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Supply Chain Problems? Here Are 6 Solutions

Struggling with supply chain issues? Here’s how to fix them. Businesses today face challenges like material shortages, rising costs, inventory mismanagement, and delivery delays. But there are practical solutions to overcome these hurdles and streamline operations.

Key Solutions:

Use Multiple Suppliers: Avoid disruptions by diversifying your supplier base across regions.
Fix Inventory Management: Leverage AI and ERP systems to improve forecasting and reduce errors.
Speed Up Fulfillment: Use multiple warehouses to cut delivery times and costs.
Improve Visibility: Adopt IoT and blockchain for real-time tracking and transparency.
Lower Shipping Costs: Consolidate freight to optimize shipments and reduce expenses.
Handle Returns Better: Automate processes and partner with 3PL providers for efficient returns.

These strategies help reduce risks, cut costs, and meet customer expectations. Start small - focus on your most pressing issue, and scale improvements over time.

Navigating Supply Chain Complexity: Tech and Diversification Strategies | Tire Tracks Podcast 48

Solution 1: Use Multiple Suppliers to Avoid Material Shortages

Relying too heavily on a single supplier can leave your business vulnerable. If that supplier encounters issues, your entire operation could come to a standstill. The answer? Diversify your suppliers. By sourcing materials from multiple suppliers across different regions, you can reduce risks and keep your business running smoothly.

The Risks of Depending on a Single Supplier

Putting all your eggs in one basket can be disastrous. When a single supplier falters, the ripple effects can cripple your business. In fact, 85% of supply chain disruptions occur in the lower tiers of the supply chain, where many companies lack visibility.

The numbers don’t lie. In 2023, 61% of manufacturing suppliers reported raw material shortages, making it the top supply chain disruption of the year. A prime example is the grain shortage caused by Russian blockades, which cut off 20 million tons of Ukrainian shipments. Businesses relying on one regional supplier faced immediate crises.

Relying on one supplier also weakens your negotiating position. If they know you have no alternatives, they can raise prices, reduce quality, or change terms without fear of losing your business. During demand surges, like the global chip shortage, companies dependent on limited suppliers found themselves unable to meet production needs, leaving orders unfulfilled.

Financial risks compound the problem. If your sole supplier goes bankrupt or faces cash flow issues, you could lose both your materials and any money already invested. It’s no wonder 86% of global decision-makers believe their supply chains are overly concentrated in specific regions. Diversifying suppliers geographically and operationally can help ensure continuity when one link in the chain breaks.

Steps to Build a Diversified Supplier Network

To protect your business, start building a diverse supplier network. Begin by identifying suppliers that meet your quality, pricing, and delivery needs. Prioritize geographic diversity - source materials from suppliers in different regions to shield your business from localized disruptions like natural disasters, political instability, or economic downturns. This way, if one region faces challenges, others can step in to fill the gap.

When evaluating suppliers, dig deeper than their current performance. Assess their financial health, production capacity, and compliance records to create a comprehensive risk profile. This ensures you’re not just choosing reliable suppliers but also minimizing potential risks tied to geography or economic conditions.

Set clear expectations with your suppliers by creating detailed agreements. These contracts should outline performance standards and include clauses for alternative sourcing to protect your operations in case of supplier failures.

Communication is key. Keep an open dialogue with your suppliers about demand changes, potential issues, and mutual expectations. Treat them as partners, not just vendors. As Doug Roginson, Head of Supplier Relationship Management at JPMorganChase, says:

"The goal is to get beyond negotiating rates, service levels and delivery schedules and work toward market-making, brand-differentiating joint value creation. That takes trust created through truth and transparency."

Regularly monitor your suppliers to ensure they meet your standards. Use tools like supply chain management software to streamline data collection and track performance. Conduct audits to verify quality and address potential issues early.

To further safeguard your operations, maintain a buffer stock of critical materials. This safety stock can buy you time to activate alternative suppliers if disruptions occur, while keeping carrying costs in check. Additionally, collaborate with backup suppliers to improve their readiness. Even if you’re not using them to full capacity now, maintaining strong relationships ensures they’re prepared to step in when needed.

The Payoff of Supplier Diversification

Investing in supplier diversification isn’t just about risk management - it’s a smart business strategy. Companies with robust supplier networks and strong relationships experience 20% fewer supply chain disruptions. When problems arise, having multiple suppliers means you can keep operations running while others scramble for solutions.

Although building a multi-supplier network requires effort, the benefits far outweigh the costs. It’s an essential step toward creating a resilient and scalable supply chain that can weather any challenge.

