Supply Chain: Common Issues and Steps to Build Resilience

Years after the COVID-19 pandemic rocked the global supply chain, U.S. companies are still grappling with ongoing supply chain challenges, including higher material costs, adverse weather events, cyberattacks, and other issues that can impact the bottom line.

Although many businesses have taken steps to strengthen their supply chains since the pandemic exposed vulnerabilities in supply networks in 2020, the 2023 Supply Chain Executive Survey from Blue Yonder, a supply chain management platform, shows that 87% of 300 business leaders at U.S. companies say they are still experiencing supply chain disruptions. In addition, more than half say those disruptions are interfering with their ability to deliver products to customers on time.

Meanwhile, business leaders are bracing for long-term instability. More than half of the 107 U.S. supply chain executives who responded to a 2022 Carl Marks Advisors survey said they don’t expect a return to a more normal supply chain until at least the first half of 2024, with many predicting the supply terrain could remain rocky even longer.

Collaboration platforms can enhance your communication with suppliers and logistics partners, so you can address problems quickly before costs escalate. 

Read on to find out some common supply chain issues businesses are facing today as well as steps companies can take to build more resilient and agile supply chains.

Potential Impact of Supply Chain Problems  

Overall, supplier delays in the U.S. have actually been improving in recent years, with 14.5% of small businesses reporting domestic supplier delays in July 2023, down from 36% in April 2022, according to the U.S. Census Bureau.

Still, the supply chain disruptions that are still occurring (both domestically and internationally) are having a costly impact on businesses, leading to delayed shipments, fewer orders, higher costs, and lost business. Small businesses in the U.S. often particularly feel the strain of supplier disruptions, according to the Census Bureau.

Invisible Theats: Resilience 2023, a survey of 750 senior procurement and supply chain leaders by Interos, an operational resilience company, found that the average annual cost of supply chain disruptions ranged between $43 million and $47 million. The survey also revealed that 90% of organizations weren’t aware of sub-tier supplier disruptions for as long as 48 hours, enough time to expose businesses to major financial and reputation risks.

Most Common Supply Chain Issues  

Although global supply chain problems have eased to some extent since the pandemic threw the supply chain into crisis mode, business leaders are still wrestling with uncertainty as they struggle to find the right balance between collecting enough inventory to meet customer needs while ensuring they don’t order too many products. Here are some of the most common supply chain issues that businesses are facing today.

Increased costs 

Disruptions in logistics and transportation networks, including port and railyard congestion and a shortage of shipping containers, have led to increased transportation costs.

U.S. business logistics costs, including trucking, rail, parcel, and air freight costs, soared to $2.3 trillion in 2022, an increase from $1.85 trillion 2021, according to the 2023 State of Logistics Report by the Council of Supply Chain Management Professionals. 

Many business leaders aren’t expecting relief anytime soon. According to a 2023 report from KPMG, a global organization of independent professional services firms providing audit and advisory services, 53% of respondents believe inflation will impact supply chains over the long term. For 71% of respondents, the most pressing concern was the rising cost of raw materials, and 62% cited rising freight costs. (The report was based on a 2022 KPMG survey of 300 global supply chain professionals.)

Adverse weather events 

Extreme weather, such as hurricanes, floods, droughts, and freezes, can lead to the closure of roads, ports, and airports, disrupting travel and cutting off the timely movement of goods through the supply chain.

Here's just one example: In 2022, a severe Midwest drought led to extremely low water levels in the Mississippi River. This log-jammed towboats and slowed barge traffic, delaying the transportation of grains and other crops.

Experts say climate change can bring on more intense, severe, and long-lasting weather events, so shippers and logistics providers in the supply chain industry are bracing for ongoing weather-related challenges that are likely to continue to threaten global trade and supply networks.

Cyberattacks 

Cyberattacks pose a significant threat to supply chains. The aforementioned 2022 KPMG survey found that nearly half of global organizations consider cybersecurity an important operational challenge for their supply chains. After all, the impact of a cyberattack can be severe.

