January 31, 2025 Managing Supply Chains in a Volatile Business Landscape

Now is the time when supply chain organizations need to double-down on fundamentals in order to navigate the uncertain 2025 landscape.

By Charles Clevenger, Principal, UHY

Creating and maintaining highly efficient supply chains will continue to be a pivotal challenge for companies across all industries in 2025.  For those companies with robust and efficient supply chains, this can be a competitive advantage.  For a supply chain to provide a competitive advantage, you must address the major risks that currently exist. Things like natural disasters, climate shifts, political unrest, geopolitical tensions, disruptive technology, potential regulatory changes, financially troubled suppliers, and a long, long list of other uncertainties can have a potential impact on your supply chain and your business, so it is critical to understand what leading practices can be employed to minimize risk and avoid tying up cash.

When we think about managing supply chains, we frequently focus on the importance of mitigating risk to ensure we satisfy customer requirements.    We sometimes call this the “too little” scenario.  To avoid having too little inventory, we lengthen lead times, add safety stock, and take other measures.  However, there is also a “too much” scenario.  Too much inventory can lead to frozen cash, increased interest expense through elevated cash borrowing, obsolescence, demands on manufacturing floor space, and other increased costs.  Managing supply chains in today’s volatile business landscape requires us to balance these two extremes.  What follows are some leading practices that can help you be successful. 

Ingredients for success

To successfully mitigate supply chain risk, a company must establish a stable and effective operating system. When describing such operating systems, you often hear or read about demand forecasting and analytics, supplier diversification, machine learning, and a multitude of technology solutions, but there are a few key ingredients that are not as commonly discussed.

Though they are extremely important to your supply chain success, the following leading practices frequently go under the radar:      

1. Constantly strive to improve your understanding of your customer’s needs,
2. Improve your supplier relationships.
3. Integrate your entire value stream,
4. Shorten lead times to improve responsiveness.

These leading practices may make a significant difference in the operation and efficiency of your supply chain and compared to some of the others, these could be relatively inexpensive. Excelling in these “soft” areas can really improve your operations and your ability to navigate ever present uncertainty in today’s business landscape. Ironically, all of these best practices cascade into the other. Let’s explore some of them so you can understand what we mean.

Understanding your customers’ needs

Understanding your customers’ needs will allow you to execute customer-focused supply chain strategies and improve your supply chain in many areas. By aligning your supply chain with customer expectations, you can achieve greater efficiency, reduce costs, and enhance customer satisfaction. All are excellent defenses against uncertainty in a volatile business environment.

For example, understanding your customer’s needs will improve your demand forecasting, which reduces the risk of overstocking, thereby avoiding frozen cash and increased working capital requirements, or running out of stock, which can be equally detrimental. Customers have also become used to, let’s call it, the “Amazon Prime effect” of product and service delivery. We want it, and we want it now, even yesterday. By becoming familiar with your customer, you can be more agile, become more efficient and be able to adjust production schedules and logistics routes to meet customer demand for shortened delivery times and instant gratification.

Understanding customer needs is an important first step to improving your supply chain, and once you have that understanding, you can share your findings with your suppliers and work on improving those relationships to further strengthen your operations.

Improve your supplier relationships

Healthy supplier relationships improve collaboration, ensure reliability, and create mutual value that can become an “insurance policy” in times of disruption. The stronger your supplier relationships, the more confidence you can have in your supply chain reliability and your ability to react to changes.  Strong supplier relationships are built on trust and are foundational to lasting trust is strong communication.  In other words, invite your suppliers to come along on this journey with you.

It’s easy to get caught up in the latest technology and technical improvements, but so often things in business come down to one thing, communication. And that communication will lead to more transparent information sharing, more frequent updates, and feedback creating a more collaborative and enduring relationship. While technology is not a replacement for open communication, it can be an additional tool to improve supplier relationships. Through supplier portals, you can give suppliers access to real-time data like forecasts and order details so that everyone is aligned. Modern tech like analytics software and automation can also help relieve some of the administrative burden on your suppliers and lays the groundwork for the next foundational element of constructing integrated value streams.

Build integrated value streams

Truly understanding your customer’s needs is a great start. Developing your operating system in line with your customer’s needs is imperative. But have you considered incorporating these leading practices in your overall process?  A highly functioning supply chain ecosystem integrates all participants in the value stream; customer, manufacturer, and supplier.

By connecting all components of your value stream, you can have additional flexibility, maintain optimal inventory levels, deliver in a timely manner and drive costs down. Now you can see how each of these strategies flows into the next, leading to a more integrated value stream. Now we’ll connect the final piece of the puzzle, which is shortening lead times.

Shorten your lead times (and your supplier’s lead times as well)

Shortening lead times can have many benefits including, enhanced customer satisfaction due to faster deliveries (Amazon Prime effect), reduced inventory costs, flexibility, and a competitive advantage against those with slower turnarounds in high demand markets.  So, what steps can you take to shorten your lead times?

Optimizing inventory levels is a great start.  You can use advanced analytics and historical data to forecast demand and ensure that you have adequate inventory and even maintain adequate safety stock for high-demand items. Next, you should analyze your procurement processes to see if there is an opportunity to utilize automated purchasing that will save time and reduce errors, and make sure you have a network of reliable providers that consistently deliver quality supplies. Finally, the last strategy we will touch on is reducing touchpoints and handoffs, using direct shipping, minimizing storage locations, and cutting down storage time between receipt and subsequent distribution are all ways that can significantly shorten your lead times and give you a leg up in times of uncertainty.

Comparing highly efficient and inefficient supply chain approaches

Highly performing supply chain systems are focused on a constantly improved understanding of customer requirements, building, and improving integrated value streams including their suppliers, and a focus on continuously shortening lead times. This is all done with the objective of increasing visibility on demand, reducing risk, and improving stability of supply.

Conversely, a poorly structured supply chain system does not emphasize these important areas.  These situations are characterized by a combination of high inventory, missed customer shipments, and unnecessary additional costs (both in terms of dollars and people).  Both financial performance and customer satisfaction suffer. A poorly structured supply chain system is a major risk in a volatile business landscape defined by competition.

Using your supply chain to gain a competitive advantage

Competition is higher than ever across all sectors. Companies need to take every advantage available. Competitive advantages can be identified and leveraged in every single area of operations. Improving your supply chain and mitigating risk will increase efficiency, improve operations, and provide a competitive advantage over those who do not have an integrated supply chain management strategy built on leading practices.

About the Author:
Charles K. “Charlie” Clevenger is a principal in UHY Consulting, providing operational excellence solutions that strengthen and transform organizations.  His specialties include complex supply chain, procurement strategy and structure, operations management, total value management analysis, and solutions. He also has significant experience collaboratively integrating these areas into the overall business to optimize performance and financial results.

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