Understanding Supply Chain Management: Challenges and Solutions
TranSwap's multi-currency account helps businesses "Go Global"
Global supply chain management is complicated, especially post pandemic. The pandemic has changed global supply chain management in many ways. It is important for businesses to understand the different challenges and evaluate the best strategies to overcome them.
What is Supply Chain Management?
Supply Chain Management (SCM) is the handling of the entire production flow of a good or service to maximize quality, delivery, customer experience and profitability (IBM, 2022). There are many sections of supply chain management. It usually starts off with suppliers of raw materials and it ends with the consumers who receive the final product.
Effective supply chain management is very important to businesses as it can minimise cost, reduce waste and improve productivity. For example, retailers want their shelves to be restocked as quickly as products are sold in order to continue to keep the business going and the income coming in!
Five Main Steps of SCM process are:
According to CIO, the SCM process is made up of five important components:
Having an effective and efficient global supply chain can bring about multiple benefits for companies. It provides them with more options and new opportunities. Businesses can select the best suppliers, labour markets and products in the world. They will now have access to new materials, manufacturing facilities and be able to expand operations beyond just their local country.
However, global supply chain management comes with many challenges. It is important to be well prepared when taking your business abroad.
Global Supply Chain Management: Challenges and Solutions:
1. Delays: Expect delays to happen. It is impossible for every part of the supply chain to be always on time, especially when the items are sourced globally.
- You should always be well prepared and order buffer stocks. By establishing an efficient warehouse management system, companies can track and identify when they need to order to ensure everything runs smoothly.
2. Rapidly changing markets: Inflation, recession, natural disasters and pandemics are just a few things that can massively impact your global supply chain. Nowadays, businesses must be well prepared for any sudden changes in the market as it can directly impact the cost and delivery time.
- One way to protect your business is to have flexible access to capital that you can use during a crisis or a sudden change in the market.
- Another solution is to diversify sourcing. By sourcing from different locations and developing good relationships with multiple manufacturers and suppliers, it gives your company more flexibility. When a crisis arises, it will be much easier to adjust.
3. Exchange Rates Fluctuations: Any shift in exchange rates can massively impact your global business. For example, foreign exchange rates can affect supply cost when they are being sourced from another country or it can change the attractiveness of your product to overseas customers. There are different ways you can protect your business from FX risks.
- Identify the FX risk in your supply chain: By simply listing your suppliers and where they may incur FX risk and examining the contracts in place with them, you may be able to add protections for your business, which would minimize damage from currency fluctuations.
- Having a diverse supplier base: It is quite risky to only source raw materials from one country. If that country’s currency strengthens against your own, it is good to have a backup supplier with a more favourable currency exchange rate.
4. Foreign transaction costs: High international transaction costs when conducting these payments and transfers. These fees can add up quickly, which can directly impact profit margins.
- For businesses that sell products and services across international borders, work with suppliers from another country or hire employees from different countries, a multi-currency global account can bring many benefits.
5. Maintaining Quality: One of the big concerns of sourcing abroad is maintaining the quality, especially when there are different regulatory standards and rules across countries. Quality can massively impact brand image and reputation.
- Research, research and research! Make sure you know who you are working with before signing a long-term deal.
- Nowadays, there are third party professionals or inspection software to collect and monitor your supplier’s supplier safety and environmental data (McAllister, 2022).
6. Cultural and Language Barriers: Mixing different cultures and languages can often create misunderstandings or miscommunications, which can then hinder supply chain management. On top of this, global companies often have employees working in many different time zones. This can make communication more difficult.
- Businesses should hire professional interpreters who can help with negotiations and cross-border communications. Being able to communicate with your suppliers, clients and customers is crucial to supply chain success.
- Be aware of time zone differences and set up teams who are in the closest time zones to work collaboratively together.
Our global market is ever-changing with new challenges arising every day. Big organisations are built to withstand these changes. On the contrary, SMEs are much more vulnerable to changes in the market. Change is inevitable but the best way to overcome these challenges is to be adaptable, flexible and well prepared.
To protect yourself when expanding abroad, it is essential to open a multi-currency account. TranSwap’s multi-currency global account offers companies the flexibility to hold up to 34+ currencies in one account, which allows you to easily issue invoices and get paid in the required local currency.
Another benefit of a multi-currency global account is that you can easily convert, hold and collect different currencies whenever the exchange rate is in your favour. For example, recently the Japanese yen hit a 24-year low against USD. If you need any Japanese Yen, now would be a good time to convert and hold for future usage. Business owners and managers no longer have to worry about currency fluctuation and the exorbitant conversion fees but instead you can gain the upper hand over managing foreign exchange volatility.
Ready to get started? TranSwap’s multi-currency global account is free to register and it only takes a few minutes to set up. Sign up today!