Solution 2: Fix Inventory Management for Growing Businesses

Struggling with inventory management can seriously hold back a growing business. As you scale, the stakes get higher - overstocking ties up cash you could use elsewhere, while running out of stock means lost sales and unhappy customers. The good news? Modern AI tools and ERP systems can turn inventory management from a persistent headache into a competitive edge.

Common Inventory Management Pitfalls

Growing businesses often fall into predictable traps when it comes to inventory. These mistakes can be costly - inventory errors can drain 10%-30% of a business's annual profits. That's the difference between thriving and just getting by.

One major misstep is poor demand forecasting. Many businesses rely on gut instinct or outdated spreadsheets instead of real sales data and market trends. This guesswork often leads to a feast-or-famine cycle: either you're stuck with too much inventory or you're constantly running out.

Manual data entry errors are another common problem. They can distort inventory records, making it hard to get an accurate picture of stock levels. In fact, asset-heavy industries lose $480 million annually from unplanned downtime, with $24 million of that linked to MRO inventory issues.

Relying on a single employee for inventory decisions is also risky. If that person is unavailable, the lack of backup processes and documentation can throw your entire system into chaos.

Then there's overstocking, which might seem like the safer option but is actually very costly. Carrying costs for excess inventory can eat up 15%-30% of a product's value every year. On top of that, overstock takes up valuable space and racks up additional fees for storage and insurance.

Poor storage organization can make matters worse. Even if you technically have enough stock, misplaced or mislabeled items can lead to delays and emergency purchases - both of which cost time and money.

Finally, many businesses stick to outdated systems, ignoring the benefits of modern technology. Fixing these mistakes requires embracing proactive, tech-driven solutions.

How AI and ERP Systems Improve Inventory Management

To tackle inventory challenges, AI-powered tools and ERP systems are game-changers. AI shines at demand forecasting, using historical sales data, seasonal trends, and customer behavior to predict what products you’ll need and when. Real-time tracking adds another layer of precision, giving you up-to-the-minute insights into stock levels and product movement across all locations. AI can even automate reordering when stock dips below a certain threshold.

By improving demand forecasting and inventory optimization, AI can help businesses reduce inventory levels by 20%-30%. When paired with ERP systems, these tools connect inventory management with other business processes. For instance, when a sale is closed or a return is processed, the system updates stock levels and adjusts forecasts automatically. That’s why 95% of businesses report improved processes after implementing an ERP system.

Automation also simplifies repetitive tasks like tracking stock, reordering, and communicating with suppliers. This frees up your team to focus on strategy instead of getting bogged down in manual tasks.

For businesses with multiple locations, AI can predict which products will sell best at each site and recommend stock transfers to balance inventory levels. This ensures the right products are always in the right place.

If adopting new technology feels daunting, start small. Assess your current inventory challenges and set clear goals. Look for systems that offer free trials so you can test them with your actual data before committing. Choose tools that integrate seamlessly with your existing sales channels and accounting software to avoid creating data silos.

Training your team is equally important. Even the best system won’t help if your employees don’t know how to use it. Invest time in proper training and make sure ongoing support is available to maximize the benefits.

"AI is not only helpful in cutting expenses but it's about making data-driven choices in real time to make it better." - Atit Purani

The rewards are well worth the effort. Businesses that use AI-powered inventory management report fewer stockouts, lower carrying costs, and happier customers. Most importantly, they gain the visibility and control needed to scale efficiently.

Solution 3: Speed Up E-commerce Order Fulfillment with Multiple Locations

Today’s online shoppers expect their orders to arrive fast - sometimes within hours. To meet these expectations, e-commerce businesses need to rethink their fulfillment strategies. Relying on a single, centralized warehouse often falls short, especially when it comes to the challenges of last-mile delivery.

The Challenges of Last-Mile Delivery

The last mile of delivery is where things often get tricky. It’s not just slow - it’s also expensive and prone to delays. Consider this: 54% of online shoppers expect one-hour delivery in urban areas, and 69% won’t even consider buying if delivery takes more than two days. That’s a lot of pressure on businesses to deliver quickly.

Using just one far-off warehouse makes it nearly impossible to meet these demands. Long-distance shipments drive up costs, cutting into profits or forcing businesses to charge higher shipping fees - neither of which is ideal. By decentralizing fulfillment operations, these obstacles can be addressed more effectively.

Why Multiple Fulfillment Centers Make Sense

Spreading inventory across multiple fulfillment centers can turn delivery headaches into opportunities. By moving products closer to customers, businesses can slash shipping times and costs, giving them a competitive edge.

