- Create a risk mitigation program
So let’s jump right into these strategies and why they matter.
1. Use Enterprise Resource Planning (ERP) Technology to its Full Potential
Enterprise Resource Planning (ERP) tools are a category of software that support a wide array of business operations. They were originally devised to track and manage inventory. But today, they can automate and administer anything from accounting to sales.
The only problem with ERPs is organizations rarely use them to their full potential.
To be clear, most companies utilize ERPs in some form or another. But seldom do they leverage these tools to maximize supply chain efficiency.
Before COVID-19, businesses could get away with this. They didn’t need to rely on ERPs to report, track, and move inventory because they had boots on the ground. But in the era of social distancing and remote work, systems like ERPs have risen to the forefront as the key players in day-to-day operations.
Where organizations used to be able to place their trust in staff, they are now forced to invest complete trust in their data systems. The result is companies who weren’t using ERPs in a strategic manner now face all sorts of distribution and inventory calamities.
That is why proper ERP utilization tops our list of tips to navigate supply chain disruptions.
If your organization struggles with things like sourcing, manufacturing, delivery, and procurement, you’ll want to start with your ERP policy.
Do you have an ERP? If so, what do you use it for? Do you have accountability measures that promote accurate reports? Are all employees trained on how to use the ERP to its full potential? Are your ERP procedures properly documented?
Depending on how you answered these questions, you’ll want to re-think how your business utilizes its ERP. And if you decide to make changes, you will have to devise an air-tight implementation plan.
If you put together a comprehensive roll-out plan, your ERP enhancements will actually solve your distribution problems, rather than create new challenges and fuel chaos.
At RTG Solutions Group, we specialize in technology implementation and supply chain consulting. Our experts partner with businesses to assess their needs and create technology implementation plans that set them on a path of continuous improvement.
2. Improve your vendor management protocol
Aside from less-than-optimal ERP usage, another common pain point in corporate supply chains is vendor management policy. Improving your vendor management is one of the most important operational adjustments you can make to navigate supply chain disruptions.
Similar to the ERP issue, most organizations did not have optimal vendor arrangements prior to COVID-19. While strong vendor management policies have always mattered in the business world, they’ve become especially important under pandemic conditions.
Why does vendor management matter so much?
Well, your company might internally do everything possible to maximize supply chain efficiency. You might make full use of your ERP, quality-check all inventory reports, mitigate risk, etc.
But if your partners don’t do the same, then you can still end up in with chaos!
Whether or not vendor relations have driven your current supply chain woes, now is a great time to analyze and revise your vendor documentation and protocols.
To survive and avoid supply chain disruptions, your vendor contracts should stipulate policies that ensure transparency and performance. Quality control and accountability measures should be built into your contracts. And, most importantly, all parties should be well-informed of the contractual obligations.
Just In Time (JIT) Management is a great example of smart vendor policy. In this inventory method, orders and deliveries are completed on an as-needed basis. The goals of this method are to cut supply chain costs, increase efficiency, and decrease waste.
Not sure how to start a vendor policy analysis and redesign? RTG Solutions Group is here to help! Our supply chain experts can help you devise a smart, sustainable vendor strategy that gets you through the pandemic and beyond.
3. Create a risk mitigation plan
No one could have predicted just where the COVID-19 outbreak would take the business world. Though there’s no magic 8-ball to tell the future, your company can still be prepared for a crisis.
The practice of risk mitigation encompasses a variety of strategies intended to improve your organization’s ability to overcome obstacles.
For instance, the coronavirus pandemic has highlighted the importance of portfolio diversity as a means for risk reduction.
One straightforward way to reduce risk in the supply chain is to move away from sole-source contracts. Your organization should diversify its vendor portfolio to include more than one viable source for any given resource.
This guarantees that, in the case that one source becomes unviable for one reason or another, your organization has a back-up provider lined up. In turn, this reduces the likelihood of a supply chain disaster on account of a compromised vendor.
Aside from diversifying the portfolio, a fantastic operational change to reduce risk management is to actually hold solution-oriented risk management meetings.
In these meetings, team members should brainstorm plausible scenarios that could impact production and distribution. Each prediction should be matched with a contingency plan and funding allocation that is ready to go at a moment’s notice.
Interested in other ways to prepare your organization for a supply chain emergency? Check out our blog on The Importance of Business Process Documentation in Times of Crisis!
Global and internal supply chains consist of complex, interconnected networks. These networks must work in perfect synergy in order to maintain the flow of goods and services within and across businesses. However, decades of inadequate supply chain operations reached a boiling point with the COVID-19 pandemic.
With these three changes, your organization can make it through the pandemic and steer away from future supply chain disruption. Need help managing your business through a supply chain disruption? Contact us today to learn how RTG Solutions Group can help you reach your goals.