Supply chain challenges are an inevitable part of modern manufacturing. Whether you are building advanced semiconductors or transforming yarn into sweaters, logistics today are tied to a number of factors that can delay production and severely impact the time needed to get a product to its end consumer.
One needs only to look at recent history to see that such is the case. Throughout 2024, ocean carriers have faced a number of challenges from Houthi rebels bombing vessels headed to the Suez Canal to a U.S. port workers calling a major strike, virtually pausing all imports and exports from East Coast ports. And that’s just looking at 2024. Before that, the Russia-Ukraine war put severe stress on various supply chains from natural gas to grain. The COVID-19 pandemic, similarly had a massive impact on the global economy, limiting manufacturing capabilities at a time where people around the world were demanding at home deliveries due to lock downs.
But even in face of challenges, supply chains persevere, moving products around the world and navigating serious disruptions. In this article, we put together an initial list of challenges we’ve seen time and time again while working with large companies around the globe. We encourage you to stay up to date on these issues and, if you are in the process of designing a supply chain yourself, question how any of these could have a meaningful impact on your production plan.
What Causes Supply Chain Issues?
Supply chains are extremely complicated systems meant to provide goods efficiently and with fair prices to companies around the world. Naturally, when dealing with such nuanced structures, it is impossible to pinpoint a single source of issues. Instead, there are a number of issues that might cause serious supply chain disruptions. These range from geopolitical instability, to the rising number of severe weather events caused by climate change in recent years.
When we speak of current supply chain problems, we are referring to structural impediments that happen across all supply chains in the abstract. We will talk about concrete challenges—such as a pandemic or geopolitical instability—in the next section. For now, we wanted to share a number of issues you could be facing in your supply chain:
International Conflicts: Even when you have a perfect plan for your supply chain, it could well be disrupted by internal conflicts. A route might be closed due to protests or your ship might be captured by pirates and charged for ransom. Not to mention the stress that wars or trade disputes can cause on a supply chain, limiting access to providers or drastically increasing the costs of goods.
Communication Problems: When companies operate in multiple countries at once, they often encounter problems when communicating to providers. These could be a result of differing time zones and work schedules. But, they could also stem from language or cultural barriers that could cause delays in delivery due to misunderstandings or additional time spent in translating information.
Bottle necks: Given the structure of some supply chains, there might be some parts or materials that are crucial to advance in the manufacturing process. When access to these parts is constrained, it reduces the rest of the supply chain as a result, creating what experts often call a “bottle neck.” Think about a pencil manufacturing company. If you don’t receive graphite for your pencils, then you cannot add the wood body of a pencil nor the erasers that are often placed on top.
Changing preferences: Some industries, like fashion, are highly dependent on consumer preferences that might change with the seasons and, at times, even week to week. Companies might be able to supply all goods with ease but, once the final product is assembled, they could well struggle with getting retailers to acquire the goods or having consumers buying them directly.
Carrier Reliability: Even though the bulk of international supply chain operators rely on ocean carriers, these are known to be highly unreliable in their ability to deliver on time. In fact, it is estimated that across the top ocean carriers, reliability is just 52.1% and has not surpassed 70% in the last three years—meaning that even the best ocean transportation companies are likely to deliver your products with delays half of the time.
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Supply Chain Challenges
Now, besides abstract issues, there are a number of concrete supply chain management problems that large companies face when organizing complex supply chain operations—and which we at Desteia have seen multiple times with our clients. These challenges could include, but are not limited to:
Inflation
Every year, the cost of goods changes resulting in increased inflation. This is a global phenomenon and, in recent years, international inflation reached a high of 8%—meaning that the price of a good grew 8% year to year. Historically, as the graph below shows, we have seen a decrease in inflation levels although phenomena like the global financial crisis in 2008 and the COVID-19 pandemic in 2020 resulted in drastic highs to inflation.
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These rises in prices could, in turn, result in adverse conditions for producers who have to account for changing costs of raw materials and decreased appetite from consumers. Not to mention that inflation changes drastically from country to country and, depending on the structure of your supply chain, could well result in unforeseen costs.