Take Amazon, for example. They operate over 200 fulfillment centers, covering a staggering 200 million square feet of warehouse space. This setup allows them to achieve a 97% on-time delivery rate and ensures 99.98% of packages arrive undamaged. With 42% of shoppers expecting two-day shipping as a standard option and 88% willing to pay for same-day or faster delivery, having strategically located warehouses is no longer optional - it’s essential.

Choosing the Right Locations and Tools

The first step in setting up multiple fulfillment centers is understanding where your customers are. Analyze your order data to pinpoint areas with high demand and long delivery times. Focus on major cities with dense populations and easy access to transportation hubs.

Technology is a game-changer here. Tools like Warehouse Management Systems (WMS) and Order Management Systems (OMS) can help you track inventory across locations. These systems automatically route orders to the nearest fulfillment center, ensuring that popular products are always in stock where they’re needed most.

For many businesses, starting with two locations - one on the East Coast and another on the West Coast - can significantly improve delivery times while keeping operations manageable.

Maintaining Quality Across Locations

With multiple warehouses, maintaining consistent service quality becomes even more critical. Standardized procedures for receiving, storing, picking, and packing are a must. Regular audits and proper staff training can help ensure that every order meets the same high standards, no matter where it’s shipped from.

If managing your own network of warehouses feels overwhelming, partnering with established fulfillment networks can be a smart alternative. These networks offer access to multiple facilities in prime locations, saving you the time, effort, and capital investment of building your own infrastructure.

Solution 4: Get Better Supply Chain Visibility with Technology

When you lack visibility into your supply chain, small issues can snowball into major problems. Shockingly, only 6% of logistics companies can claim they have complete visibility over their operations. This gap leaves businesses vulnerable to a host of operational challenges.

How Poor Visibility Hurts Supply Chains

A lack of visibility in the supply chain can seriously impact profitability. Without real-time tracking of inventory, shipments, and processes, businesses often face production delays, missed deliveries, and costly mistakes. In fact, nearly half of surveyed companies admitted to losing revenue opportunities due to inaccurate demand forecasts. Compounding this, over 90% of consumers now expect delivery within three days, and 85% say they would avoid shopping with a company again after a poor delivery experience. These problems often stem from outdated systems, manual data entry errors, and disconnected technologies that fail to communicate effectively.

Using IoT and Blockchain for Real-Time Tracking

Modern technology offers powerful tools to address these visibility issues. IoT devices can provide real-time updates on the location, condition, and status of goods, while blockchain creates an unchangeable record of transactions, boosting transparency. Together, they form the backbone of a smarter, more efficient supply chain.

"Supply chain visibility is the ability to track different goods and/or products in transit, giving a clear view of the inventory and activity. It enables shippers to improve customer service and cost controls through management of inventory in motion, proactive status updates, limiting disruptions and risk mitigation."
– C.H. Robinson

Companies leveraging IoT and blockchain have reported up to 30% fewer delays and significantly improved operational transparency. The market potential for these technologies is immense. By 2024, the blockchain in IoT market is projected to surpass $3 billion, with a CAGR of nearly 93%. Additionally, industrial IoT applications could contribute between $4 trillion and $11 trillion to global GDP by 2025.

To make these solutions work effectively, start by ensuring IoT devices are correctly installed and secured to reduce vulnerabilities. Use sensors to automatically scan products and log data onto blockchain systems, eliminating the errors associated with manual data entry. Regular audits can also help verify the accuracy of digital records. By adopting IoT and blockchain, businesses not only resolve internal visibility challenges but also align with modern consumer demands for real-time tracking.

Solution 5: Lower Shipping Costs with Freight Consolidation

Shipping costs can take a big bite out of your profits, especially with logistics expenses on the rise. A 2023 report by Deloitte highlights that global shipping costs have surged by 15–20%, driven by higher fuel prices, supply chain disruptions, and increased demand. For e-commerce businesses, the situation is even more pressing, as 88% of their fulfillment budgets are tied directly to shipping costs.

Freight consolidation offers a smart way to tackle these rising expenses. By bundling smaller shipments into larger ones, businesses can cut costs and improve delivery efficiency. This method is particularly effective for Less Than Truckload (LTL) shipping and international logistics, where optimizing cargo space directly reduces costs. It’s a practical approach that addresses inefficiencies in the shipping process.

Where Shipping Costs Add Up

Many businesses lose money through inefficient shipping practices. Underutilized trucks, redundant routes, and extra fees are common culprits. Without a consolidation strategy, companies often send separate shipments to nearby regions, missing out on opportunities to combine loads.

