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Supply chain

Current challenges in the area of global supply chains

12.09.20233 min read

What is a supply chain and why is it that its management is crucial to keeping the company competitive on the market?

  • A supply chain is a complex system covering a network of people (such as a company’s employees, stakeholders and subcontractors), organisations, resources and activities as well as technology involved in the creation and delivery of final goods or products.
  • The effective supply chain management means that every stage of the production of goods or services is successfully controlled – starting from the order for raw materials all the way to the final delivery of products to clients.
  • In case of international companies, the supply chain comprises large scale operations involving resources across the world and encompassing millions of various subsidiaries and linkages.
  • When managed efficiently, supply chains are the decisive factor in the process of cost reduction of goods both for businesses and customers and are critical in the effort to save time and minimise waste in the production cycle

Companies operating worldwide in post-COVID times face many critical challenges related to successful global supply chain management. What are they?

  • Unexpected events causing disruptions (such as natural disasters, health crises, conflicts)
  • Global labor shortages
  • Equipment availability
  • Lack of transparency on supply status
  • Lost or delayed goods
  • Growing costs of production, transport, and shipping
  • Shifts and changes in client expectations
  • Increasing client awareness and maturity in terms of user experience

Is it possible to measure the supply chain conditions? Indeed we can, thanks to the metric created by the Federal Reserve Bank of New York! The index combines variables from several indices in transportation and manufacturing, such as those related to delivery times, prices, and inventory.

  • According to ‘Global Supply Chain Pressure Index from January 2000 to August 2022’, published by Statista, this index reached 1.47 points in August 2022, down from 1.75 points in the previous month.
  • April 2022 saw an increase in the index due to COVID-19 lockdown measures in China and the Russia-Ukraine war.
  • In the months to follow, the restrictions in China were eased, leading to a decrease in global supply chain pressures. Nevertheless, the index scores were significantly higher than prior to the COVID-19 pandemic.

Despite these challenges, most customers rarely experience severe problems related to stock shortages or delivery delays. How do companies navigate a climate of continuous unpredictability and manage to deliver their products on time?

They are able to do so by rethinking their approach towards supply chain management. Among the many important trends shaping the future of supply chain management are the following:

  • Using digitalisation to monitor entire supply chains, define and implement successful mitigation strategies, tackle risks, and minimise any potential financial consequences.
  • Leveraging innovative data-driven technologies to support increased transparency, flexibility and resilience, resulting in more robust and agile supply chains.

Looking for the cutting-edge solution in this regard? The answer is a digital twin technology! It allows the creation of a digital replica of a physical supply chain. Recreating real supply chain conditions in a virtual environment enables organisations to test various scenarios and prepare ideal policies and behaviours.

To create successful interconnected infrastructures and digital twins, companies can rely on Mitsubishi Electric’s e‑F@ctory Alliance. Bringing together over 900 manufacturers of industrial components, specialist system integrators and software providers, this global initiative has introduced more than 20,000 solutions.

Photo: Getty Images


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Supply chain