Ever wondered what’s with sky-high prices of products? It could be the supply chain.
In 2022, companies still face challenges in their supply chains that hinder their progress and success in the world of e-commerce. A lot of supply chain disruptions continued into the year, which caused further problems for e-commerce retailers of all sizes following a very tumultuous 2020. There has been a great deal of stress placed on manufacturers and suppliers from all over the world who have experienced massive stock shortages, fulfillment delays, and long backorders on the most popular inventory items.
Modern supply chains must evolve to meet new demands, and supply chain managers must plan ahead in order to stay on top of things amidst increased delivery routes, international complexity, and other factors that create significant supply chain challenges. In this article, we look at some of the pressing challenges in the supply chain industry and learn how blockchain can help mitigate them.
5 challenges in the supply chain industry
Below are some of 2022’s biggest supply chain issues faced by businesses globally:
Lack of traceability
In the supply chain, traceability refers to the process of identifying, tracking the provenance, and tracing elements of a product from raw materials to finished goods. It is crucial for companies to increase traceability and share information with stakeholders, customers, and partners today. This is especially relevant in sectors like pharmaceuticals and food, with a high need for safety. In 2022, we continue to see growing problems with uncooperative distribution partners, downstream supply chain operations and inventory management, counterfeits and fraud, and product diversion.
Improper inventory management
Public companies are often known to mismanage their inventory. A conjunction of factors is responsible for improper inventory management, such as poor production planning, poor communication, lack of expertise, and increasing competition. This could lead to a loss of potential revenue, add to inventory holding costs or cause out-of-stock situations, that cost retailers around $1 trillion every year.
Most supply chains have a multi-site network of manufacturers, suppliers, retailers, and distributors. One of the common challenges the majority of these companies face is controlling costs that could, over the long haul, damage the business. The costs could be in the form of:
- Transportation costs: Insufficient supply chain planning, wrong selection of suppliers, manufacturers, or distributors, and deployment of resources are some of the major reasons for high transportation costs.
- Inventory costs: Though inventory helps companies tackle with supply and demand and volatility, storing inventory and stockpiling can lead to increased costs.
- Procurement costs: The wrong choice of suppliers or outdated data can add up procurement costs and affect the delivery of finished goods.
- Investment costs: Businesses may fail to invest in the right places, owing to a negative impact on their finances.
Documentation and regulatory compliance
Regulatory risks and non-compliance are two other challenges stemming in the supply chain. This includes aspects such as corruption and fraud, social and governance (ESG) compliance requirements, health and safety laws, export controls, and adherence to labor laws. Such non-compliance and lack of due diligence often turn out to be expensive for companies.
Overcoming supply chain challenges
The current supply chain management system requires significant improvement in end-to-end tracking, logistics and transportation, delivery speed, compliance, coordination, and finance among geographically dispersed partners. A growing interest is being shown in the application of blockchain to supply chain management because of its complexity and the above-mentioned challenges.
The underlying principles of blockchain like security, decentralization, time-stamping, and transparent information-sharing help in leaving a permanent audit trail of goods from their inception to delivery and ensure easy provenance, consensus, and immutability. This leads to a significant reduction of errors in trade-related documents, ensures the right tracking of change orders and reverse logistics, manages costs in logistics and transportation, and easy linking of physical products to RFID and serial numbers and storing them on the blockchain. Read more to know how companies are already implementing blockchain in their supply chains.