Customer expectations add another layer of complexity. Nearly two-thirds of global shoppers now expect delivery within 24 hours. This pressure often pushes businesses toward costly expedited shipping rather than exploring smarter options like freight consolidation.

Take the case of an online retailer specializing in home goods. They struggled with scattered small orders across different regions, leading to high shipping costs and delays. By partnering with a logistics provider focused on freight consolidation, they managed to cut shipping expenses by 28% and improved delivery times by 15%. These savings allowed them to offer better shipping rates and enhance customer satisfaction. Technology played a key role in making this transition successful.

How to Streamline Shipments and Track Costs

Freight consolidation works best when paired with the right technology and planning. Strategies like geographic consolidation - grouping shipments by location to reduce travel distances - and time-based consolidation, where orders are batched for specific days, help maximize truck capacity before dispatch.

Advanced software tools make these strategies even more effective. Transportation management systems (TMS) optimize routes, while digital freight matching platforms connect businesses with carriers that have available capacity. These tools can identify shipment combinations that might be overlooked using manual methods [72, 73].

"Freight consolidation helps shippers combine small shipments into one container, reducing costs, transit times, and handling risks, while improving overall shipment efficiency." – Freightify

Automated freight auditing tools take cost optimization to the next level. These systems can identify overcharges, cutting logistics costs by up to 8–12% annually. Companies using AI-powered audits report transport savings of 12–25%, while reducing manual effort in invoice validation by more than 60%. For example, a Fortune 500 retailer saved $4.2 million annually by switching to AI-driven freight audits and renegotiating carrier contracts based on the insights. Similarly, a mid-sized automotive parts manufacturer saved $50,000 each year and reduced carbon emissions by 20% through shipment consolidation.

McKinsey research shows that freight consolidation can boost delivery efficiency by 20%. Plus, consolidated shipments experience 15% fewer damages compared to individual ones, cutting down on replacement costs and customer complaints.

To get the most out of freight consolidation, businesses should focus on the right tactics. Container and pallet optimization helps eliminate wasted space, vendor consolidation simplifies procurement and strengthens negotiating power, and cross-docking speeds up the handling process. If in-house logistics expertise is limited, partnering with third-party logistics (3PL) providers can provide access to established networks and industry know-how.

Solution 6: Handle Returns Better with 3PL Providers and Automation

E-commerce returns hover around a staggering 30%, compared to just 8–10% for in-store purchases. For retailers, this translates into significant costs - about $165 million in processing, inspection, and restocking for every $1 billion in sales. To make matters more pressing, the reverse logistics market is projected to reach $954 billion by 2029.

Handling returns manually is time-consuming and resource-intensive, often leading to delays and inefficiencies. However, there’s a silver lining: 92% of customers are likely to buy again if the returns process is simple, and 84% say a smooth returns experience will encourage them to shop with the same retailer. Clearly, improving returns management isn’t just about cutting costs - it’s also about retaining customer loyalty and maintaining operational efficiency.

Why Returns Are Hard to Manage

Managing returns manually involves a series of complex steps, from customer initiation and approval to label generation, shipping, inspection, and restocking. This process can take over 10 days without automation, frustrating customers and creating inventory inaccuracies. Slow processing leaves returned items stuck in limbo, which can lead to stock-outs and poor demand forecasting. On top of that, labor costs for returns can eat up about 66% of an item’s original price. These challenges underscore the need for automation to streamline the process.

"The rise in e-commerce shopping has led to an increase in return rates and volumes across most categories because online shoppers can't touch and feel products before they buy."
– David Morin, Vice President of Customer Strategy at Narvar

How 3PL Providers and Automation Make Returns Easier

Automation and third-party logistics (3PL) providers can revolutionize returns management, turning what’s traditionally a costly burden into a competitive advantage. Automation can cut handling time per return by up to 90% while reducing customer service inquiries by 50%. Modern systems allow customers to initiate returns 24/7 through self-service portals, automatically generate return labels, send real-time updates, and sync with inventory systems to adjust stock immediately.

3PL providers bring specialized infrastructure and expertise to the table. They operate dedicated returns processing facilities with trained staff, enabling faster and more cost-effective returns handling compared to in-house operations.

Take TechDirect, for example. By integrating a returns management system with Shopify and teaming up with 3PL providers, they cut their processing time from 10 days to just 4. This not only improved customer satisfaction by 20% but also boosted sales by 15%. Similarly, Travelpro streamlined their process by automating label generation and carrier integration, slashing processing time from 20 minutes to just 90 seconds.

