Limitations and Complications of SCM

What kind of limitations and complications can occur in Supply Chain Management?

Due to the many players and complexity of supply chains, a problem in one link can have increasingly negative effects on the chain as a whole. There are many areas in which incidents, preventable or not, can hinder production.

Even though more and more systems are able to predict the quantity and types of resources or inputs necessary for production, improper forecasting (over- or under-stocking) remains a problem for supply chain management, especially in response to unpredictable market changes. For example, if there is an unexpected surge in demand due to an unpredictable trend and one of a firm's suppliers is out of stock of a particular part necessary to complete a product, there will be negative effect on the firm. There will be at least a slight delay in production, wasted resources or extra costs incurred from any of the possible reactions of waiting on the supplier, finding a new supplier or shifting the allocation of resources to a different product.

By using business intelligence software to streamline and monitor information from a variety of sources could help the firm in this situation in quickly finding the best way to overcome the problem and waste the least amount of time and resources possible. These systems are imperative in helping businesses keep costs down and satisfy customers with timely and efficient service

Another example of an unpreventable pressure on the supply chain would be a natural disaster. For example, among other firms and products affected by the devastating earthquake and tsunami in Japan, Apple’s production of the iPad was hindered because Japan is the only producer of Toshiba’s 16-gigabit NAND flash memory chip which are essential to the production of the iPad as well as other products. The Japan crisis has also affected industry in that any cargo arrivals from Japan have had to be checked for possible radiation contamination.

Some possible transportation complications include delays due to security issues such as passing through customs, additional costs from importing and exporting fees and taxes, determining the most efficient packing technique, tracking of shipments or delays due to carrier errors. Consequences to possible supply chain management incidents include financial penalties, damage to reputation, lost business opportunities, reduced profitability and high cost of capital.