How to identify and eliminate internal demons in supply chain management

An inefficient, disorganized supply chain spells the death knell for organizations. It impacts customer reliability and retention and impedes new customer acquisitions. A broken supply chain also bleeds company resources through returns and repairs, delay costs, and rework. While external supply chain issues are well-understood, internal problems—inadequate processes, outdated systems, data silos, stagnant leadership, and other human factors—are less discussed but just as detrimental. Given the havoc internal supply chain issues can wreak on a company, it is crucial to identify and eliminate them.

Why addressing internal issues is crucial to supply chain management

All companies face external supply chain issues from uncertainties surrounding labor, shipping, raw materials, suppliers, carriers, and other industry factors, plus the changing international landscapes regarding trade barriers, tariffs, trade law rules, and compliance requirements. These are essential issues to address, but companies suffer when they spend all their energy trying to prevent inevitable global bottlenecks while ignoring preventable problems within their ranks.

Abhishek Chaudhuri

Take, for example, the 2021-2022 supply chain fiasco of UK chip brand Walker Crisps, when multiple internal IT glitches resulted in massive product shortages. While the business world was reeling from COVID-induced supply chain shortages, Walker was suffering at the hands of its systems, unable to provide vendors and consumers with their product for months, resulting in a 3.5% decrease in overall revenue.

With global supply networks still far from stable, internal system errors and supply chain disruptions like the one Walker faced are a detriment most companies can’t afford. In fact, addressing internal supply chain disruptions is the key to helping companies excel beyond their current status quo.

In the wake of the pandemic, PepsiCo—Walkers’ parent company—completely revamped its supply chain by transforming its digital platforms and systems, integrating data, and focusing on a reduced carbon footprint, and brought its overall revenue from $79.5 billion in 2020 to $92 billion as of June 30, 2024. PepsiCo’s success proves that addressing internal supply chain issues doesn’t just prevent bottlenecks, product shortages, and customer dissatisfaction; it also means that companies that spend resources to fix them have a leg up on their competition.

The three demons of internal supply chain bottlenecks

PepsiCo’s supply chain success is mirrored by Coca-Cola, Toyota, Walmart, Heineken, and other global brands, which have all refocused supply chain management to optimize internal operations instead of overspending against external uncertainties. By examining how these companies remodeled their supply chains, it’s clear that internal supply chain challenges fall into three main categories:

1. Process-based issues. These relate to managing the end-to-end processes of a company’s product or service as it moves through its supply chain. They often stem from an overreliance on people rather than systems for data entry, risk management, and supply sourcing, resulting in incomplete bills of materials and a lack of transparency and visibility throughout the planning, purchasing, and manufacturing processes.
2. System-based issues. Inefficient IT systems that lack cohesion between a company’s business functions and operations are a prime example of system-based issues. They occur when companies use archaic, point-to-point systems. Issues also arise if systems operations teams aren’t integrated into the larger decision-making process. Isolated system functions and disconnected personnel make it impossible to build sustainable models that promote economies of scale, resulting in nightmarish rebuilding across business functions.
3. Data-based issues. Data-based issues happen when companies don’t prioritize data management, treating data as a forgotten stepchild in their supply chain instead of the star player. When companies make do with data that lacks quality, integrity, and flexibility, they end up with incomplete, inaccurate datasets that create downstream disruptions and prevent any kind of scalability.

All three internal supply chain demons drain companies through wasted time, resources, and capital, so it’s critical to address them. When companies successfully wrangle these demons, they thrive, expanding and improving their business through data-backed innovation rather than paddling to stay afloat.

Developing a holistic, data-integrated solution for thriving supply chains

No successful company can address one supply chain demon without tackling the others. Process, system, and data issues are innately linked, working together to either sabotage a company or bring it to new heights. Because of this, it’s imperative for all companies to address all three simultaneously—and this begins with data.

Data is the currency that runs supply chains. With thorough, quality datasets, organizations can confidently ensure their supply chains don’t run into preventable bottlenecks by making all decisions in quantifiable, data-backed ways. Prioritizing data management means updating old systems that can’t handle high-volume datasets, don’t communicate data across business functions, or over-rely on human labor for data input and organization. Data prioritization in supply chains also entails revamping outdated manufacturing and supply processes that neglect data-backed systems. By recentering internal supply chain systems and processes around data management, companies can conquer all three internal demons in one fell swoop.

Fortunately, today’s organizations coexist with a surplus of new technologies and tactics they can use to reliably and efficiently prioritize data management and integration in their supply chains. By investing in artificial intelligence (AI), the Internet of Things (IoT), and end-to-end enterprise resource planning systems (ERPs), companies can cut back on human labor and delegate high-cost, high-risk, time-sucking processes to more efficient and accurate data-integrated systems and tools. These new technologies are the key to making real-time, data-driven decisions. They can help companies merge traditional metrics like cycle times, inventory turnover, and on-time delivery with newer measures such as carbon footprint, data accessibility, data completeness, and analytics turnaround.

Don’t self-preserve: Innovate and thrive

Internal challenges can doom any supply chain, but facing them head-on also presents unique opportunities for leaders to develop a companywide culture of innovative, cutting-edge collaboration from the top down. Rather than creating silos between business functions and focusing on repairing broken systems to maintain “the way things are,” leadership and management can embrace new technologies, encourage cross-function collaboration, and invest in skill development to bring their supply chains to new heights. With the right strategies and tactics and a mindset centered around constant innovation, internal supply chain issues can be identified, addressed, and minimized so companies can thrive.

About the Author:

Abhishek Chaudhuri is a principal program manager of data governance for a multinational technology company. He has more than 18 years of experience in data management, data governance, product management, business management, materials management, and supply chain operations. Abhishek is an SAP Certified Associate and holds an MBA in marketing. Connect with him on LinkedIn.

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