In every business, demand and supply are the two factors that drive the whole graph of profitability, and the fact that they are uncertain creates a sense of insecurity among retailers and online merchants. The E-commerce industry is by and large dependent on supply chains, which often get fundamentally altered by the drastic change in demand, and to cope with this crisis, businesses maintain supply chain flexibility.
The size of the international market for supply chain management was estimated at USD 16.64 billion in 2021, and it is forecasted to grow at a CAGR of 10.8% from 2022 to 2028. In such a scenario, supply chain flexibility becomes increasingly important in today’s global supply chain management and warehouse fulfillment. With more and more companies competing in international markets, the ability to respond quickly and efficiently to changes in demand can be the difference between success and failure.
What is supply chain flexibility, how does it affect global supply chain management, and what are the challenges faced by businesses to maintain supply chain flexibility? By the end of this blog, you will get a better understanding of all these queries.
Understanding Supply Chain Flexibility
Supply chain flexibility is the ability of a company to respond quickly and efficiently to changes in demand. A flexible supply chain can help a company avoid inventory shortages, production blockages, and other disruptions that can adversely affect the bottom line.
3 Key Roles Played by Supply Chain Flexibility to Help Businesses with Supply Chain Management?
#1 Battling Rising Market Volatility
Historically, demand patterns were carefully examined to establish supply chain elements including manufacturing rates, raw material purchases, transit capacity, etc. Now, though, it’s just not possible. The marketplaces of today are becoming more and more unpredictable, and having a flexible supply chain can help businesses in dealing with potentially harmful market fluctuations like price increases or declines in demand.
#2 Helping Adapt to the Intricate Consumer Demand Patterns
As markets are more volatile than they once were, predicting consumer demand has become more complicated now than it ever was. It requires more than just looking at past trends in consumer demand. Most emerging economies are experiencing double-digit economic growth, which has caused significant changes in global demand trends. It is challenging to forecast how consumer demand will change in five or ten years due to the magnitude of these adjustments.
#3 Boost the Worth of the Company
A business may be inclined to cut back on everything during a recession or in any situation where demand declines. However, this can be a costly error because it will be challenging to meet demand if and when it increases again. Flexible supply chains allow a business to rapidly change its production rates, raw material purchases, and transportation capabilities to increase revenues.
5 Major Challenges in Achieving Supply Chain Flexibility
#1 Limited Resources
Due to a sudden increase in consumer demand unlike anything before, there has been concern about insufficient inputs ever since the pandemic started. Even now, with the supply of several parts and materials being limited, merchants and suppliers are having difficulty meeting this demand.
#2 Surging Freight Rates
Contrary to earlier predictions, container shipping has become significantly more important throughout the pandemic. Global lockdown measures have led to a spike in online purchases, which has increased demand for imported raw materials and finished consumer goods (a large percentage of which are moved in shipping containers).
#3 Challenging Market Analysis
Supply chain management for many businesses has become even more complex due to demand forecasting amid a global epidemic. Numerous retailers and providers of consumer goods/services had their projections effectively broken by the advent of COVID-19, leaving them without a reference as to how much inventory to hold or produce at any particular time.
#4 Port Obstruction
Given that port owners, carriers, and shippers are still looking for a workable solution to this issue, port congestion brought on by the epidemic continues to be one of the biggest issues for supply chain flexibility. Congestion happens when a ship docks at a port but is unable to load its cargo because that station is already full.
Companies are unable to ship their products on schedule as a result of this congestion and the backlog it creates, which makes it difficult for carriers to meet their claimed delivery dates.
#5 Drastic Change in Consumer Behavior
The pandemic has also significantly altered consumer attitudes and habits, lowering the bar for delivery times and increasing the standards for a satisfying customer experience. The difficulty lies in building a flexible supply chain that can use automation and AI to maximize fulfillment and easily meet increased demand.
Optimizing Supply Chain Flexibility
There are several ways to increase supply chain flexibility. One way is to have multiple suppliers for each component of the product or service being produced. This way, if one supplier experiences a production slowdown or stoppage, the other suppliers can pick up the slack.
Another way to increase flexibility is to use just-in-time inventory management practices. With just-in-time inventory management, companies attempt to keep only the minimum amount of inventory on hand, ordering new supplies only as needed. This reduces the amount of capital tied up in inventory and allows companies to respond more quickly to changes in demand.
A third way to increase flexibility is to use modular production methods. Modular production involves breaking the manufacturing process down into small, self-contained units that can be rearranged or reconfigured as needed. This allows companies to quickly change the mix of products they are producing without having to retool their entire production line.
Final Notes
In the wake of a global pandemic, international market trends are drastically changing and businesses are by and large tuning to the current demand and supply trends for survival.
Partnering with the right logistics provider who can conform to the constantly changing demand patterns in the logistics and shipping industry becomes a necessity for your business. NimbusPost is one such haven for e-commerce businesses, it is a shipping aggregator dedicated to providing smart warehousing and fulfillment facilities and domestic and international shipping at the most affordable rates.