In May 2021, for example, the Colonial Pipeline, which supplies fuel to the East Coast of the U.S., fell victim to a ransomware attack when a cybercriminal group targeted the pipeline’s computer systems. The attack led to a temporary shutdown of operations and disrupted the transportation of gasoline, diesel, and jet fuel, with subsequent panic buying leading to a spike in gas prices in sections of the U.S.

Meanwhile, in 2022, a food manufacturer experienced more than $600,000 in losses after shipping orders for dry milk powder to four fraudulent companies.

Cybercriminals are using increasingly sophisticated methods to infiltrate supply chains, making businesses more vulnerable to attacks. In fact, Gartner predicts that by 2025, 45% of organizations worldwide will have experienced attacks on their software supply chains, three times as many as in 2021.

Geopolitical tensions

When geopolitical tensions escalate, essential materials may be difficult to access and major trade routes can be affected. More than six out of 10 global organizations in the previously mentioned 2022 KPMG survey said they expect geopolitical instability to have a detrimental impact on their supply chains through at least 2025.

Political tensions can lead businesses to turn inward and build self-sufficient material networks on their own domestic soil. Many companies also embrace “nearshoring” by forming relationships with partners in geographically close countries to ensure they can respond quickly to changing market conditions and get products to customers on time.

How to Build Supply Chain Resilience

Businesses can build resilience into their supply chains to minimize the impact of disruptions by working proactively to identify potential problems in the supply chain and develop strategies to help mitigate those risks. Here are some steps business owners can take to help solve supply chain problems and ensure their supply chains are resilient enough to adapt, rebound, and recover from disruptions.

Step 1: Map your supply chain. 

Consider mapping your supply chain by documenting information about your suppliers, manufacturers, distributors, and other parties you rely on to deliver products and services to customers. A supply chain map may include the suppliers of raw materials, transportation partners moving goods, and shipment timetables, among other details.

This comprehensive diagram should illustrate how products travel through the supply chain, allowing you to analyze your supply networks to help identify areas of improvement, protect against potential risks, make informed decisions, and react quickly when your business faces supply chain problems.

Step 2: Diversify your supply chain.

Relying on a small number of suppliers can spell trouble for your business if a weather event, health crisis, or other emergency interrupts another company’s production or shipping processes, causing delays.

After mapping your supply chain, one of the best ways to build resilience is by diversifying your supplier base. Try to start by evaluating potential risks associated with your current suppliers and other partners, considering factors such as the geopolitical stability and weather conditions of their home base, as well as the financial health of the companies.

Consider finding alternative companies that can supply key materials, perhaps looking for businesses located closer to home, which can shorten lead times. It’s best to cultivate strong relationships with multiple suppliers, keeping the lines of communication open to allow for flexibility and a quick response if a crisis arises.

Step 3: Invest in technology to enhance visibility.

Companies often use a variety of technology solutions that can allow for greater supply chain visibility and responsiveness. Your business can implement software and other tools that can assist with real-time tracking of goods as they move through the supply chain, as well as demand forecasting and inventory management to monitor supplies and identify potential issues early on. 

Automating certain routine and repetitive tasks can also help improve accuracy and lower operational costs, which can contribute to greater supply chain resilience. In addition, collaboration platforms can enhance your communication with suppliers and logistics partners, so you can address problems quickly before costs escalate.

The Bottom Line

Despite efforts to strengthen supply chains, many companies are still experiencing shockwaves like increased material costs, severe weather events, cyberattacks, and geopolitical tensions – all of which may be negatively impacting their bottom line. Companies can anticipate such problems and build greater resilience by mapping their supply chains, diversifying their supply base, and using technology to closely monitor the supply network. These solutions help allow business leaders to quickly respond to supply chain volatility, keeping products and services flowing to customers smoothly even in the face of change.

Photo: Getty Images