Top 10 Supply Chain Challenges & How to Navigate Them

The modern supply chain is complex and faces various challenges. Supply chain leaders need to understand the current global challenges and how to reinforce their supply chains to deal with them.

Check out learn about top 10 supply chain challenges that organizations face in the current business environment and actionable solutions with examples.

1. Managing supply chain disruptions

Disruptions such as factory shutdowns, transportation delays, natural disasters, and geopolitical events have become the norm in supply chain operations. According to McKinsey, companies experience significant disruptions every 3.7 years, with the COVID-19 pandemic amplifying these risks.¹

Even minor disruptions can ripple across the entire supply chain, affecting production capacity and procurement processes, causing raw materials shortages, and delivery timelines.

Solution: Building supply chain resilience

To mitigate these risks, businesses must focus on building resilient supply chains that can adapt to unexpected challenges. Diversifying suppliers is a key strategy, ensuring that operations are not overly reliant on a single source or region.

Local sourcing can further reduce vulnerabilities by shortening supply lines and improving control over critical components. Additionally, stockpiling essential materials can provide a buffer during periods of disruption.

For example, a clothing manufacturer could source fabrics from multiple countries rather than depending solely on one supplier. This diversification reduces exposure to localized disruptions, such as political instability or natural disasters, ensuring continuity in production and delivery.

By adopting these measures, businesses can safeguard their supply chains and maintain operational stability in an unpredictable environment.

2. Tackling the lack of data visibility and integration

Supply chain operations involve a myriad of systems, from Enterprise Resource Planning (ERP) to Warehouse Management Systems (WMS). However, getting these disparate systems to communicate effectively is often easier said than done, leading to fragmented data and poor visibility across the value chain.

Solution: Leveraging a no-code platform

No-code platforms offer a useful solution to address this challenge by integrating disparate systems without the need for extensive programming expertise. These platforms help empower citizen developers—employees without formal coding backgrounds—to build workflows and connect systems, to create a cohesive data environment.

For instance, a fast-moving consumer goods (FMCG) company can use a no-code platform to integrate its ERP and WMS systems. This integration provides real-time visibility into critical metrics such as inventory levels, order statuses, and supply chain bottlenecks.

The result is a comprehensive view of operations, allowing the company to make informed decisions, optimize processes, and proactively mitigate risks. By embracing no-code technology, businesses can enhance data visibility and foster greater collaboration across their supply chains.

3. Preparing for increased demand uncertainty

Consumers are becoming more unpredictable, leading to increased volatility and unpredictability in demand.² This makes forecasting more difficult, impacting inventory management, production planning, and capacity utilization.

Solution: Advanced demand forecasting

Employ advanced analytics and machine learning techniques for demand forecasting. By incorporating factors like real-time sales data, market trends, and even social media sentiment, businesses can create more accurate demand forecasts. 

For example, a food producer might use machine learning algorithms to analyze historical sales data and identify patterns that can predict future demand spikes.

4. Managing rising costs

In the post-pandemic environment, businesses are grappling with increased costs across the board, from raw materials to freight charges. These escalating costs are putting a strain on margins, especially for businesses in price-sensitive industries.

Watch this quick video to further understand how and why supply chain costs have become a problem for business leaders:

Solution: Cost optimization strategies

Invest in cost optimization strategies such as process automation, supplier renegotiations, and waste/damage reduction.

For instance, an automobile parts manufacturer might introduce automated assembly lines to reduce labor costs and increase productivity.

5. Achieving supply chain sustainability

Consumers and regulators increasingly demand sustainable business practices, moving sustainability higher on organizations’ priority lists. However, implementing sustainable measures in the supply chain – from sourcing to manufacturing to distribution – can be complex and costly. This is mainly due to the following reasons:

• Sourcing: Locating suppliers of sustainable materials can be difficult and potentially necessitate a total overhaul of existing supply chains.
• Manufacturing: Adapting to sustainable manufacturing often requires costly investments in new technology, staff training, or hiring an ESG team.
• Distribution: Implementing environmentally-friendly distribution methods typically involves significant initial investment and added operational complexity, such as buying route-optimizing solutions or environment-friendly vehicles.
• Assessment and monitoring: Regular evaluation and tracking of sustainability metrics in the supply chain adds complexity and can be both costly and time-intensive.

Solution: Green supply chain initiatives

Invest in green supply chain initiatives, such as eco-friendly packaging, renewable energy, and ethical sourcing. A coffee retailer, for instance, might source beans from certified fair-trade farmers, use biodegradable packaging, and offset its carbon emissions through reforestation projects. 

Supply chain leaders can also motivate the top executives towards sustainability if they attach cost savings with sustainable practices.

Check out sustainability AI applications to learn more.

6. Mitigating labor shortages

From factory workers to truck drivers, labor shortages are disrupting supply chains worldwide. This is causing delays, increasing costs, and putting pressure on existing staff.

