What Is Causing Supply Chain Complexity?

Posted by Martin Verwijmeren on Jul 26, 2017 8:24:02 AM

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The data and research is right in front of us. Whether you read Gartner’s Supply Chain research, daily articles from supply chain media outlets, or the Geodis 2017 Worldwide Supply Chain Survey, you’ll notice that a major concern for supply chain leaders is increasing supply chain complexity.

Supply chain complexity is caused by a variety of factors often the result of rising customer expectations for faster lead times, expanded products and services, and tailored experiences. These factors force brand owners to support more unique orders for customers across their supply chain, requiring greater collaboration with partners, improved inventory management with suppliers, and deeper visibility and control into all supply chain steps.

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For this post, we’ll look at supply chain complexity, why it exists today, and the impacts it has our ability to meet customer service levels.

Customer Expectations Are Driving Innovation

The quick answer to why we have supply chain complexity is that customer expectations have evolved greatly over the past several years. Buyers crave transparency and flexibility in the purchase process and have turned novel fulfillment concepts into necessities – especially for companies looking to maintain or grow business with their current customers.

Some of these expectations include:

  • Faster Lead Times: Whether it's same-day shipping for B2C or made-to-order manufacturing with a quick turnaround for B2B, we’re seeing that lead times have gotten substantially shorter to meet customer demands. And while this may have been a source of competitive advantage a few years ago, it’s a need-to-have in today’s economy.

  • Tailored & Stringent Delivery Expectations: Customers want to know where their order is and receive the most accurate expectations for delivery, within tighter delivery windows. They may not even expect the fastest delivery, but rather accuracy within a convenient time window. These pressures extend beyond the consumer world, as you've likely heard about companies, such as Walmart, that experience similar expectations from their suppliers.

  • Expanded Products & Services: Mass customization and the “endless aisle” concepts have expanded the products lists for many shippers. Further, associated services, such as technician installation, and repair, are also getting more specialized.

Complexity is affecting current business transactions and customers. To simply maintain that revenue, we need to adapt the customer experience to meet these higher standards.

Growth Targets Require Expansion

It wouldn't be fair to place the full blame of the current complexity solely on customers and their rising expectations. Business aspirations contribute strongly to supply chain complexity. Most businesses do not want to maintain the status quo but grow past it. The post-internet world has provided a huge opportunity for every business to expand their footprint and reach a larger, broader customer base. This growth, however, greatly adds to the complexity we need to support new customers.

This includes:

  • Expanding Markets: In order to drive more top line growth, we’re seeing a ton of expansion into complimentary markets by most businesses. This adds complexity in the form of new suppliers, 3PLs, faster handling and lead times, and potentially new fulfillment requirements.

  • New Locations: Whether expanding regionally in the US or internationally, scaling adds numerous milestones to achieve to ensure the fulfillment of each customer order. It also requires investment into new facilities and partner relationships to service the expansion.

  • Acquisitions: Consolidation has been a large driver of complexity for many large firms. It takes years to remove duplicative processes and merge business processes together after an acquisition. This is barring even the multiple systems integrations needed to tie together the different IT infrastructures.

As we expand the businesses and the markets served, we add a ton of complexity and stress on our supply chain.

How Does the Supply Chain Get More Complex?

As we look to grow our businesses and serve our current customers we see that supply chains grow in complexity in the following key ways:

Growth in Supplier / Partner Relationships: As mentioned above, supplier and partner relationships are critical to expand your footprint with current customers and reach new ones. However, managing all these relationships, which are crucial to customer satisfaction, as well as negotiating, evaluating, and optimizing these relationships add to complexity. Supplier collaboration and visibility into your partners is crucial to success.

More Milestones to Manage: When customer bases and product lines expand, it lengthens the supply chain. In other words, more steps are needed to complete orders, whether made-to-order manufacturing, order splitting and consolidating, or multi-leg international shipments. In any case, visibility into the granular steps of each supply chain step helps you to manage exceptions in real-time and set the right expectations for customers with greater transparency.

Vastly Different Orders: It used to be that supply chains were very similar for a range of customers, however, with increased product lines, various shipping options, and expanded geographic distribution, this model has strained efficient order fulfillment. Today, strategies must be more flexible and agile to accommodate each customer order and ensure it arrives on time, at the lowest possible cost. We are essentially dealing with micro supply chains for each customer order.

Inventory across multiple parties: Along with our supplier collaboration needs discussed above, we also have a complex inventory problem on our hands. Inventory – especially that which is not used – can make or break profitability. Today, inventory is not only stored internally by manufacturers and warehouses but also with suppliers and partners. Getting real-time visibility and control across our entire internal and external network of partners is the only way to prevent the “bull-whip effect” of increased, unused inventory across the network.

Data Availability: There is a tsunami of available data across the supply chain to use toward more informed decisions. However, trying to understand it can be overwhelming. Beyond forecasting, the data should also be used for real-time decisions about customer orders in your supply chain. Gaps in data tend to form as more systems, partners, and complexity are added, increasing the need for better supply chain visibility.

It’s About Embracing Complexity in your Supply Chain

Complexity in the supply chain will continue to be a significant pain point for organizations, especially as customer expectations and aspirations for business growth rise. The answer is not to make the supply chain “less complex,” but to figure out how to embrace the complexity. One way is to make processes flexible and agile via supply chain orchestration.

 

Visibility, Control, and Transportation Management are at the heart of supply chain orchestration. To simplify the buying process and choose powerful, long-lasting solutions that will help you embrace supply chain complexity, browse these buyer’s toolkits!

Control Tower Buyer’s Toolkit TMS Buyer’s Toolkit

 

Topics: Supply Chain Visibility, Supply Chain Complexity, 3PL, Supplier Collaboration, Inventory Management

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