Overcoming The Challenge Of Material Shortages With Data Analytics

Supply chain

Supply Chain managers are tasked with monitoring on-time deliveries, vendor-managed inventory (VMI), and oncoming – or worse, existing – shortages. These localized problems often leave little to no room for addressing deeper issues and working towards real, lasting solutions. A report suggests 94% of the Fortune 1000 are seeing coronavirus supply chain disruptions. These numbers may be a clear indication that supply chains could benefit a lot from new, innovative practices – from digital transformations all the way to industry 4.0.

Supply chain

These are the remedies that will better equip supply chain managers to have a considerable impact on their supply chain’s success. Regain control of your material shortages with these initiatives:


Prioritizing the Root Causes & Critical Shortages

Irrespective of the scale of the manufacturer, they are typically held responsible for thousands, sometimes millions of technically complex products. And this commotion may muddle the list of priorities and leave the chain in limbo when a shortage does occur.

On top of that, despite material issues being a big disruptor, sometimes small recurring issues can add up over time to impact the company’s productivity and bottom line significantly. These recurring issues are often deemed “normal”.

The answer is prioritization.

Understanding what smaller issues and what material related issues are impacting the production performance boosts problem solving efforts. Identifying inventory that represents the most impactful costs in the value chain can do wonders. This is essentially a supply chain’s equivalent of identifying low-effort-high-return areas. The next step is to get to the bottom of it. Fighting the root source of shortages lets management better prepare for and prevent future shortages. This, in turn, develops foresight within the organization.

This approach of uprooting the real problem not only identifies the highest effort-to-reward ratio(s) in the chain, but also helps deal with oncoming material shortages based on current demand, POs, MOQs, and lead time.


Tapping into The VMI Thresholds

As the challenges of material shortages rise, manufacturers in their pursuit of innovative solutions turn towards Vendor-Managed Inventory (VMI). VMIs work strictly based on necessity. Here’s how:

VMIs ensure that the right materials arrive only when they’re needed. The retailer merely houses and assists with the sale of the product in exchange for a commission (or profit) that is agreed upon by the owner.

On the regular, managers need to track VMI parameters for hundreds of materials provided by a gigantic network of suppliers. And there isn’t a lot that manufacturers can do to ensure timely delivery of materials by suppliers.

This can be optimized by monitoring data from their ERP system to find optimal Min-Max levels for the organization. Contrasting current inventory levels with extreme statuses (both maximum and minimum inventory levels) will help avoid costs associated with both shortages and excesses.


Employing ERP and SCM Systems

Urgent actions demand faster decision-making. Enterprise Resource Planning (ERP) systems provide such a coordinating platform. ERP systems connect various departments comprehensively, while supply chain management systems enable high-level organization of the flow of resources in a company. Here’s how they can provide benefits during material shortages:

  • Communication And Faster Decision-Making:
    Managers can unlock effective real-time communication with an ERP system in place. As the workers stay informed on recent developments, they can act faster on information they receive. This prevents useful data from getting lost in translation and improves the overall efficiency of the supply chain.
  • Forecasting And Analytics:
    ERP and SCM systems empower managers to collect useful data and scale up business operations. This data, when integrated into one comprehensive platform, allows business leaders to strategize as to how they want their processes to fit into the bigger picture. These analytics also provide the necessary heads-ups about what to expect.
  • Automation:
    Modern ERP and supply chain management systems can automate business functions in innovative ways. They are used to contact suppliers for restocking, for identifying low stocks in inventories, and keeping the supply chain running. These limit the chances of errors as automations imply little to no human involvement. Intelligent automation also helps employees worry less about mundane obligations in the workplace and focus more on the core business processes.
  • Streamlining Business Processes:
    SCM ERP systems provide the advantage of streamlining business processes to managers. Here’s how:

    • They allow you to hand-pick and optimize unproductive areas of the supply chain.
    • They further boost efficiency in these areas, enabling proper organisation and the smooth running of the supply network.
    • They facilitate productive interactions between suppliers, manufacturers, managers, retailers, consumers, and virtually everyone involved in the supply network.
  • Risk Management:
    One of the key ways how SCM ERP systems help supply chains is by providing more visibility to the processes. And as discussed earlier, it lets managers foresee oncoming risks. This provides a window for forming risk management plans ahead of time. ERPs can greatly reduce the probability of inaccuracies, errors, and risks, hence, allowing operations to proceed more smoothly.


Increasing Accountability and Transparency Among Buyers

Simply telling employees that managers expect them to be accountable and take ownership of the company’s initiatives, successes and failures is not enough. It is difficult to inspire an accountable and transparent culture among your ranks, but here are some things every supply chain manager can (and should) do:

  • Provide dashboards and metrics aggregated across the buying process. These dashboards should have clear insights about trend lines, past performance, and forecasted figures.
  • Hindsight into company figures provides insights about specific KPI drivers. A better understanding of forecasted figures helps team members understand how they can drive results.

By implementing comprehensive data visualization, managers cultivate a culture of transparency within their supply chain and increase accountability and transparency among buyers.


In Conclusion

The hustle of the supply chain industry can get frustrated and barely leave any room for intentful action. Losing sight of the bigger goal here is very easy. Managers and business leaders must learn to implement smart manufacturing practices to better manage their shortages. And the way forward involves tapping into the power of data analytics and taking up initiatives that leave an impact on the supply chain’s trajectory.

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