What keeps you awake at night? That is the question posed to executives at 50 firms by Beyond the Horizon, a supply chain research project at Michigan State University conducted in partnership with the APICS Supply Chain Council.
If you manage a warehouse or distribution center – both important nodes of the supply chain – you will likely recognize yourself in many of the issues that participants cite as their biggest supply chain challenges.
Here’s a summary of the top 6 issues that make supply chain executives across a range of industries lose sleep:
1. Capacity/Resource Availability
Whether the firm is growing, declining, or planning for growth during a period of decline, executives wrestle with managing capacity issues. Solutions include, for example:
- Selective outsourcing until new equipment is operational.
- Reconfiguration of the firm’s supply chain network.
- Trying to do more with less as resources to expand into new and emerging markets may not be available. Says one executive, “I don’t get a [greater] allocation, so we just keep stretching.”
- Training junior-level employees to fill critical positions as needed and ensure continuity of the firm’s information systems.
The much-publicized talent shortage was evident among the interviewed firms. Competition for talent is intense. And even as the firms find talent, retention becomes another concern especially when it comes to millennial hires who tend to job hop more than older employees. To prepare for future turnover due to retirements, many firms pursue succession planning.
This comments sums up the challenge: “You go out to the market, and it’s one of those ironies. Right now, you put a job description out there and you hear about 8 percent unemployment. However, I can’t find an industrial engineer worth his salt—you know, someone who can really think about strategy and think about [profit and loss statements] and drive change.”
The combination of increasingly complex products and a skyrocketing number of stock keeping units have firms scrambling. The complexity, in turn, drives costs. Realizing that complexity really cannot be reduced, the focus has turned to management strategies such as stressing greater standardization, simplifying processes, and, in at least one case, considering the potential of issuing rewards to plants that successfully tackle the challenges. One executive noted the simplification of processes has made the firm more nimble and better at mitigating risks.
Three themes emerged when the firms outlined their thoughts on threats and challenges.
- Supply chain risk. The unpredictable nature of risk, whether it is a natural disaster or a troubled supplier, makes advance planning difficult, the executives said.
- Personnel management. It only takes one poor decision by one employee to put the reputation of the entire firm on the line. Noted one participant, “Today, five seconds after it happens, someone will upload a video [of a company-related disaster] from their phone onto YouTube. You’ll have 10 million views by the end of the week. So there are risks to our reputation and our business and ethical behaviors. All are subject to a different standard today.”
- Continuity planning. The ever-evolving challenge of new markets as it relates to scalability and determining necessary adjustments have some firms on edge.
The moving target of regulations was cited as a major issue, prompting one interviewee to note: “[The changing regulations] are really causing us to spend a lot of money and a lot of our time. It is sucking up a huge amount of our information technology dollars and resources to be able to be compliant with those regulations.”
Participants described the sheer number of regulations as “staggering” and said government actions in general have not just doubled, but increased “five-fold.” To deal with the onslaught of inspections (“In this facility, almost every day we have one of those regulatory bodies here”), some firms have created a position for a chief compliance officer (CCO).
6. Cost/Pricing issues
How do the firms survive? They are forced to be “ruthlessly efficient.” In addition to price pressures across all types of industries, healthcare and pharmaceutical firms have been particularly hard hit by the Affordable Care Act as well as Medicare and Medicaid restrictions.
One executive explained: “Everything in healthcare is submitted through insurance for reimbursement. The government won’t pay you any more to treat your patients, so you better get [the payout from] your suppliers. Well, we’re the supplier they’re coming after.”
Now, is there anything you want to add to the list?