Studies show that the supply chain accounts for over half of the total cost of production. Successful management of the supply chain therefore requires the ability of a company to recover quickly from disruptions. The supply chain is even more complex than it was two decades ago so it is critical that you remain vigilant, steer clear of common mistakes and appreciate the benefits of proactive management.
That said, here are 5 common mistakes in modern-day supply chain management;
1. Prioritizing functions by spend
Quantifying by spend is probably the most common mistake in supply chain management. Simply put, you look at your suppliers and prioritize functions based on who supplies most of your goods and services. So, even if you have 20 suppliers, you’ll want to prioritize say five suppliers whom you’ve always spent 80 percent of your budget on. This strategy worked well until fifteen years ago when outsourcing was proliferated. Today, supply chains come in layers where you source from several suppliers.
You can no longer rely on a single source for your parts otherwise these parts would become a single point of failure in the supply chain. Continue reading