There are several reasons that a company might utilize a fragmented supply chain. For one, using separate suppliers and manufacturers allows businesses to produce components of their final product in parts of the world where labor is less expensive, making the whole process more cost-effective. However, the COVID-19 pandemic and the resulting supply chain backlogs demonstrated just how fragile the whole system can be, specifically when borders are closed and delivery of products is slowed.
We wanted to explore some of the benefits and challenges of a fragmented supply chain and provide advice about what your organization can do to better control the fate of its supply chain.
Pros and Cons
There are both good and bad things about having a fragmented supply chain. On one hand, it can help with company growth, but it can also cause major delays and backups when production isn’t managed efficiently.
Fragmented Supply Chain Pros
- It can be more cost-effective to go to different suppliers and manufacturers.
- The benefit of cutting costs can be passed down to the consumer, meaning more affordable goods.
- This practice can provide employment and economic opportunities for developing countries. This will also allow workers in those countries to gain new skills.
Fragmented Supply Chain Cons
- Companies with different manufacturers and suppliers may have more trouble finding and tracking the location of raw materials and individual parts.
- When an organization has multiple suppliers and manufacturers involved, with different rules and regulations, this can further complicate companies’ ability to accurately predict the needs of their customers.
- Backups at critical ports of entry can be an issue for any business, but when one is relying on parts from around the world, a congested port can lead to even more complications in getting final needs completed.
How to Avoid Supply Chain Disruptions
We don’t have to tell you how important it is to make sure your organization’s supply chain is healthy and protected. Here are some ways supply chain managers can work alongside their 3PL to make sure a fragmented approach doesn’t cause any issues:
Identify Risks
It may seem simple, but knowing where your organization’s supply chain is susceptible to problems will help in the long run. Identifying and understanding the risks with a fragmented supply chain will help when preparing for any potential issues. To identify these areas, supply chain managers must actively search for any disruptions to the supply chain and analyze their possible impact on operations. Luckily, 3PLs like TOC are also happy to help analyze that data and identify areas for optimizations.
Communicate
Constant, organized communication with your organization’s suppliers and manufacturers can alleviate several roadblocks before they occur. Eliminate any isolated systems incapable of seamless communication with each other, and use predictive analysis to predict the best course of action based on the available data.
Consolidate
TOC Logistics’ consolidation programs are one answer to your company’s supply chain woes. If your supply chain currently incorporates LCL shipping, our team can work with you and your suppliers to save you money by combining with other companies shipping out of the same port. Alternatively, we can help organizations combine shipments from multiple suppliers in one location. Our consolidation programs are just another way we help eliminate LCL and the fees associated with them.
Integrate Data
Your organization’s data and systems must work together. To ensure seamless data management, it is vital to integrate separate data systems used by suppliers, customers, or other key stakeholders. This integration allows for enhanced efficiency, coordination, and collaboration, no matter how many points a supply chain has.
Respond Quickly
When your organization’s supply chain does face an interruption, act fast. This may mean taking on a new supplier or manufacturer to fill the gap in the process. Whatever it is, it’s important to be agile and responsive to make sure any issues don’t compound down the line.
TOC Logistics also offers shared consolidation programs and simplified pricing models to ship your cargo, large and small. Our team is happy to help manage our customers’ entire programs, when that’s most beneficial for the organization. This way, we can keep you informed about your shipments’ progress and how much you’re saving by consolidating it into a single network. Contact us today to get started.