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A logistics bottleneck describes what happens when a specific link in the supply chain fails to operate as usual and keep up with client or customer demand.
Worryingly, just one small hold-up can be enough to impact the entire supply chain — causing production and shipping delays, high costs, backlogs of orders, unhappy customers, and disgruntled workers. Because of this domino effect, it’s important to identify (or better still, prevent) any bottlenecks within the supply chain so they can be quickly resolved.
What Are Some of the Most Common Types of Logistics Bottleneck?
Here are some of the blockages most likely to occur within the supply chain:
Poor storage methods – This can result in damaged or spoiled components or products. Examples of this include fresh produce not being stored at the correct temperature or shipping containers being over-filled and leading to breakages.
Inefficient operating processes – Clunky operating processes, which typically arise from lack of communication and failure to plan effectively, can lead to a blockage at any stage of the supply chain, whether it be manufacturing, packaging, shipping, or warehousing.
Poor inventory management – Organizations have long operated just-in-time (JIT) supply chains. This means they don’t typically store large quantities of additional inventory to account for disruptive events. In a post-COVID world, many businesses have recognized that this method of supply chain management is untenable. Another challenge surrounding inventory management is that organizations often fail to accurately predict surges or dips in customer demand.
Lacking supply chain transparency – If an organization doesn’t have visibility into what’s going on at each stage of the supply chain, it’s difficult to identify problems and make improvements. With improved transparency meaningful changes can be made, whether it’s re-routing the supply chain, finding alternate suppliers, or investing in additional warehousing.
Limited resources – Sometimes all the right cogs of the supply chain will be in place, but there are insufficient workers to operate them. In other cases, employees might not have the resources, equipment, and technologies to work efficiently.
How To Overcome Logistics Bottlenecks
Before deciding the best course of action for your business, you’ll need to identify exactly where your bottlenecks are and conduct a bottleneck analysis. You might know that your supply chain processes are clunky and inefficient, but finding the root cause of the problem will likely require a thorough investigation.
A bottleneck analysis describes the process of finding and examining a bottleneck to determine an appropriate course of action. You must identify the bottlenecks in your supply chain, acquire the relevant data, and decide on the appropriate solution. This might include:
1. Investing in Data Analytics Technology
It’s always useful to learn from past mistakes, which is why investing in data analytics tools can prove beneficial when it comes to addressing supply chain bottlenecks.
Today, there is a range of technologies available that can perform tasks such as:
- Monitoring inventory levels
- Identifying patterns in customer behavior
- Analyzing supply chain routes
- Predicting supply chain disruptions and changes in consumer behavior based on a company’s historic supply chain activities
- Improving supply chain transparency by tracking shipments and monitoring supplier performance and output
- Auditing equipment in factories and warehouses to identify hazards, faults, or reduced functionality
The data insights gained from these activities can help to pinpoint specific bottlenecks, offer guidance on how to resolve them, and prevent the same problems from arising again in the future. Prevention of future blockages is the key benefit here, since planning to mitigate against future disruption is far more cost and time-effective than resolving existing problems.
2. Hiring Additional Workers To Address Specific Areas of the Supply Chain
Once you’ve identified high-risk areas within your supply chain, you might choose to hire additional staff members to improve operational efficiencies or implement new processes.
The solution might be something simple like hiring extra warehousing staff to manage increased customer demand during busy periods. Your data analytics might have revealed, for example, that your biggest bottleneck typically occurs in an overseas warehouse during November of each year — when staff is likely struggling to cope with increased customer demand ahead of the holiday season.
Alternatively, you could employ specialists to advise on factors such as risk mitigation or effective inventory management. The latter option is useful if you’re planning to do a complete overhaul of your operations, like shifting from a JIT to a just-in-case (JIC) supply chain model, reshoring operations, or simplifying the supply chain.
3. Investing In Automation
Leveraging automation throughout the supply chain promises to drive efficiencies, reduce cycle times, and improve reliability, while the costs associated with warehousing, inventory management, and labor can be significantly reduced.
Some examples of the tasks these technologies can perform include:
- Storing and retrieving products and components
- Product picking for packing and shipping
- Ordering products and components when inventory levels are low or demand is predicted to increase
- Scheduling and coordinating shipments
- Processing documentation including client orders, invoices, and shipping paperwork
- Operating heavy and/or dangerous equipment
Using technology to automate these processes improves safety, keeps goods flowing in the right direction, connects applications and supply networks, and improves communication between different parts of the supply chain. Furthermore, automation in the supply chain is useful for reducing human touchpoints, which is important now that we live in a world where social distancing measures are the norm and workers are often in short supply.
4. Outsourcing Operations
Hiring a third-party logistics (3PL) provider promises to drive major efficiencies and cost savings throughout the supply chain. These companies have the knowledge, resources, equipment, and people-power to get your products and components where they need to be when you need them to be there.
Many years of specialized industry experience also means these organizations might be best placed to anticipate and prevent supply chain bottlenecks, as well as effectively overcome them if and when they do occur.
Image Credit: Gorodenkoff / Shutterstock.com