Watch this video to learn more about why the supply chain sector is facing labor shortages:

Solution: Workforce planning and automation

Effective workforce planning, skills training, and automation can help alleviate labor shortages. A warehouse, for example, might use autonomous forklifts and sorting systems to handle peak loads, reducing the need for manual labor.

Experts also suggest that marketing supply chain jobs in schools is also one of the ways to fix this issue in the long-run.

7. Bracing for geopolitical risks

Trade wars, tariffs, and political instability can all disrupt global supply chains. These geopolitical risks are difficult to predict and can have significant impacts on costs and lead times. For instance, the Russia-Ukraine war has significantly impacted global logistics operations, which is one of the key functions of supply chains.

Watch the video below to learn more about the impact of the war on global supply chains:

Solution: Diversified supply base

This issue also comes down to the level of resilience of the supply chain. By diversifying their supply base across multiple countries, businesses can mitigate geopolitical risks.

However, for some companies, it can be difficult to find alternative suppliers due to the nature of the materials. For instance, for smartphone manufacturers, some materials can only be purchased from certain suppliers in certain countries. In this case, companies need to plan in advance and make sure their supply network is diverse enough to mitigate the risk of geopolitical disruptions. 

8. Avoiding cybersecurity threats

As supply chains become more digital, they are also becoming more vulnerable to cyber threats. Cyberattacks can target various points in the supply chain, including systems, data, and connected devices, potentially causing:

• Data breaches: Theft of sensitive customer, supplier, or operational data.
• Ransomware attacks: Cybercriminals encrypt critical data and demand payment for its release.
• Operational disruptions: Hacked systems can halt production, shipping, or inventory management.
• Reputational damage: Breaches undermine customer and stakeholder trust.
• Regulatory non-compliance: Failure to safeguard data may lead to fines or sanctions under laws like GDPR or CCPA.

Solution: Building a cybersecurity framework

To counter these threats, organizations must build a strong, multi-layered cybersecurity framework that protects data, systems, and operations. Key strategies include:

Strengthen network security

To enhance network security, organizations should deploy advanced firewalls to block unauthorized access and filter malicious traffic effectively. Intrusion Detection and Prevention Systems (IDPS) can monitor networks for suspicious activities and provide real-time responses to potential threats.

Additionally, network segmentation helps isolate systems into smaller segments, limiting the spread of breaches in case of an attack.

Protect data with encryption

Encrypting data at rest and in transit using end-to-end encryption ensures that sensitive information remains secure from unauthorized access or interception. Secure file transfer protocols, such as SFTP or HTTPS, should be used when sharing supply chain data.

Data anonymization techniques can further protect sensitive information by masking it, reducing exposure during a potential breach.

Implement access control measures

Access control measures such as Zero Trust Architecture (ZTA) ensure that all users and devices are verified before being granted access, regardless of their location.

Role-Based Access Control (RBAC) restricts user access to only the data and systems necessary for their specific role.

Employee training and awareness

Comprehensive employee training programs are vital in fostering a security-conscious workplace. Training should cover recognizing phishing attempts, practicing secure password habits, and promptly reporting security incidents. Educated employees serve as the first line of defense against cyber threats.

Backup and recovery plans

Automated backups ensure that critical data and systems are regularly saved to secure locations, minimizing data loss during an attack. A disaster recovery plan should be developed and routinely tested to ensure fast restoration of operations with minimal downtime.

Read cybersecurity best practices to learn more about to improve supply chain cybersecurity.

9. Meeting customer expectations

Customers now demand faster deliveries, greater transparency, and more customization than ever before. Meeting these high expectations requires a flexible and customer-centric supply chain.

Solution: Customer-centric supply chain

To address these challenges, businesses should adopt a customer-centric supply chain strategy that prioritizes delivery speed, order accuracy, and clear communication. By putting the customer at the heart of supply chain decisions, organizations can create systems that respond quickly to changing demands and preferences.

For example, a fashion eCommerce brand might leverage data analytics to better understand customer behavior, which would enable the personalization of shopping experiences. This could include recommending products based on browsing history and offering flexible delivery options, such as same-day shipping or store pickups.

By aligning supply chain operations with customer expectations, businesses can enhance satisfaction, build loyalty, and remain competitive in a fast-paced market.

Check out to find the right eCommerce analytics tool for your business.

10. Meeting regulatory compliance

With regulations becoming more stringent worldwide, maintaining compliance can be a significant challenge for global supply chains with vast supply and distribution networks.

Solution: Compliance management systems

To navigate this complexity, organizations should invest in a compliance management system that streamline the tracking, monitoring, and updating of regulatory requirements. These systems provide a centralized platform for managing compliance efforts, ensuring that policies remain aligned with evolving laws and standards.

