You might have sensed growing disruptions in every field of life ever since the pandemic started. In particular, supply chains that heavily relied on just-in-time practices struggled the most. And so, you may want to rebuild robust supply chains.
To do this, you need to know what bottlenecks are and what causes these disruptions. Then, you can identify these disruptions in your supply chain and establish remedies that will help you overcome them.
In this blog, you will discover what is a bottleneck in a supply chain, what causes these disruptions, and how you can deal with them.
What Are Supply Chain Bottlenecks?
In business, the expression ‘bottleneck’ refers to how a stage in the supply chain is receiving more orders than it can output. And so, products get stuck or slow down at a stage of the supply chain. These problems can occur at any stage and for a large number of reasons, i.e., high demands for a product.
Originally, the term referred to a situation where a substantial volume of liquid had to flow through a narrow passage. To illustrate this concept, picture a water cooler bottle filled with a gallon of water struggling to pass through a narrow neck. This analogy helps you grasp how similar challenges can arise within your business operations.
Lets elaborate it on with another example – imagine a situation where there’s a hold-up at the port. As a result, trucks are forced to wait for extended periods, and even more trucks keep arriving. This leads to increasing delays in every shipment. This example vividly illustrates how a bottleneck can be highly damaging to your supply chain.
What Are the Causes of Supply Chain Bottlenecks?
Here are reasons why bottlenecks in supply chain may occur:
Demand:
When there is a forecasted surge of demand, the processing setup might become overwhelmed. This is because your supply chain is designed to handle a certain amount of orders. Therefore, a sharp increase can lead to all or parts of the chain reaching capacity and for orders to start piling up.
Shortage:
Four shortages affect your supply chain: Labour, component, warehousing, and carrier. As with demand, shortages can cause a backlog as you have to wait since:
- Workers are outputting the most they can.
- You have to wait for more components to ship in so you can continue the manufacturing process.
- Carriers are shipping at maximum capacity.
- When there is not enough space in the warehouse, every stage must go on stand-by until more space is available.
Congestion:
Sometimes, a bottleneck in the supply chain is not internal, like congested ports. When this happens, multiple industries are affected as they disturb the workflow because the ports are already processing at the highest speed they can.
Delays:
Whether a delay is from the manufacturing side or due to carriers, it will cause bottlenecks. In fact, so long as one next stage does not have every component it needs, it will delay the next and so on. In the end, this causes an avalanche of delays across the supply chain.
Disasters:
From wars to disease to extreme weather, there are massive outside forces that can ground everything in a country to a halt. Even if a disaster is not happening locally, it can still give you supply chain bottlenecks. Moreover, there are many things like fuel and raw materials that depend on international trade, and so cause a weakness in your supply chain. A lack of fuel affects transport while a lack of raw materials delays production.
In the end, every bottleneck issue can be boiled down to a failure to have appropriate contingency plans to deal with these issues.
5 Ways to Overcome Supply Chain Bottlenecks
Let’s take a look at 5 best ways to overcome bottlenecks and make your supply chain process smooth:
Monitor Your Supply Chain
To understand which bottleneck you face, you need to be aware of everything in your supply chain. This involves monitoring your goods and services at each stage, auditing your inventory regularly, and running risk assessment tests. Although quantitative data is necessary, you should take feedback into account from both your workers and your third-party logistics partners.
With the data you collect on things like inventory levels and delivery times, you can discover underlying issues. Additionally, this information can help you formulate contingency plans that are adapted to your unique bottlenecks.
Strengthen Relationships with Your Business Partners
Strengthening your relationship with your partners will help you both be on the same page and will make data sharing easier. Moreover, when you have a good relationship with your partners, you can work together, pooling your resources and expertise to better your supply chain. Furthermore, many mistakes that go on to balloon into bottlenecks can be fixed with clear and open communication.
Create Contingency Plans
Once you have examined your supply chain bottlenecks, you can create plans tailored to each possible bottleneck. In addition, you should create contingencies to deal with natural disasters, new pandemics, and epidemics, as well as shortages and delays.
For these plans to work when necessary, your workforce and all your partners must be aware of them and prepared to implement them. You can do this by bringing in your partners in the creation of these plans and by practising them or running stress tests on your supply chain.
Something to note: You should have alternative strategic suppliers and resources so you never become fully restricted because of a failure in one area.
Improve Demand Forecasting
Shortages, demands, and delays can all be handled or partially handled with effective demand forecasting. To forecast, you need to study the market’s needs, get feedback from customers on product preferences, and analyze your order history. Once you have that data on hand, you can extrapolate demand trends and organize yourself accordingly. However, you must remember that these are possibilities. And so you should give yourself some leeway to maneuver around surges and falls in demand.
Communicate with Customers
Customers have expectations when it comes to delivery times. While honouring them is paramount, demanding timelines can easily turn into bottlenecks. Communicating with your customers about these challenges can help them understand why delays are happening and even help them accept to push delivery time so there is no backlog. In fact, this transparency might even recover customer loyalty.
In Conclusion
Bottlenecks are disruptions in your supply chain caused by a stage or more being unable to fulfill any more orders. The reasons can be internal, like a labour shortage, or external, like a congested port. In any case, bottlenecks can have a ripple effect, so it’s important to identify and deal with them quickly and effectively. To combat supply chain bottlenecks, you need to strengthen your supply chain. You can do so by monitoring your supply chain for issues, strengthening your partnerships, and creating contingency plans, among other things. These tips will help you overcome every bottleneck your supply chain may face.
Frequently Asked Questions
What is causing supply chain issues in 2023?
The main supply chain issues in 2023 are material access and the effects of the Covid-19 pandemic.
What is the difference between strategic suppliers and bottleneck suppliers?
Strategic suppliers give you a competitive edge, while bottleneck suppliers are at risk of disruption.
