Unpacking the Pain Points, Challenges, and Solutions in Today’s Supply Chain Management

Introduction

In today’s rapidly evolving business landscape, global supply chains face a multitude of challenges and uncertainties. Among these, the ability to promptly identify and accurately assess supply risks is of paramount importance. It not only allows for proactive responses but also guides the allocation of resources—an essential aspect in a world where resources are perpetually constrained. The return on investment (ROI) in managing these risks has become a defining factor in business success. In this blog, we delve into the pain points and challenges faced by procurement supply chains and explore innovative solutions.

Problem 1: Identifying and Assessing Supply Risks in an Uncertain Environment

Supply chain professionals grapple with three significant challenges that intensify global uncertainty:

1. The persistent and unpredictable nature of the COVID-19 pandemic.
2. Escalating global competition among major economies.
3. The unpredictable nature of conflicts, such as the Russia-Ukraine crisis.

Traditional risk assessment models, relying on the frequency of risk occurrence and the severity of its impact, face complexity in an era where the “three major challenges” increase the frequency of risk events. This complexity makes timely risk identification even more challenging.

Assessing the impact of these risks becomes elusive due to the growing complexity of supply chains, with multiple tiers of suppliers and customers. The resulting resource demands often lead to underestimated risk impacts, affecting supply continuity.

To address these challenges, we recommend enhancing supplier lifecycle management through the creation of a data-smart ecosystem. This approach harnesses digital technology to make supply chain elements transparent, efficient, and predictive.

Problem 2: Ensuring Continuity and Stability in a Complex Environment

The answer is straightforward: continually enhance supply chain resilience.

Classic methods include:

1. Reducing the number/percentage of single or sole-source suppliers.In the past, these suppliers demanded significant sums due to their dominance in a seller’s market, both in terms of high initial prices and annual price increases. However, when faced with supply shortages, these suppliers become “life-savers.” Buyers with significant market share can survive through global allocation, while smaller buyers struggle to meet demand.
2. Developing domestically-based backup suppliers.The keyword here is “domestically-based.”
3. Optimizing inventory strategies.To ensure business continuity, the brute-force approach is to increase inventory. Two points to remember: first, negotiate based on increased quantities, and second, consider product shelf life.
4. Implementing a global localization strategy.This strategy involves foreign giants manufacturing SKU products locally in China.

As mentioned at the beginning of this article, these classic practices are well-known. However, “knowing but not doing” is the real issue.

Take, for example, “reducing the number/percentage of single or sole-source suppliers.” Many don’t act on this because they label it as “important but not urgent.” Moreover, in foreign enterprises with near-monopoly dominance in “the big four” or “the big five,” finding alternative suppliers, especially domestically-based ones, is indeed challenging.

The problem is that if you avoid difficult tasks at the start, they become even harder later on. The reason is that challenging tasks inherently require more time and effort. If you haven’t started, when problems arise (e.g., supply interruptions or global allocation), you won’t have time to focus on high-importance, high-urgency matters, let alone embark on domestic alternatives.

Conclusion

1. The current procurement supply chain’s challenge is timely identification and accurate assessment of supply risks. The solution lies in enhancing supplier lifecycle management through the creation of a data-smart ecosystem.
2. In today’s complex environment, ensuring supply continuity and stability means continually strengthening supply chain resilience.
3. To effectively enhance supply chain collaboration, the “People-Machine-Material-Law-Environment” comprehensive collaboration framework must be promoted.

（Note: This article is shared in collaboration with the WeChat public account, JiltLogistics, for informational purposes only.）