Cost issues

First and foremost, the most obvious cost that you will need to mitigate in your supply chain is the procurement costs i.e. paying for products throughout your supply chain. If you have a large company it won’t be possible for you to personally go to the supplier and buy all the components. You will need to hire procurement officers to take care of this for you. The term “procurement costs”, not only includes the price of the products, it also includes the salaries and bonuses of the procurement officers and the cost of their development also.
Usually a compromise between speed and expenses is required. High-speed transportation choices cost money. However, going for a financially cheap option can compromise significantly on time,
Many companies end up borrowing money from banks to pay for the inventories. So, not only does the loan require servicing, their interest rates must be managed as well. Having an unguarded inventory is impractical. Not only do you need to hire a team who can take care of and catalogue your products there is often a need for security personnel as well. Despite best efforts, you will still have to account for shrinkage, i.e. your products could be lost, damaged, stolen, expired, become obsolete.
Any product purchased is expected to meet a certain level of quality. Getting defective products will lead on to problems further down the chain. However, in order to do these quality checks, properly trained experts will be required.

Other Problems

Hard to Track Down

1. True value of the products used is unknown.
2.Lack of transparency in modern supply chains. Impossible to pinpoint exactly
where that defective piece came from and who was responsible for it.


The problem with running a complex supply chain is that you will need to trust all the participants to do their job. You need to trust them to deliver quality while following standard safety standards. However, human beings are not really that trustworthy and are prone to corruption.

Globalization Complexities

As companies become big enough to have international influence or it start operating on an international scale, globalization opens up several challenges to supply chain management. Many companies need to run their supply chain through multiple countries to procure different parts of their products. However, this introduces complications. Suppliers can be in vastly different geographic locations which makes it difficult to co-ordinate and collaborate. In other words, it is difficult to assess and manage performance.