One significant supply chain operation problem is increased costs. With the increasing demand for goods, the cost of supplying goods and services has increased by a huge percentage. The evolution of the market into e-commerce has complicated visibility and accountability, causing investors not to notice the factors increasing the supply chain’s cost. As a result, investors are unable to control the accruing supply chain costs.
One of the factors is transportation costs. Raza (2020) argued that unplanned transportation processes result in costly supply chain operations. It is worth noting that the movement of goods can be through water, air, or land (rail and roads). Routing inefficiencies increase transportation costs (Raza, 2020). These inefficiencies can result from harsh environmental conditions that can cause accidents, destroying goods and the vessel. In such a situation, the investors are forced to invest in expensive mitigation measures to ensure that such harsh conditions do not interrupt the movement of goods. Another routing inefficiency can be complicated relationships between countries (Blume Global, n.d.). For example, the ongoing COVID-19 pandemic has strained inter-country business relationships as each country must observe COVID-19 protocols to avoid the spread of the virus. Each country has come with policies to ensure goods and vessels entering its borders are free from the virus. These policies are usually not included in the initial budgeting, causing the transportation costs to increase. They (policies) result in higher storage and management charges in the supply chain’s operations.
Another critical factor is the consumer’s ever-changing demands (Blume Global, n.d.). As technology and innovation evolve, the consumers evolve, resulting in them changing their preferences. Companies must keep up with ever-changing preferences, lest they lose customers. Notably, investing in technology or methodologies to meet these demands is quite expensive (Blume Global, n.d.). For instance, most consumers prefer glass packaging though they do not want costly prices. Thus, most companies are left with no option other than package goods using glass and charging them relatively lowly to attract consumers.
References
Blume Global. (n.d.). What are the main supply challenges? https://www.blumeglobal.com/learning/supply-chain-challenges/#:~:text=Increased%20Costs%20Throughout%20the%20Supply%20Chain.%20Profit%20margins,operational%20expenses.%20Major%20contributors%20to%20increased%20costs%20include%3A
Raza, A. (2020, May 5). Supply chain costs: A definitive guide for manufactures. ThroughPut Inc. https://throughput.world/blog/topic/supply-chain-costs/
