As per the reports of Reuters, in 2022, supply chain disruptions led to an average of $82 million in annual losses per company. What does this mean for CTOs of manufacturing enterprises? 

From the ongoing rising geopolitical tensions to raw material shortage and the unpredictable effects of climate change, it’s important to understand what’s causing these challenges. 

 Understanding the primary causes of disruptions can help you plan ahead of time and develop effective risk management strategies.  

Furthermore, using technology may enhance your supply chain, ensuring that your operations stay resilient and adaptive even when times are rough. 

Major Causes of Supply Chain Disruptions 

Supply chain disruptions can erupt from all sorts of places, impacting businesses in any and every industry.  

For CPOs, knowing these main causes is key to building resilience and effectively dealing with challenges when they arise. 

• Act of God – Natural disasters such as hurricanes, earthquakes, and floods have long disrupted supply lines, causing infrastructure damage.  

• These so-called ‘acts of God’ incidents frequently cause product delivery delays and expense increases. 

• Act of Human – Political conflicts can cause significant disruptions in supply lines. Political conflicts have the potential to seriously disrupt supply systems.  

Tariffs on Chinese products, for example, increased expenses for corporations such as Apple during the US-China trade war, prompting them to seek alternative suppliers.  

Similarly, sanctions against Russia resulted in abrupt shortages of critical supplies for several European enterprises. 

• Labor Shortages – Labor shortages have emerged as a critical challenge, particularly during and after the COVID-19 pandemic.  

Many businesses face difficulties in finding skilled workers, which can slow down production and delivery processes. 

• Raw Material Shortages – A persistent shortage of raw materials is disrupting manufacturing across various sectors.  

These shortages can stem from supply chain inefficiencies, increased demand, or geopolitical factors. 

• Shifting Consumer Behavior – Changes in consumer purchasing patterns can lead to inventory imbalances.  

The pandemic saw a surge in online shopping, leaving retailers struggling to manage excess inventory when demand shifted back to pre-pandemic levels. 

The Role of Technology in Mitigating Risks 

To navigate these complexities, CPOs must leverage technology to build more resilient supply chains.  

Here are some key areas where technology can make a significant impact: 

• Enhanced Supply Chain Visibility – Implementing tools that provide real-time visibility into supply chain operations is crucial.  

Technologies such as IoT sensors and RFID tags enable businesses to track shipments and monitor inventory levels, allowing for proactive decision-making. 

• Advanced Analytics – Utilizing data analytics can help CPOs identify potential disruptions before they occur.  

Predictive analytics tools can analyze historical data and current market trends to forecast demand and potential supply chain issues, enabling companies to adjust their strategies accordingly. 

• Scenario Planning – Scenario planning software allows CPOs to model different disruption scenarios and assess their impact on supply chain operations.  

This proactive approach enables organizations to devise contingency plans and adapt quickly to unforeseen challenges. 

• Automation and AI – Integrating automation and AI into supply chain processes can enhance efficiency and reduce the reliance on human labor. 

Automated systems can streamline order processing, inventory management, and logistics, minimizing delays caused by labor shortages. 

• Collaboration Platforms – Technology can foster collaboration among various stakeholders within the supply chain.  

Platforms that facilitate communication and information sharing between suppliers, manufacturers, and logistics providers can enhance responsiveness and adaptability. 

Way forward for CPOs 

Understanding the root causes of supply chain disruptions is essential for CPOs aiming to navigate today’s complex landscape.  

By leveraging technology to enhance visibility, analytics, and collaboration, businesses can build more resilient supply chains that can withstand challenges.  

Embracing these strategies not only mitigates risks but also positions organizations for success in a rapidly evolving market. 

Moglix has been, for almost a decade, working with organizations to mitigate the supply chain risks in India and the UAE.  

With our integrated procurement SaaS Solution, working capital solutions, catalog-based buying solutions, prequalified 20K+supplier base combined with ever evolving state-of-the-art physical warehouse network we have been helping organizations to start building long-term resilience into their supply chain.  

Discuss your digital transformation project with Moglix