5 Scary External Factors for Supply Chains

Read time: 7 mins
5 Scary External Factors for Supply Chains

Demand planning for fun-sized candies and trending costumes is only one grisly scenario supply chain professionals face.

One thing Halloween can teach us is that having the right inventory available at the start of the season is much better than empty shelves. Yet, no one wants too much leftover inventory on November 1st.

Supply chains serve just about every person in the world. It’s a careful balancing act to ensure the right products are available at the right time, price, and location. And while supply chain decisions can affect a massive population, few people understand just what goes into making them — and the role market, industry and external factors play in guiding businesses to accurate scenario planning the right answers about their product mix.

Many of those factors, such as customer preferences, competition, weather and natural disasters, outbreaks, geopolitical events, and regulations, are outside of the enterprise’s control. They can lead to some scary “what-if” scenarios.

Here’s a close look at five of the scariest external factors affecting supply chain resiliency that happen more often than most people think.

1. External Disruptions

Fires, floods, and fuel shortages — oh my!

Those are all things that can grind supply chains to a halt. Yet, no event in modern times has demonstrated the impact of external supply chain disruption more clearly than COVID-19. It has highlighted the imperfections of traditional supply chain models in the face of sudden change.

Most supply chains have been designed with cost efficiency in mind. But just-in-time and lean inventory management optimization strategies have resulted in organizations struggling to adapt as disruptions become more frequent and forceful.

This trend is likely to accelerate due to the continued adverse human footprint on the planet, growing resource scarcity, and the interdependence of our processes and our reliance on digitization.

2. Emerging Technologies

Technology has always been a disruption in our world. From the invention of gunpowder revolutionizing war to the way the automobile transformed our world, new technology can change things in the blink of an eye.

For supply chains, it’s often a mixed blessing.

According to McKinsey, several groundbreaking technologies hold the promise to change the way we think about supply chains and supply chain planning. They include:

  • Artificial intelligence
  • Drones and robots
  • Electric vehicles
  • End-to-end performance management software
  • On-demand delivery
  • Advanced supply chain analytics

Although most of these technologies for building a digital supply chain are intended to make our lives easier, more efficient, and more sustainable — it takes time, talent, and organizational realignment to implement new technologies across complex supply chains. If that sounds like a challenge, that’s because it is.

Striking the balance of risk between adopting and not adopting new technologies is a constant, terrifying struggle. Yet, supply chains must constantly assess and evolve to stay current and effective.

3. Talent Shortage

There’s a deepening talent shortage in the supply chain industry. Alarms began sounding in 2018 as companies scrambled to find new ways to attract talent. Supply chain professionals are collectively dealing with a lack of:

  • Data engineers
  • Modelers
  • Data scientists

Much of that has to do with the fact that technology is changing so rapidly that it’s hard to find anyone who has fully mastered it. In response, companies are trying to adapt by making education a part of professional development goals.

Shifting values between generations represents another cause. To address this, supply chain companies are fostering young talent in universities and even younger.

Our biggest challenge could very well be convincing the future generation that math is cool…not scary!

4. Unpredictable Demand

The events of 2020 showed us that demands for various goods can spike at a moment’s notice, and that can throw everything into chaos.

Getting demand right is crucial for supply chain survival. Inaccurate demand forecasting can result in shortages, overstocks, and wasted capital. Yet, precise demand predictions seem to require divination (or an AI-powered demand modeling tool). Most supply chain companies are left to seemingly gamble as they peer at forecasts. Most of the time they get it right.

Sometimes, they don’t.

To make things scarier, other factors than disasters can influence demand. These include:

  • Market trends
  • Product cannibalization
  • Seasonality
  • Personalization
  • Customer expectations

We live in a world where market trends can shift in hours and a single misstep can damage customer loyalty. Getting demand right is hard.

5. Environmental Concerns

Scientists agree the environment is facing enormous challenges. From more severe natural disasters to resource shortages, the future isn’t looking pretty.

As scary as this may be, supply chain professionals are in a unique position to have a massive positive impact as it relates to the reduction of CO2 emissions. Sustainable practices and operations can build efficient, resilient supply chains that survive whatever is to come.

Unfortunately, sustainability has come with some connotations attached that aren’t deserved at all.

Supply chain pros who are fearful of any profit losses associated with sustainable efforts should be reminded that it doesn’t have to be a chore! Research shows that not only is sustainability profitable, but customers are increasingly expecting companies to demonstrate it.

Taking steps now can better prepare companies for the day that customers will refuse to purchase from companies that don’t embrace this value.

Risk, Resiliency, and Your Supply Chain

In normal times, the supply chains that power our way of living are all but invisible. Rarely do consumers wonder — or question — how all those goods wind up on the store’s shelves. For a long time, that’s also all that was needed. We were comfortable with our lean, efficient models that assumed perfect stability.

However, if there’s one thing that we learned from the COVID-19 pandemic, it’s that supply chains are extraordinarily susceptible to disruptions from external factors.

We’ve covered five of the biggest challenges that the supply chain industry must contend with on a regular basis. From disasters to technology, building a resilient supply chain is key to surviving the future.

Don’t way for the future to happen. Equip yourself with the knowledge you need to steer your company to success.

Read our white paper to learn more about the value of Risk, Resiliency, and Supply Chain Modeling.