For example, a pharmaceutical company operating in multiple countries can leverage a cloud-based compliance management system to manage regulatory variations efficiently. These systems allow for real-time updates, automated compliance checks, and comprehensive documentation, reducing the risk of oversight or error.

Additionally, they improve collaboration among teams by providing visibility into compliance efforts across the organization, enhancing accountability and readiness for audits or inspections.

Regularly updating compliance policies and integrating these systems into operational workflows ensures adherence to regulations and also fosters trust with stakeholders by demonstrating a commitment to ethical and lawful practices.

Industry based supply chain challenges

While some challenges are shared across various industries, each sector also has unique supply chain dynamics driven by its operational priorities, regulatory environment, and global dependencies:

Healthcare

Healthcare supply chains face visibility issues due to siloed data across hospitals, clinics, and distribution networks. This lack of transparency leads to mismanagement, such as unnecessary investments in additional warehouse space to address perceived shortages.

Studies show that 93% of healthcare providers continue to report widespread product shortages, which are challenging to predict.³

Pharmaceuticals

Beyond general healthcare challenges, the pharmaceutical industry deals with highly regulated supply chains that require strict adherence to safety and quality standards.

Issues like counterfeit drugs, supply disruptions of active pharmaceutical ingredients (APIs), and dependency on a few global suppliers increase risks. COVID-19 further highlighted vulnerabilities in the pharmaceutical supply chain, with vaccine distribution encountering bottlenecks and inefficiencies.

Food and agriculture

Supply chain challenges in this sector often arise from the perishability of products, unpredictable weather, and global trade dependencies.

Farmers and food producers struggle with transportation delays, insufficient cold chain infrastructure, and labor shortages. Food recalls due to contamination and regulatory compliance further complicate logistics and inventory management.

Retail

Retailers face challenges in synchronizing inventory with seasonal changes due to complex store networks and outdated systems. Legacy technologies damage their ability to gain an accurate, end-to-end view of customer demand, resulting in inefficiencies in placing inventory at the right locations.

A survey revealed that retailers are less equipped to handle supply chain disruptions, exposing them to risks from fluctuating consumer behavior, demand shifts, and other uncertainties.⁴

Manufacturing and automotive

Manufacturers, especially in electronics and automotive industries, struggle with fragmented data and delayed information flow across multiple systems operated by various partners. This lack of real-time, unified visibility leads to challenges in optimizing inventory levels and addressing disruptions.

Without consolidated data, companies cannot proactively manage risks, leading to higher costs, reduced sales, and inefficiencies in inventory management.

Energy and utilities

The energy sector faces supply chain issues due to fluctuating demand, geopolitical risks, and the complexity of sourcing and transporting raw materials like oil, gas, and rare earth metals.

The transition to renewable energy has added further complexity, with challenges in securing critical materials such as lithium and cobalt for batteries. Additionally, aging infrastructure and regulatory constraints create bottlenecks in supply chain optimization.

More solutions to supply chain challenges

By leveraging technologies such as IoT, blockchain, AI, and advanced analytics, organizations can achieve greater supply chain visibility, transforming challenges into opportunities for competitive advantage.

Better supply chain visibility can help manage future supply chain issues and increase supply chain performance by:

Improving risk management

• Proactive issue identification: Greater visibility helps identify potential disruptions (e.g., delays, shortages) earlier in the process, allowing businesses to respond promptly and helping build resilient supply chains.
• Alternative sourcing: When disruptions occur, visibility across the supply chain enables rapid identification of alternate suppliers or routes.

Optimize inventory management

• Balanced inventory levels: Visibility into inventory across the supply chain prevents overstocking or stockouts by ensuring just-in-time replenishment.

Increased responsiveness and agile supply chains

• Adaptability to market changes: Visibility allows businesses to respond quickly to shifts in consumer demand, regulatory changes, or market conditions.
• Faster lead times: Monitoring processes in real-time reduces bottlenecks and accelerates production and delivery.

Further reading

• 7 Best Practices to Master Supply Chain Integration
• Top 6 Supply Chain Collaboration Software
• 3 Ways to Improve Supply Chain with Automation

External Links

• 1. https://www.mckinsey.com/capabilities/operations/our-insights/risk-resilience-and-rebalancing-in-global-value-chains#:~:text=Averaging%20across%20industries%2C%20companies%20can%20now%20expect%20supply%20chain%20disruptions%20lasting%20a%20month%20or%20longer%20to%20occur%20every%203.7%20years%2C%20and%20the%20most%20severe%20events%20take%20a%20major%20financial%20toll
• 2. Understanding consumer behavior: Insights from McKinsey and Forrester | McKinsey. McKinsey & Company
• 3. Supply Chain: A Look Ahead Navigating The New Normal .
• 4. https://impact.economist.com/perspectives/sites/default/files/eiu_maersk_-_retail_report.pdf