Supply chain companies in the Middle East continue to face challenges at multiple levels. Along with geopolitical problems, supply chains face the consequences of volatile oil prices, inadequate infrastructures, and a lack of qualified talent. Many of these issues cascade into procurement and provisioning crises that hold up efficiency and effectiveness. Manufacturing companies are actively looking for structural as well as procedural ways to address these challenges. For instance, in the face of the Red Sea crisis, Daniel Karlsson of ARC Consulting had forecasted supply chain disruptions in the Middle East. This prompted many manufacturers to relocate their procurement operations to European countries.
Over the past few years, supply chain disruptions have been in focus due to a variety of reasons including global shutdowns, military conflicts, and extreme weather events. For instance, geopolitical conflicts are causing freight ships to avoid the Suez Canal – and opt for the longer route around the Horn of Africa.
Supply chain operators survived the 2020 global pandemic by streamlining their operations and making them leaner. Here are 5 challenges that modern supply chains must overcome to become ever smarter and more efficient in the VUCA world:
1. Shortage of essential raw materials
Across the globe, manufacturers depend on the continuous and efficient supply of essential raw materials including steel, plastics, and glass. In the 2023 Supply Chain report, 61% of respondents cited the shortage of raw materials as their top challenge.
This growing shortage can disrupt production schedules – thus adding to production costs and consumer prices. To a certain extent, manufacturers can address this problem by diversifying their suppliers (across regions), thus limiting the impact of a regional event like war or bad weather.
Additionally, ERP technologies can optimize the procurement of raw materials to maintain a minimum stock during supply chain disruptions.
2. Lack of operational visibility
55% of manufacturers want to improve visibility into their supply chain processes. Real-time visibility is essential for manufacturers to build an efficient and resilient supply chain. Companies with real-time operational visibility can easily track the movement of raw materials, components, and finished products across their supply chain.
Through automated supply chain management, manufacturers can improve their operational visibility. Additionally, they can quickly address supply chain issues early, thus avoiding any major problem at a later stage.
Further, technological innovations like IoT sensors and RFID can improve visibility by providing real-time information on:
- Inventory levels
- Production status,
- Delivery deadlines
3. Cost escalation
84.6% of companies say supply chain disruptions have increased their cost of working. Supply chain disruptions can impact operational costs in different ways. For instance, 62% of companies say their logistics costs are impacted by adverse weather events.
Due to the Suez Canal problem, supply chain companies now have to deal with rising freight and transportation costs. This is largely driven by higher fuel and labour costs due to the increase in the freight distance.
Through efficient route optimization and restructuring of fleet management, supply chain companies can reduce costs and speed up their deliveries.
4. Lack of real-time data sharing
Data silos can cause companies to potentially lose up to 30% of their revenues. In supply chain operations, fragmented data can cause operational problems such as excess inventory, duplicate orders, and underutilized resources.
A complex supply chain system requires real-time collaboration among multiple teams. For instance, a manufacturing company can face a shortage of raw materials from a supplier replacing their legacy production equipment.
Without a centralized system, supply chain stakeholders cannot share real-time data, thus leaving other stakeholders unprepared for any disruption. A digital supply chain can address this challenge by providing real-time data and valuable insights.
5. Unpredictable customer demand
52% of manufacturers say changing customer demands are the biggest challenge for their supply chain operations. To prevent any stockouts, companies are constantly trying to balance between their consumer demands and inventory costs.
Largely, manufacturers have adhered to a “leaner” inventory model to reduce both waste and costs. However, this approach is challenging for companies with long production cycles and unpredictable swings in customer demands.
To address this challenge, ERP systems with supply chain management can help manufacturers accurately predict their demands. With accurate demand forecasting, companies can optimize their supply chain operations and avoid overstocking.
6. Digital transformation
Nearly 80% of companies implementing digital supply chains are recording impressive growth in their revenues. This Forbes article states that companies are allocating 30% of their IT budget to digital transformation.
That said, it’s equally challenging for companies to digitalize their complex supply chain operations. This is especially relevant for global companies with a distributed supply chain ecosystem. Additionally, they must continually evolve their supply chains to stay ahead of the competition.
Besides adopting supply chain technologies, companies need efficient training to prepare their operators for the new system. To achieve digital transformation, manufacturers need a “smarter” supply chain powered by digital technologies such as:
- Internet of Things (IoT)
- Automation
- Generative AI
- Data Analytics
How Shahgaron can help you address your supply chain challenges
Digital technologies enable Middle East companies to streamline their supply chains and reduce the impact of geopolitical conflicts and other disruptions.
With its expertise in supply chain management (SCM), Shahgaron is helping manufacturers in the Middle East deal with ongoing supply chain disruptions. Our cloud-powered SCM solutions include capabilities like:
- Supply chain planning
- Inventory management
- Procurement
- Logistics
- Order management
And much more…
Do you want to digitalize your supply chain operations? We can partner with you. If interested, contact us now.