The MAPI Foundation recently released predictions for how the supply chain will grow and evolve from 2016 to 2018. While the supply chain fell short of previous expectations for growth in 2015, it continued to have a strong fourth quarter in 2015. However, the supply chain of 2016 is looking different from what economists had expected, and the supply chain is battling many problems. Fortunately, companies are reviewing their supply chain initiatives and using technology to improve productivity and safeguard against uncertainty. Let’s take a closer look at the current state of today’s supply chain.
Today’s Supply Chain Is Experiencing Problems.
The supply chain is experiencing growing pains. The second half of 2016 is expected to see an accelerated growth rate of 3 percent, and several problems can be linked to these lower growth rates.
Disruptions Are Causing Headache in the Supply Chain.
Approximately 43 percent of supply chain companies experienced disruptions in the past 12 months, asserts the GT Nexus report, “State of the Global Supply Chain.” External disruptions, which are disruptions a company has no means of control over, affected 24 percent of manufacturers. Meanwhile, 19 percent of manufacturers experienced disruptions due to internal issues, such as technology issues, inability to hire a sufficient number of workers or even the driver shortage.
Last year, disruptions in the West Coast port resulted in a $7 billion loss for the supply chain, and labor issues are becoming a key player in U.S. politics as the country nears the election.
Concerns Continue Over China, the Driver Shortage and Global Lead in the Economy.
China, the driver shortage and the role of the U.S. in the global economy are also causing problems in the supply chain. Today’s supply chain is fighting at near full capacity with its available resources, and until more drivers are available, the capacity is unlikely to grow. Yet, the problem with China is also focusing on reshoring efforts.
Although many argue China leads the global economy, the U.S. actually carries a higher gross domestic product than China in a global perspective, reports Bob Trebilcock of Supply Chain Management Review. In addition, the U.S. is becoming a key competitor against China’s manufacturing capabilities, and some reports have indicated that the U.S. will surpass China in manufacturing by 2020. In order for this ideal to become fact, the U.S. supply chain will need to grow annually without unnecessary disruption or delay.
Leadership Is Missing.
The Chief Supply Chain Officer is responsible for overseeing all the manufacturing and shipping operations within a given organization. However, up to 76 percent of supply chain entities do not have a person designated for this role, reports Bryan Nella of GT Nexus. Since “the supply chain is an extension of the business,” the modern supply chain will need to evolve and hold someone in the organization accountable for all supply chain actions. Essentially, the role of c-level executive to oversee supply chain operations is the solution to the problem of missing leadership.
Bottom-of-the-Barrel Oil Prices Undermine Supply Chain Profits.
Consumers do not want to pay large shipping costs. This is due to Amazon and other major retailers’ being able to access unprecedented shipping rates. If a portion of the supply chain charges more for shipping, competitor need to ensure their prices reflect competitor rates for shipping. Otherwise, consumers will go somewhere else, and the online shopping environment only serves to strengthen this notion. So, you may be wondering how this relates to the low cost of oil.
Lower oil costs have made it difficult for supply chain parties to explain why rates are increasing. In truth, the driver shortage is a major player, but consumers do not care about the number of drivers. They only see low gas rates as being with practically nonexistent shipping rates. Essentially, the current supply chain needs to get involved in explaining why rates are what they are.
Companies Are Reviewing Supply Chain Management Initiatives.
Supply chain functions and processes are capable of addressing many of the problems faced by today’s supply chain. Outdated technology needs to be replaced, which will allow faster processing and delivery times for consumers. Since each moment a shipment is in transit reflects the overall cost of shipping, consumer demand will be more easily met when new technology is fully utilized.
Additionally, today’s supply chain entities are re-evaluating their current operations to determine what can be enhanced. Although up to 48 percent of all supply chain transactions use non-digital, manual processes, reports GT Nexus, one-third of manufacturers are actively looking for ways to make their supply chain more digital.
The Digital Supply Chain Has Arrived.
The digital supply chain is being used to improve compliance with all local, state and federal regulations. This also applies to international supply chain processes. Concurrently, Big Data is helping supply chain entities learn how manage their overall operations more efficiently, which includes further expansion into the omni-channel economy.
Yet, the relative problems of today’s supply chain can also be traced back to a benefit and opportunity in today’s global economy—the cloud. Cloud computing technologies are giving small and medium businesses the opportunity to enter a global supply chain without the extraordinary investments that major players have always had to make. Essentially, the level playing field is distributing the abilities of the supply chain to a larger number of participants, which makes the average growth seem less than what is actually taking place. Ultimately, growth is occurring even though it may not be as evident as some would expect.
The current state of the supply chain is different from what experts predicted in previous years, and many parts of the supply chain remain reluctant to change and adapt. However, the digital supply chain is helping today’s supply chain prepare for the potential problems of the future.
Meanwhile, the hype of China’s role in the global economy continues to dominate the stage. Yet, U.S. already has a higher gross domestic product than China. Although current progression of the supply chain is lower than experts had predicted, the supply chain is continuing to grow. Only time will tell where the supply chain will go as more companies turn toward digital capabilities to secure their futures.