Supply chain disruptions are not new. In fact, they are a main feature in modern international shipping and global commerce. And they can have a profound financial impact on the entire operation.
Recent research has shown that these disruptions can lead to a 5% increase in expenses and a 7% decrease in sales, a significant blow to the bottom line of any business and supply chain. Granted, on the surface, these numbers might be relatively small, but for these businesses, that might be their entire profit margin. Beyond that, the affected customers may never give the business a second chance, leading to a lifetime loss of monetary value for these customers.
That is why, although supply chain disruptions are the norm rather than the exception, it is important to navigate challenges that produce them and build resilience across the entire supply chain management.
4 Major Causes of Supply Chain Disruptions
The COVID-19 pandemic was a menace, and its impact was felt by businesses, supply chains, and people. Despite the devastation, it ended up highlighting how good supply chain management is the bedrock of running a profitable business amidst volatility.
While the pandemic has passed, the challenges exacerbated during its time have not subsided. As businesses aim to go global, disruptions across different corners of the world can come back to bite operations of critical supply chains. In a working environment where businesses are increasingly reliant on a complex logistics network, companies are more vulnerable than ever to disruptions.
But what are the causes of these disruptions?
1. Natural Disasters
Unfortunately, despite tremendous advancements in technology, there is little businesses can do to combat natural disasters. Flooding, drought, and wildfires have become increasingly common, and are now expected almost every year. Other not-so-common disasters are earthquakes and tsunamis, all of which majorly destabilize the supply chain process.
For instance, severe drought in Panama has cut the canal's capacity, negatively impacting about 40% of all U.S. container traffic.
2. Global Conflict and Geopolitics
Geopolitics is the bane of global supply chains and international trade, considering it leads to protectionism more often than not. Currently, the world seems to be in a never-ending bout of geopolitical conflicts -- from the Houthi rebels to the Russia-Ukraine conflict, tensions between China and Taiwan, and the never-ending coups in Africa. Every continent seems to have its fair share of geopolitical conflicts. And it can put quite a strain on logistics and supply chain operations.
The crisis on the Red Sea has forced many shipping lines to take longer routes through Africa’s Cape of Good Hope, potentially adding up to 12 days in transit time. This has given a significant blow to the supply chain reliability of many businesses, forcing them to seek ways to improve supply chain resilience.
3. Labor Shortages and Disputes
The lack of skilled labor at various critical points of the operation is a supply chain bottleneck that slows the operations and potentially leads to poor outputs. It could also impact government facilities such as ports. The U.S. and Canada are constantly at the periphery of labor strikes that could locally impact supply chain operations. To combat this, supply chains may need to diversify their operations, to ensure there is redundancy in case of labor shortage or strikes.
4. Demand Fluctuations
Demand fluctuations have been a constant feature of global supply chain operations over the last few years. With evolving consumer expectations and businesses forced to stock a greater variety of product variants and SKUs, managing demand fluctuations becomes increasingly challenging. Failure to accurately estimate these demands may cause supply chains to be either overprepared or underprepared to meet the needs of the consumers. Either one could lead to waste and loss of sales.
How to Build Supply Chain Resilience Through Shipping Operations
Avoiding supply chain disruptions will be difficult. Especially considering that, in many cases, the causes are outside the control of the business, shipper, or supply chain. The answer is to build a resilient supply chain. That way, the supply chain can take whatever is thrown at it and still meet up with its obligations.
The following strategies will ensure an optimized shipping operation that will, in turn, allow the supply chain to navigate disruptions effectively.
1. Visibility and Transparency
Real-time tracking, route optimization, and supply chain data-sharing technologies have made visibility and transparency across the entire shipping operation so much easier to manage. This has allowed shippers and businesses to have better control over their entire supply chain operations -- from inventory management to demand planning, sourcing, and manufacturing. By leveraging technology solutions that promote visibility and transparency, the processes flow together seamlessly, and there are no surprises.
2. Collaboration With Internal and External Stakeholders
Supply chain networks can be vast. Different stakeholders are responsible for the success of any supply chain operation. Some of them are internal, and others are external. However, the level of collaboration and communication with each other will determine how far the supply chain will go. Collaboration allows for effective planning, risk mitigation, and seamless coordination of the different processes captured in the supply chain operation.
3. Flexibility and Agility
There is no supply chain resilience without embedding flexibility and agility into the operation. Flexibility entails having multiple shipping solutions on hand and leveraging various modes of transportation. This means that when one is affected, the supply chain can move on to other modes to ensure seamless cargo transportation.
On the other hand, an agile supply chain entails coming up with contingency plans in case of emergencies or unforeseen supply chain disruptions. It could be exploring new sourcing options or strategies for allocating inventory. Ensuring quick scalability in the supply chain also gives it the ability to accommodate much demand fluctuation. It can shrink and expand capacity when needed.
4. Risk Management and Sustainable Practices
Risk management takes into cognizance the various potential risks that could occur and then takes steps to mitigate them. For instance, tech-based shipping documentation, taking out an insurance policy or cargo, taking more secure routes to avoid issues with the cargo, and rigorously assessing suppliers before getting into partnership with them.
Taking risk mitigation steps streamlines the shipping process and enhances the resilient supply chain.
Logistics and shipping operations are the biggest contributors to greenhouse gas emissions. The problem is that these emissions are responsible for climate change, which can spark any number of natural disasters, including drought and wildfire. Whether global or domestic supply chains, taking steps to mitigate them will ensure logistics management can operate seamlessly.
How Silq Helps Navigate Supply Chain Disruptions
Silq is a technology-based freight forwarding platform that leverages a mix of expertise, experience, and robust supply chain technologies to streamline your shipping operations. Our platform provides you with all you need to customize your workflows, enhance transparency, collaborate effectively, and manage risks through effective documentation.
Silq controls every step of the shipping operation from your factory to the delivery location. It could be through air freight or ocean freight. We take all the necessary steps to ensure resilient supply chains for our clients. Connect with us today to see the difference.
