Inventory, logistics, warehousing, supply chain – not terms that generally appear in the vocabularies of global CEO’s.
So how important are they to successful business management?
Vital, actually. While they may not make headlines, these are the business issues that underpin profitable operations.
What are the risks in Logistics?
In this post we will show you the types of supply chain risks. Learn how managing 4 key risks in logistics can help keep your organisation healthy.
Supply chain risks and how to mitigate them
1. The risk – badly managed inventory
Supply Chain Management Review suggests that since the global economic downturn, the cost of holding inventory may have risen from the previously assumed 25% as high as a staggering 60% for items in inventory for over a year.
Costs that should be factored into inventory management include warehousing storage, insurance, obsolescence and transportation. Weak planning and poor forecasting can lead to inventory failures. Managing this risk by ensuring you shop around for the best warehousing and distribution solutions means that the cost of holding inventory needn’t damage your business.
2. The risk – bottlenecks in logistics and supply chain management
All too often the control levels for logistical operations are set below the necessary minimum. While your Chief Financial Officer might not be in daily contact with the logistics team, supply chain analysts will tell you that if the control levels aren’t high enough, decision-making will devolve to the lowest priority (cost) because that’s all the decision makers are empowered to take action on.
A good logistics policy ensures that streamlined warehousing and logistics management can be undertaken. In reality, the greatest product in the world won’t please the customer if it arrives too late, damaged or disappears en route. Setting the bar at the right level means that risk mitigation is a feature in deciding who to work with and how to assess risk in the supply chain.
3. The risk – failure to integrate logistics
Third party logistics (3PL) has grown up to support the logistics industry. That doesn’t mean that supply chain governance shouldn’t be built into your organisation. Even if your logistics and warehousing are entirely outsourced.
Even excellent logistics organisations can’t set your priorities for you from outside. No matter how good your warehouse space, unless supply chain strategy is linked to the corporate strategy, there will always be a drift away from excellence in aligning 3PL with organisational aims.
This may mean that in a large organisation a director takes on reporting responsibility for 3pl. Or in a small business, that the CEO is given periodic updates on supply chain issues.
4. The risk – being run by technology
Software is meant to help a business become faster, stronger and more streamlined. Sometimes this has an unintended consequence – it creates an organisational mindset that can only think the way the software allows. This can mean that supply chain operatives spend a lot of time putting data into the system but struggle to obtain from it the information they need to make good business decisions.
One way to ensure this is to create good alliances with key partners and suppliers – working with the best in field allows an organisation to learn about new technology and new systems without having to take the risk of investing in them until it’s sure that the investment will be worth it.
It also stops an organisation becoming over reliant on technology that is falling behind global developments. From driverless cars to drones, the logistics industry has taken great leaps forward – working with strong partners ensures even the smallest business doesn’t get left behind.