One of the tricky things about managing a supply chain is that even the smallest problems don't happen in a vacuum. One issue at any stage in the change creates a ripple effect in the worst possible way. Supply chains are also getting more complex all the time, which only compounds this idea. It also serves to underline the fact that communication has officially become the most important part of your supply chain.
Or at least, that's the way it should be.
The Dangers of Poor Communication
Think about all of the disparate parts of a supply chain, and then consider the fact that supply chains themselves seem to be getting larger every year. With this many moving pieces it is of critical importance for everyone to come together to form a much more powerful whole. You're talking about many different people who interact with a product (or a series of products) as it moves along the line from its origin to its destination which makes supply chain optimization so important.
Without a stable bedrock of communication, how are these people supposed to stay on the same page at all times? How are you supposed to know that everyone is following important policies and best practices? How are they supposed to know the stakes of the situation - that Shipment X is of perishable items so it needs to be handled with greater speed and additional care over Shipment Y, which is non-perishable?
If you haven't made communication a central part of your larger supply chain optimization efforts, the answers to all of these questions and more are almost never going to be good.
Failed communication also leads to one of the biggest issues that modern day supply chain managers face: untimely deliveries. The costs associated with this run far deeper than just a poor customer experience, negative brand recognition and ultimately bad word-of-mouth (all of which can hurt you in the long-run). According to one recent report from 2016, these types of supply chain disruptions cost one out of every three organization approximately $1 million or more per year in losses.
But even the disruption itself is not the only consequence. The impact of that disruption is far-reaching, including factors like:
- A general loss of productivity as people try to scramble to catch up.
- An increased cost of working as people need to both fix a problem and continue the jobs they're supposed to be doing in the first place.
- An impaired service outcome (the untimely delivery), which leads to:
- Damage to your brand reputation or image.
- Customer complaints that you now have to deal with.
- An ultimate loss of revenue.
But the problems don't end there. Poor communication can also lead to a delivery that ends up in the wrong place, which can create a whole new category of troubles for even the strongest brand. Not only do you have to deal with all of the above (because from the intended customer's perspective, the delivery is delayed) you also have to deal with the cost of replacing the product, too. Did the shipment contain a proprietary item that was essentially one-of-a-kind? Now you have to figure out how to get it back and ship it to where it's supposed to be.
Was the item in that shipment protected by some type of governing body or set of standards like HIPAA? Now you've got compliance violations and fines to think about - remember that even an unknowing HIPAA violation can cost you an annual maximum of $25,000 per repeat violation.
The Power of Communication: Empowering Your Supply Chain
The good news, however, is that the reverse is also true. Terrific communication can make the supply chain faster, more efficient and more effective than ever before. When standards, best practices, and priorities are communicated properly, every touch point along your supply chain is essentially firing on all cylinders. Every last resource is being used to its maximum potential to align what the supply chain is capable of with your long-term objectives as a business. People are working smarter, not harder, and both you and your customers are enjoying the benefits - particularly in terms of cost-savings.
When you consider the fact that the number of entities in the supply chain has increased over the years, it makes clear communication at all levels even more important. Without communication, you take a small problem and turn it into a much bigger and more expensive one in an instant. By emphasizing communication as much as possible, however, true supply chain optimization is no longer a question of if but when.