Delivery bottlenecks are among the worst problems a company can have. If you can't deliver, you have to reckon with lost customers, declining profitability and, in the long term, employee turnover. What are the causes of delivery bottlenecks and how can they be avoided?
Causes of supply bottlenecks differ depending on the industry. For example, while waves of illness are a problem in the pharmaceutical industry, which can lead to poor availability of medicines at times, other industries are much less subject to fluctuations. There are also special cases such as the chip shortage, which since March 2020 has affected not only the electronics sector but also adjacent industries such as automotive production.
The most important reasons for supply bottlenecks can be found here:
Delivery bottlenecks at your company mean that your customers do not receive their goods on time or in full (or both). As a result, your customers no longer perceive you as a reliable supplier. They migrate to the competition and you have to deal with lower sales expectations.
So economically, supply bottlenecks can have major consequences for you. But they also cause problems within your company: If manual rework is constantly required, processes have to be adjusted or corrections have to be made, your employees will become dissatisfied in the long term. For you, this means that personnel costs rise and you have to reckon with increased employee turnover.
Special case automotive industry: Automotive manufacturers (also OEMs) are regarded as particularly demanding customers. They generally keep a close eye on the delivery reliability of their suppliers Delivery reliability is a key figure that measures the delivery of the correct quantity at the correct time. Contractual regulations specify the consequences that poor delivery reliability can have for the supplier. Accordingly, delivery bottlenecks have particularly drastic consequences in this industry.
So it's definitely a good idea to be prepared for potential supply bottlenecks or to have a good contingency plan ready. For this to succeed, it helps to get to grips with exactly where your problems are coming from, because only then can you take action against them.
The key figure delivery reliability is central to the company's success. If delivery reliability is too poor, you can expect drastic consequences. These affect far more than just the satisfaction of your customers. You can find out about the other consequences if you repeatedly deliver the wrong quantity at the wrong time in our clear table.
| Effect on | Area | Follow | Worst Case |
|---|---|---|---|
| Customer dissatisfaction | Total company, sales | Loss of trust/reliability | Migration to competitors, loss of market, loss of orders/customers; overall poorer sales expectations |
| Sales losses | Total company | Investment freezes, declining growth opportunities | Liquidity bottlenecks in the absence of reserves |
| Deteriorated customer relationship | Total company, sales | Increased expenses for measures to retain and win back customers (credit notes, bonus payments, goodwill payments, win-back campaigns) | Customer loss |
| Increased costs/expenses | Overall Company, Finance & Controlling, SCM | Contractual penalties for delayed delivery; increased costs for special freight not included in calculation | Liquidity bottlenecks in the absence of reserves |
| Pricing strategy | Distribution, Purchasing | More difficult position in price negotiations (prices can be depressed in future orders) | Cost/benefit ratio; overall declining profitability |
| Increase in opportunity costs | SCM, logistics, SCM controlling | High capital commitment costs, increase in warehousing costs, poorly coordinated processes within the supply chain, capacity bottlenecks in the warehouse | Deteriorated profitability, high opportunity costs (tied-up capital cannot be used for investments), high interest costs for the tied-up capital |
| High capacity utilization in production | Production, production planning, SCM, logistics | Increased equipment set-up times, deterioration in efficiency, deterioration in overall equipment efficiency (OEE), worsened planning | Inefficiency of the company |
| Failure to achieve internal target agreements such as "increase OEE" or "reduce special loads". | Personnel, HR, Recruiting, Team | Dissatisfaction of employees/managers (impending loss of bonuses or premiums and consequent loss of motivation) | Fluctuation, capacity bottlenecks |
Whether it's Corona, freighters in the Suez Canal or international crises: Global supply chains harbor risks that can have a direct impact on your deliveries. There are various strategies to counteract them.
You can rarely influence external factors. However, you can be prepared for them when they occur. Planning and simulation are effective ways to counter problems as quickly as possible. The time you have to put into this preparation is usually worth it, however, as you then do not have to bear the economic consequences of delivery failures.
Internal problems are usually well summarized by the term transparency. Too often, companies only have basic software systems in place, but these do not map many individual processes at all. It is not just a matter of recognizing delivery bottlenecks at an early stage. The problem usually arises earlier:
Transparency seems like an empty buzzword. But in this case, transparency is crucial: it's about how much you know about the current state in your company, how sensibly your inventory management is planned, how confidently you can promise deliveries, and how quickly you can respond. The more time you have to invest to identify and solve problems, the more expensive a supply bottleneck will be.
Digitization offers considerable opportunities for improvement. To avoid supply bottlenecks, it would be necessary to analyze data at an early stage to anticipate problems. Rising or falling trends are often identified manually instead of being detected by the systems. Although many companies are already using digital solutions such as SAP systems, the full potential of the available data is not yet being realized. The solutions are not implemented or configured correctly, functions are not used, and data is poorly maintained.
Better IT support in all areas can help to optimize processes, work more efficiently and avoid delivery bottlenecks. There is considerable potential for optimization in many companies that has not yet been exploited.
These are the benefits you can expect when you use digital solutions to avoid supply bottlenecks:
