The pandemic has adversely affected every facet of global supply chains, from sourcing raw materials to the finished product reaching the end customer.
It is straining every aspect of the business resilience of global corporations – organizational, financial, operational, and commercial. It has also exposed the vulnerabilities of international supply chains across major conglomerates.
Supply chain leaders are eager to respond to these challenges with innovation. Sixty-seven percent of CEOs surveyed want to increase their investments in finding solutions to detect and resolve global supply chain bottlenecks.
While historic cooperation between countries and global organizations has been able to bring the worst of the pandemic under control, it shows no signs of going away completely. How, then, should businesses immune their supply chains against bottlenecks?
This article explores the causes and examples of supply chain and process bottlenecks, how benefits of AI in supply chain management are indispensable, how technology can aid in resolving them, and why Gramener should be your digital supply chain partner of choice.
Table of Contents
What is a Supply Chain?
The network of activities that involve the technology, resources, organizations, and individuals needed to produce and sell goods is known as a supply chain. It starts with the procurement and delivery of raw materials from the supplier to the manufacturer and ends with the consumer’s purchase of the finished product.
The supply chain segment that reaches the end product from the manufacturer to the consumer is referred to as the distribution channel.
What is Supply Chain Bottlenecks?
A supply chain bottleneck is any congestion point those costs businesses precious time and increases production costs. Resolving all the bottlenecks can increase the supply chain visibility and hence enable a clear decision-making scenario for the executives. instance, the pandemic has accelerated supply chain bottlenecks such as transporting goods containers and an acute shortage of laborers. What gave rise to these bottlenecks and how technology can help resolve these bottlenecks have been covered in detail below.
What is Causing Supply Chain Bottlenecks?
Global supply chains are often plagued with siloed route planning or disorganized inventory, resulting in bottlenecks. Identifying the underlying causes can help resolve these bottlenecks.
Supply chain bottlenecks result in frequent delays instead of one-time disruptions caused by traffic or weather events. Understanding the root causes of these bottlenecks is the key to resolving them.
Dependence on a Single Supplier
Over-reliance on a single or a small number of suppliers increases the risk of bottlenecks for supply chain players and manufacturers. For example, if the raw materials are sourced through a specific supplier, region, or country, an adverse change in conditions, such as war or natural disasters, can affect the entire supply chain.
A prudent strategy is to hedge supplier risks, ensuring that the components needed to manufacture a product can be obtained from multiple sources.
Planning in Isolation
When liaising with other players within the supply chain network, the objectives of your operations have to align with theirs.
Imagine a scenario in which your inventory managers plan to optimize by eliminating a portion of the buffer stock. At the same time, you have planned to use your buffer stock in your job shop for a production run.
This misalignment could result in catastrophic wastage of capacity or costly raw materials. To avoid such a situation, businesses can use integration to ensure that the goals of each stakeholder in the supply chain are in sync with each other.
Lack of Technology Integration
Lackluster technology integration can directly contribute to bottlenecks. For instance, suppose one of your primary raw materials is sourced from three suppliers. Thanks to digital integration, while you enjoy transparency in the operations of one of the suppliers, you have no visibility with the other two.
Lack of oversight can give rise to issues such as the expansion of order lead-time without notice, resulting in idle machines as parts take time to arrive. This, in turn, can hurt the subsequent stages of your supply chain operations.
Poor Visibility
Low visibility is another leading cause of supply chain bottlenecks.
Modern global supply chains are incredibly complex. This makes it challenging to identify the cause behind recurring disruptions.
To understand the problem, businesses must have visibility throughout the value chain. This includes bills of material for production, logistics operations, real-time view of inventory, etc.
Without visibility, you will be unable to resolve your bottlenecks, resulting in a loss of revenue and profits.
No Planning
If planning silos constitute a significant cause of delay and disruption, not having a plan of action can be equally problematic. For instance, in the absence of a company-level sales and operations plan (S&OP), individual departments will fail to align themselves with each other’s objectives, leading to conflict.
A data-driven and robust planning workflow can help detect potential bottlenecks and proactively address them in a flexible manner. This allows businesses to react to disruptions promptly and effectively, optimizing supply chain functionality.
Examples of Supply Chain Bottlenecks
There are many reasons for supply chain bottlenecks that cause further issues down the lane. Some of these factors have cascading effects, escalating the disruptions and stifling resolution.
The Pandemic
Since 2020, the Covid-19 pandemic has wreaked havoc on international supply chains. Strict border controls between countries delayed the movement of goods, further straining the global balance between demand and supply. The quarantines, restrictions, and lockdowns led to noticeable labor shortages.
The catastrophic effects of the pandemic were not felt uniformly across different regions worldwide, further complicating the needs of diverse communities.
Asia was the first to suffer the consequences of the virus outbreak. Using unprecedented measures, manufacturing hubs like China eventually stabilized their production levels to near pre-pandemic levels.
However, Europe was in the middle of its first wave by this time. This resulted in a global imbalance between supply and demand, leading to new supply chain challenges. For example, a major fallout of this imbalance was the disruption in content distribution.
Many filled containers were imported into the US due to the early start of production in Asia and continuous demand in the west. However, these containers were never re-exported.
By some estimates, only 40 out of every 100 containers that reached the US returned, leading to an acute shortage of cargo containers in Asia.
Labor Shortage
Global supply chains are currently experiencing one of the worst labor shortages in history. Albeit temporarily, the spread of the coronavirus has forced some warehouses and port areas to shut down completely.
This has further escalated the threat of strikes by laborers already discontented with the pandemic restrictions affecting their working conditions.
A 2021 Transport Intelligence (TI) study found that Europe faced a shortage of 400,000 truck drivers. The British market analysts reported that Germany alone experienced vacancies of around 60,000.
How Can Technology Help Solve Bottleneck Problems?
Build a digital supply chain and collect the right data from warehouses and operations. This is why use cases of AI in supply chain are so successful as they provide a level of granular detail that humans can’t reach with traditional methods, and it also provides a lot more efficiency and cost savings for companies who use it. This will be step one for reducing and eventually eliminating supply chain bottlenecks. Global organizations must rely on and invest heavily in this to improve their business outcomes. They must first analyze and identify where these bottlenecks lie. Sometimes, that may include conducting a thorough investigation to flag the inefficient and clunky processes within your supply chain.
A bottleneck analysis will help you to detect where the problem lies. The following measures will help you remedy the issues.
Data Analytics
Data analytics tools can assist you in accomplishing a wide range of tasks, including
- Evaluating equipment in warehouses and factories to identify reduced functionality, faults, and hazards
- Monitoring supplier performance and output and tracking shipments to improve transparency
- Forecasting changes in consumer behavior and supply chain disruptions based on past events
- Tracking inventory levels
Building a supply chain data strategy can help businesses gain insights to permanently resolve specific bottlenecks in a cost-effective and prompt manner.
Read More: Find out why you need a supply chain data strategy in the first place. Evaluate your business ROI and map with the decision to go data-driven.
Automation
Automation can help improve reliability, reduce cycle times and drive efficiencies of supply chains. It can also reduce labor, inventory management, and warehousing costs.
Furthermore, automation can help companies perform the following tasks –
- Operating dangerous and heavy equipment
- Processing shipping paperwork, invoices, and client order documents
- Tracking shipment itinerary
- Anticipate increased demand and order product components before inventory levels run low
- Product picking for shipping and packing
- Retrieving and storing components and products
- Automating these processes using technology improves communication across the supply chain, connects networks with applications, ensures uninterrupted flow of goods, and enhances safety.
- Additionally, automation helps reduce human touchpoints, which is useful when social distancing measures are in effect, and there is a worker shortage.
Simulation Modeling
Simulation modeling can help resolve specific supply chain bottlenecks. It can enable businesses to examine the potential impacts of supply orders or inventory management changes before implementing them in the real world.
Manual assessment of supply chain bottlenecks often results in errors, such as pushing the bottleneck towards the inventory management system due to short orders of materials. Companies can use simulation modeling to accurately identify a bottleneck’s root cause.
Simulation modeling can replicate complex and large-scale supply chain operations using as many variables as required. It is limited only by its processing power which can be enhanced using cloud computing.
Cloud hosting allows organizations to simulate innumerable hypothetical scenarios and archive reports. These provide them with actionable insights to resolve bottlenecks.
Low-Code Process Automation Platforms
Many supply chain companies don’t have 100% visibility over their operations, leading to unforeseen bottlenecks. To remain agile, they must quickly respond to market dynamics and revamp processes on short notice. This includes resource challenges and changes or fluctuations in demand from third-party suppliers.
Low-code process automation platforms and process modeling can allow businesses to build their supply chain operations on an agile foundation. Using process modeling, companies can add capacity or alter functions by making incremental changes within the workflow without disrupting the result or overall output.
Using Data Analytics & Visualization to Resolve Supply Chain Bottlenecks
One of our top clients, a retail major, approached us to help them identify their supply chain bottlenecks. They wanted to understand where goods of different values were getting stuck. They also wanted an interface that gave them a bird’s eye view of their supply chain end-to-end.
Gramener’s supply chain analytics team built a visualization that showed how goods flowed through each stage in the supply chain – trader, collection point, cargo hub, warehouse, distribution center, and store.
Each node on the simulation represents a stage in the supply chain. The lines that come out of the nodes in the right direction show the progress of the goods down the supply chain. The lines on the left of the nodes signify the in-flow of materials from the vendors.
The thickness of the lines represents the value of the goods. The color of the lines represents the speed with which the goods flow.
The visualization comprises a set of filters to make it easy to identify the bottlenecks. For example, managers can filter by the number of days to see which goods take the longest time to reach their destinations.
They can also filter by the value of the goods being moved, helping them to determine where to allocate resources urgently to resolve the bottlenecks. The pictorial representation is supported by a table that uses numbers to aid in the understanding of the bottlenecks.
Managers can also see the total value of the inventory stuck between each step in the supply chain. The platform allows them to identify the bottleneck hotspots readily.
The interface also helped our client to view the entire supply chain in one go. Additionally, we developed a mechanism that helped them explore “what-if” scenarios. Managers could see their decisions’ impact on the supply chain if they tweaked specific parameters.
Using our solution, the retail giant could optimize its inventory and reduce the overall turnaround time of its supply chain operations.
What are Operations Bottlenecks?
A bottleneck in operations management is a manufacturing deadlock in which the production quota cannot be met even at maximum throughput capacity. It can cause significant interruptions, including failure to meet customer demand, delaying delivery up the supply chain, and hurting work productivity.
How to Avoid Process Bottlenecks?
Ideally, businesses want to prevent expensive bottlenecks from ever happening. The following strategies can help them protect their supply chains from disruptions.
Overproduction
Conventionally, companies look to maximize their production at every step of the manufacturing process. However, deliberately scaling production back to certain levels can help your business.
This may help you to optimize overall production, especially in areas with a disproportionate number of people and machines, lowering wastage and stress throughout the production line.
Rolling back production and reallocating the resources at another point in the process will help relieve the bottleneck and increase overall productivity.
Machine Capacity Optimization
Process mechanics often lead to delays, such as the time required to start up and shut down machines or machine recalibration between product runs. Companies can avoid potential bottlenecks by reducing the number of shutdowns or recalibrations.
Adjusting supply chain schedules to keep machines running consistently longer or scheduling the maximum possible number of material or product runs can also help to optimize your machine capacity.
Schedule Streamlining
Any step in your supply chain where you may be unintentionally creating flow problems by under-staffing, over-staffing, or over-purchasing, can result in supply chain bottlenecks. You can even out the flow by reassigning, adding, or subtracting resources.
Scheduled and unscheduled downtimes present many opportunities to streamline supply chain processes. Data-driven solutions can further accelerate your process automation efforts.
Conclusion
The following reasons for supply chain bottleneck issues are dominating company board discussions right now – dealing with demand peaks, labor shortages, depleted inventory levels, increased freight costs, shipping delays, inflation, logistics provider capacity issues, driver shortages, etc.
Now, more than ever, organizations want to build resilient and flexible supply chains, avoid unnecessary resource requirements and added costs and modernize existing operations. The benefits of AI in the supply chain can help companies diversify the way customer needs are met, provide visibility, and reduce operating costs.
Digital operations can exploit data to drive growth.
At Gramener, we work with clients to create detailed supply chain strategies, facilitating opportunity analysis and integrating target operating models.
We help companies track supply chain visibility, improve service level uptime, detect manufacturing defects, and assess and recommend alternate sourcing markets.
Our outcome-driven solutions are designed to support complex and dynamic supply chains. It helps our clients respond to market changes and meet customer demands. It also helps them to maximize efficiency.
Contact us for custom built low code data and AI solutions for your business challenges and check out supply chain AI solutions built for our clients, including Fortune 500 companies. Book a free demo right now.
