The 4 Biggest Mistakes to Avoid When Designing Your Supply Chain
Global health crises. Labor strikes. War. Famine. 1,000-year floods. Snarled ports and roadways. These headlines beg the question: is it the end of times or just another day in the life of a supply chain professional?
Even when the current crises resolve, some surveys suggest supply chains may not stabilize until 2024.
Despite ongoing challenges, all hope is not lost. While the future might be uncertain, myriad supply chain opportunities, solutions, and frameworks exist that can reduce this uncertainty and help supply chain organizations come out stronger on the other side.
Whether you have decades of experience in supply chain or are just starting out, you can choose whether to adapt to new paradigms that can give your supply chain a competitive edge — or not.
As you weigh your options, here are some insights into what not to do as you move your organization forward, inspired by a new report from MIT.
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What are the four biggest supply chain design issues you can avoid?
As you’re updating your supply chain design, you might want to watch out for the following common pitfalls.
1. Focusing too much on minimizing costs
For decades, the supply chain organization was understandably focused on cost minimization. But this was beginning to shift (slowly) even before the pandemic.
Then the pandemic exposed several points of failure across global supply chains, sending out a roaring wake-up call to businesses: focusing too much on cost without weighing other factors can result in multiple unintended and unwanted consequences. From missed deliveries, to unhappy customers, to monumental costs to correct disruptions — you already know the impacts.
Instead, as discussed in more detail in the MIT report, organizations should design for global and diverse markets, value creation, and sustainability.
It’s not that cost doesn’t matter. It should just be one of many factors.
2. Approximating tactical decisions
Many organizations seek to reduce complexity in their decision-making by favoring strategic design decisions over the tactics of sourcing, production, replenishment, transportation, and more. One consequence of approximating these decisions is that it can create gaps between anticipated and actual performance and lead to financial losses.
The good news is that you don’t have to choose between tactics and strategy. By incorporating short-term tactical decisions around sourcing optimization, production planning, inventory and replenishment, and transportation into your long-term strategy, and employing data and computational resources, you can strike a balance that yields better results.
3. Not accounting for risk, sustainability, and resilience
The world continues to change at a rapid pace, creating more exposure to internal and external shocks in supply chains. Regulations and consumer demand for lower carbon emissions and products made without human exploitation are increasing. You probably already know what’s at stake if you’re not accounting for these kinds of risks.
Instead of leaving risk mitigation, sustainability, and resilience to the end of your design process, consider building these factors in from the start.
4. Not leveraging advances in supply chain planning technology
Hopefully, you’re learning that it’s time to stop relying on spreadsheets to plan, design, and review your supply chain networks. Doing so leads to missed opportunities and fragmentation, and makes it harder to bounce back after disruption. Static spreadsheets make it harder to adapt readily to market demand and visualize and assess the impact of even the smallest changes.
Instead, you can start adopting technology that allows you to embrace flexible models, run scenarios, and make adjustments to your digital supply chain before implementing them in your physical supply chain.
Introducing a new executive guide on supply chain from MIT
Supply chains can not only create cost savings, but can also create value and help differentiate your business.
A recent executive guide, The New Competitive Edge: Analytics-Driven Supply Chain Design, written and produced by MIT in partnership with Coupa, lays out four distinct opportunities for supply chain leaders to create the value.
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