Political Uncertainty
Supply chains are deeply tied to the politics of the countries in which they operate. This makes them susceptible to a number of potential challenges that range from local governments imposing new taxes to specific industries to imposing trade restrictions. This is most often the case when it comes to tariffs: a set of taxes placed by governments on the import of particular goods. Tariffs are now part of the political discourse of the U.S., with both former President Trump arguing for them, and President Biden increasing tariffs against China.
Volatile Shipping Costs
Although you might think that the price to ship a container is a standard unit, it is actually highly volatile given the changes in the costs of gasoline and the constant fluctuation of available routes. Just in 2024, the average price to send a 40 ft shipping container—equivalent to two TEUs—went from around $2,700 at the beginning of the year to a peak of over $5,900, before falling back down to $3,300. The moment in which a company plans to do their shipping, thus, will result in drastically different costs, creating a meanion
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Port Congestion
Another great challenge to well-structured supply chains could be a drastic shock to port congestion. You could have products leave the assembly line on time and cross the ocean just at the right speed only to arrive at their final port and have to wait days for a spot to unload containers. The problem is much worse when you consider that, by and large, ocean carriers tend to operate based on routes that include various ports. So if you are importing goods from Shanghai, China to Manzanillo, Mexico, you could well be impacted by congestion in the port of Busan, South Korea, or Yokohama, Japan, at which your carrier might make strategic stops to refuel.
Reduced Supply Chain Visibility
It is crucial to have visibility to your operations, this way you can identify issues that may rise and tackle them before they become an issue. Having item level visibility is the best way to tack where you products are in the supply chain. Supply chain visibility allows your company identify bottlenecks that slow down your process and overall efficiency. the best way to keep track and have full visibility is by implementing new technology, and supply chain software.
Limited IT Systems
Finally, a great challenge in supply chains is a lack of efficient IT solutions that are able to track and manage trips in real time. Companies might face a number of challenges along the way and be unaware they are occurring until days after. At that point, challenges might accumulate and become even more difficult to solve. Software like Desteia is designed to give supply chain operators increased visibility, allowing them to respond to disruptions before they take a meaningful impact.
How to Respond to Challenges
There are a number of ways in which companies can deal with challenges as the ones listed above. By and large, they all relate to improving supply chain resiliency. Namely, to make supply chains more robust and better able to respond to an unforeseen supply chain disruption. Naturally, operators ask how to solve supply chain problems? And there isn’t a single answer to this question.
This could be done by diversifying suppliers to mitigate the potential impact that delays from one supplier could have in your overall process. Companies can also diversify the ports from which they import and export, based on growing patterns on delays or efficiency. And, above all, a key strategy to follow is to improve visibility.
Arguably, nothing is more important than visibility to supply chain operators. It is the foundation upon which logistics exports can build better strategies and prevent possible disruptions.
Improving Supply Chain Logistics
The first and most important step companies can take to improve their supply chains and reduce potential challenges, is to increase visibility. The more visibility that logistics operators have, the easier it will be for them to react to threats and propose innovative solutions. Once a baseline of visibility is reached, one can work on increasing communication, and improving team work to enhance responses.
To do this, companies should create organized strategies to acquire and use data from their day to day operations. Without data, companies will struggle to gain such visibility. This applies both to historical data that could be used to find inefficiencies from current practices, or real time data that could alert operators of disruptions. That is why, at Desteia, we’ve prioritized getting such information with minimal integrations from our clients. Using just information from existing communication channels, our system is able to aggregate relevant insights and update users on the status of their trips.
The Bottom Line
Supply chains are complex and are inevitably plagued by challenges. Be it port saturation in a country far away, or unforeseen changes to inflation, companies must deal with a number of issues in the process of moving goods across the globe.
If your company is struggling with similar problems, you could benefit greatly from a tool like Desteia that will give operators the needed information and visibility to respond to challenges. Make sure to schedule a demo of our tool to better understand how Desteia could help you navigate the complex world of supply chains!