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Did Your Supply Chain Fail? Four Reasons it May be Your Fault

truckingIn business, accountability is everything. After all, if you don’t assume responsibility for shortcomings and mishaps, you’re likely to repeat mistakes. So the next time your supply chain fails, it may be time to look internally and ask, “Is this actually my fault? Could I have avoided this situation for my company?”

Supply management is complex because it requires dealing with a number of manufactures and distributors while still focusing on your end users. A lot can go wrong: your shipments can get delayed; a focus on cost cutting can create broken links in your chain; and sudden industry changes can throw off your demand forecasting accuracy. Here are four reasons your next supply chain failure may have been your fault:

1. You Failed to Do a Background Check: Not only do businesses need insight into the corporate linage of a potential supplier, they also need to run a thorough credit assessment. A comprehensive background check includes everything from determining whether similar companies used this same supplier to looking for a history of delinquent payments. Another sign that trouble may be ahead is if the company is plagued by constant corporate turnover. It’s imperative to understand the ins and outs of your supplier so you can appropriately gauge risk.

2. You Focused More on Cutting Corners than Getting the Best: In our still-recovering economy it can be tempting to cut costs by finding a cheaper, less experienced supply chain partner. However, there are a number of risks to taking this approach including: heightened risk for productivity mishaps; decreased stability; and limited flexibility to respond to slight changes in orders, demands, or products. Don’t be a cheapskate. Go for the best partners that boast reputable backgrounds and favorable credit histories.

3. You Didn’t Account for Industry Volatility: An unpredictable global business environment—and ever-changing industry standards—has complicated the supply chain. Risk is a huge part of supply management. As a leader, it’s up to you to determine how you will adapt to unexpected changes and implement proper risk management strategies. To start, your company needs to create a strategy that accounts for order cutbacks, inaccurate forecasting predictions, and sudden deviances from historical data. Being able to accurately predict demand is a bit like lightening striking twice in the exact same location: it’s near impossible. Therefore, the next time your supply chain encounters a road bump ask yourself whether your company did its due diligence and had a proper strategy in place to address sudden hiccups.

4. You Don’t Have Supply Management Expertise: Is your company knowledgeable about supply chain best practices? Does it have employees with experience in ocean, air, and rail logistics? Or who understand the consequences of things such as long lead times and delayed shipping? Before turning the tables on your supply chain partner, perform a quick gut check and ask if you have the right individuals in-house to manage your supply chain. These individuals should be well-versed in concepts such as ERM framework, predictive analytics, and risk management. If not, it may be time to go back to the recruiting stage.

Successful supply chain management starts with choosing reliable partners. Proper preparation will help ensure smooth supply sailing and greatly reduce risk in a volatile marketplace.

Photo Credit: 1nelly, Flickr