"The return process is completely customer-centric. They fill out the request, generate the label, and get a refund."
– Mark Costigliola, eCommerce Operations Manager, Travelpro

Advanced returns systems can do even more. They can automatically approve or deny refund requests based on factors like return history and product condition. They can also route returns to the most suitable processing center, consolidate shipments to save on costs, and enforce policies such as restricting returns for custom products or flagging frequent returners.

Switching to automated returns processing can reduce labor costs by 25–30% compared to manual methods. When paired with 3PL expertise, businesses not only save money but also enhance customer loyalty. In fact, 65% of customers say the speed and ease of refunds influence where they choose to shop.

To get started, choose a returns system that integrates seamlessly with your existing platforms, offers customizable workflows, and provides detailed analytics. Partnering with 3PL providers who specialize in returns processing can help you manage higher volumes efficiently while keeping your customers happy.

Conclusion: Building Supply Chains That Can Grow and Handle Problems

By focusing on strategies like diversifying suppliers, fine-tuning inventory, expanding fulfillment locations, leveraging technology for better visibility, consolidating freight, and automating returns, businesses can create supply chains that are both resilient and ready for growth. Each of these approaches addresses specific challenges while laying the groundwork for long-term success.

For example, working with a variety of suppliers and managing inventory more effectively helps reduce risk. Adding more fulfillment centers and improving visibility with tech tools speeds up delivery and sharpens decision-making. Freight consolidation cuts shipping costs and boosts efficiency, while automating returns with 3PL partners turns a traditionally costly process into a competitive edge. Together, these elements create a flexible, efficient supply chain that moves beyond being a cost center to becoming a strategic advantage.

The numbers back this up. Companies with top-tier supply chains often see revenue growth that outpaces their industry peers. Brands offering consistent customer experiences across all touchpoints enjoy 2.4 times higher customer loyalty. And 57% of 3PL providers reported order volume growth of 10% or more in 2024, highlighting how impactful these changes can be.

As one expert from Trax noted:

"Managing supply chains was once about minimizing expenses and creating adequate buffers to fulfill demand despite inefficiencies. Leading them now requires harnessing exciting yet disruptive technologies to achieve predictive clarity and deliver phenomenal customer experiences." – Trax

To begin, conduct an audit of your current supply chain, mapping every step from procurement to customer delivery. Look into supplier performance, technology systems, inventory management, and transportation expenses to identify areas where time or money is being wasted. From there, decide which of the six strategies will make the biggest difference for your business.

You don’t have to be a large retailer to see results. Start small - pick one or two strategies that address your most pressing issues and build from there. Track progress using metrics like inventory turnover, fill rates, shipping costs per order, and customer satisfaction. Top-performing operations aim for over 99.89% picking accuracy and fill rates above 98%. These benchmarks offer clear goals to work toward.

Improving your supply chain doesn’t happen overnight, but incremental progress each day adds up. By implementing these focused solutions, you can enhance efficiency, strengthen resilience, and drive profitability for the future.

FAQs

How does working with multiple suppliers reduce supply chain risks?

Relying on several suppliers can significantly lower supply chain risks by reducing reliance on just one source. This strategy provides businesses with more options and agility when dealing with challenges such as natural disasters, geopolitical tensions, or unexpected market fluctuations.

By working with a diverse range of suppliers, companies can keep operations running smoothly, adapt swiftly to changes in demand, and create a stronger, more dependable supply chain. This approach not only helps protect against potential disruptions but also enhances how efficiently the entire operation runs.

How do AI and ERP systems help businesses improve inventory management?

AI and ERP systems have become essential tools for improving inventory management, particularly for businesses experiencing growth. Together, they deliver real-time insights, predictive analytics, and automation to keep operations running smoothly. AI helps monitor inventory levels with precision, predicts future demand trends, and fine-tunes stock levels to avoid overstocking or running out of key items. On the other hand, ERP systems bring together various business processes, offering a unified view and better coordination across the supply chain.

When AI's data-driven analysis pairs with ERP's seamless integration of processes, businesses can cut costs, operate more efficiently, and make quicker, smarter inventory decisions. This combination proves especially useful for companies scaling up and tackling the complexities of logistics.

What are the benefits of using multiple fulfillment centers for e-commerce order delivery?

Using several fulfillment centers can bring significant benefits to e-commerce businesses. For starters, keeping inventory closer to your customers can cut shipping costs, speed up delivery times, and boost customer satisfaction. It also helps avoid delays caused by long transit routes, ensuring orders are processed and delivered more quickly.

Another advantage is the added protection against stock shortages. By spreading inventory across multiple locations, you can keep operations running smoothly and consistently meet delivery promises. This reliability strengthens customer trust and keeps your business running efficiently.