A supply chain bottleneck can have a ripple effect across your entire organization, impacting not just your short-term supply but your long-term strength in the marketplace. When these types of bottlenecks occur, it’s very important to identify them as quickly as possible, determine the cause, and take swift action to get the supply flowing smoothly again. This is sometimes easier said than done, but it should always be a priority.
What Is a Logistics Bottleneck in Supply Chain?
A supply chain bottleneck is any disruption that creates delays within the natural supply chain. There are different types of supply chain bottlenecks that can occur. One of the most common types is the logistics bottleneck. But what is a logistics bottleneck in the supply chain?
Logistics is concerned with the movement of goods internally. In other words, it’s anything related to transport, inventory management, fleet management, handling, or fulfillment. Bottlenecks can occur within any of these stages of the supply chain, but the result is always the same: a slowdown in distribution that reduces the ability of customers to access the goods they need on demand and thereby jeopardizing those customer relationships and hindering your bottom line.
How to Identify a Supply Chain Bottleneck
Sometimes a supply chain bottleneck is easy to identify. For example, international supply chains were disrupted on an unprecedented scale during the height of the COVID-19 pandemic, resulting in delays that spanned across most industries. When freight is delayed, production is slow, or you’re simply unable to keep up with demand, the bottleneck may be obvious. However, in most cases, supply chain bottlenecks are a bit tougher to pinpoint—at least in the early stages.
The best way to identify bottlenecks right out of the gate is to understand your operations inside and out through precise business modeling and workflow diagramming. You need to keep a close watch on your most essential key performance indicators (KPIs) like lead times and inventory levels. Simulation modeling can help you to determine the actual vs projected supply. If discrepancies arise between these two figures, it’s time to start diagnosing the issue.
Common causes of a supply chain bottleneck include:
- Too few suppliers. If you’re relying on a single supplier with limited resources, you potentially leave yourself vulnerable to supply chain bottlenecks.
- Poor technology integration. Technology is integral to managing supply, especially when you’re juggling multiple suppliers, regulatory bodies, product lines, and raw materials. You need reliable, up-to-date supply chain management software to track important variables like lead times and ensure that there are no unexpected surprises in your supply chain. In addition, you need precise data analytics to track inventory levels, forecast changes in consumer trends, and evaluate warehouse equipment to anticipate any hazards or functionality issues that might halt supply.
- Limited shipping capacities. If you deal in large volumes of inventory, you may discover limitations in shipping capacity. Shipping companies will often break up shipments or rely on alternative routes to address the challenges associated with managing large volumes. This can slow your supply.
- Factors outside your control. Unfortunately, not all bottlenecks are within your control. This became painfully clear during the recent global pandemic. Freight delays, global supply shortages, and labor shortages are just some of the factors that can affect supply even when you’re doing your due diligence to keep things on track.
How to Fix a Supply Chain Bottleneck
Once you’ve identified the cause of your supply chain bottleneck, the next step is to act as quickly as possible to keep operations flowing. The cause is often your best clue as to the solution. For instance:
- If your team is unable to keep up with the demands of supply chain management, it might be time to incorporate automation into your business. There are a number of sophisticated and affordable AI tools that can increase the efficiency of your operation, such as by tracking your inventory in real time and generating optimized routes to transport goods to and from the warehouse.
- If you’re experiencing supply delays as a result of international trade restrictions, consider shifting operations to factories or distribution centers in locations that are less restrictive. You can also speed things along by employing the services of a knowledgeable customs broker.
- If you’re struggling with slow and insufficient supply at the hands of a single supplier, consider incorporating multiple suppliers into the mix. This will allow you to close the gap between supply and demand.
If the problem is simply a logistics bottleneck, the main solution is often as simple as outsourcing to a third-party organization that specializes in logistics and fulfillment. For instance, Partner Trade is a 3PL company that works with businesses of all sizes to provide warehousing and logistics across all corners of the planet. Contact us today to take care of supply chain management so that you can focus on running your business.
Regardless of how you address your supply chain bottleneck, the important thing is to do it. Small bottlenecks can quickly turn into massive crises when the telltale signs are ignored. So keep your supply chain in order, and keep your customers happy!