The supply chain is the “journey” that a product takes from a supplier to the customer. It includes the system of organisations, people, activities, information, and various resources. Supply chain management, according to the Council of Supply Chain Management Professionals, encompasses the planning and management of all activities involved in sourcing and procurement, conversion, and all logistics management activities. Importantly, it also includes coordination and collaboration with channel partners, which can be suppliers, intermediaries, third-party service providers, and customers. In essence, supply chain management integrates supply and demand management within and across companies.
In this article, we will be focusing on the first part of the process, the supplier & the shipping industry.
Did you know that the International Chamber of Shipping estimates that marine shippers transported over 7.7 billion tons of cargo in 2008, generating roughly $380 billion in freight charges alone and covering more than 32 trillion miles? According to Easy Freight, shipping is one of the cheapest & safest ways to transport cargo. It is also the most popular one, with over 90% of raw materials still being transported by sea. The world fleets are manned by more the 1.5 Million seafarers and the numbers are continuing to grow.
Overall, the industry is huge and it stays at the basis of virtually every retail business and end consumer product. It is essentially, that crucial & very important, part of the process that everyone takes for granted and never really gives it any thought. However, as one of the oldest industries out there, the global economy would not be sustainable, had it not been for all the containers being transported from one place to another.
Given the size of the industry, and the amount of processes and people involved, one can only imagine the amount of challenges that can arise from operating in this business. To add on to that point, today the shipping industry has some of the least technology developed processes and, people within can sometimes be reluctant in changing their ways.
\We had a look at some of the major challenges that concern Industrial Supply, within the supply chain. We believe that at the end of the day, looking at the supply industry as part of something bigger, a comprehensive process, can help identify from a Macro to Micro level the current & potential shifts in demand.
1. Increasing volatility of customer demand & increasingly complex patterns of customer demand
According to a McKinsey Global Survey, these were the most frequently cited challenges of the past years. We live in an era where the customer is spoiled and gets exactly what it wants. The customer demands the end-product and the supply chain goes backwards from there. This ends up impacting the suppliers, who need to constantly comply with the new demands.
2. Economic uncertainty
As global economy continues to shift, raw materials can become scarce or hard to get, but the consumer wants what it wants. This puts a big pressure on industrial suppliers, who are feeling squeezed to boost their efficiency in order to meet customer demand.
3. Improved Customer Service
According to the Supply Chain Management Review, customers want full transparency about where their delivery is at all times. These days, the location of a package is as interconnected as your social network. One, needs to provide its customers all information concerning what they paid for. Fortunately, there are technologies out there, that will do this for you. Check our article on Delays for more information of this matter.
4. Government Regulations.
Carriers face significant compliance regulations imposed by federal, state and local authorities
5. Fuel Costs
One of the highest costs contributing to the transportation concern is fuel prices. The fluctuation of this cost, strongly impacts the Shipping industry
6. Advances & Improvements in processes
Notwithstanding the need for new technology, it has become an increasing challenge for the logistics industry to stay on top of new advances in business processes. Taking advantage of these new technological opportunities sounds enticing but adoption and on boarding can be overwhelming and trust is a major issue.
7. Technology Strategy & Implementation.
While the industry understands and supports many of the benefits of these technologies, some questions remain as to how they will pay for it and who will help implement the improvements.
To conclude, these are real issues that the industry is facing today. Solutions today rely strongly on technology. And despite general opinion being reticent and putting their concerns first, using technology comes at low costs (at least in comparison to what you’d be losing otherwise).
It can be challenging and frustrating to have such a high lack of visibility in the big picture, yet get affected so strongly by every little change. Without industrial supply & shipping, products would not end up in the hands of the consumers, which should help them understand how crucial and sensitive this part of the process is. The reality is different, consumers are aware of their power and they keep demanding, unaware of the work that goes behind.