The significant relationship between each element of a supply chain is cost. Even the process of making decisions costs money. Every function in a supply chain is about balancing Space, Capital and Labor. The relationships between these three areas are delicate and often hard to predict. If a company does not regularly look at the impact of changes in their customers, suppliers and products to their supply chain it is easy for costs to slowly begin to build and add up in ways hidden on the balance sheet.
Over time, it is also more difficult to understand which costs are higher than they should be. Costs naturally change over time, understanding which should have gone up and which are completely unnecessary becomes more difficult. Complexity increases over time and makes understanding the current supply chain, and the optimal future state, that much more difficult.
Costs in a supply chain are largely dictated by two key factors: customers and suppliers. For most companies, the customer is the primary driver but often suppliers can have a significant impact as well. As the customer or supplier bases begin to change the supply chain should react. If it does not, there are cost increases.
The not-so-far-in-the-past Great Recession led to significant changes in consumer behavior. All of the news channels reported on the lost jobs and drop in consumer demand. The more subtle impact was the location of consumer across the country. For supply chains setup to meet demand in specific areas, this relocation of demand can be a significant factor.
As the Great Recession came to an end, the consumer side of the equation was significantly changed. People had relocated to be near family or jobs and they also now had new desires for products. As purchasing came back it did not look the same as before.
Most supply chains spend a lot of time and money positioning to deliver the best mix of products at the lowest cost to customers which usually means being near those customers. But when customers move and their consumption patterns change at the same time there is bound to be conflict with the supply chain setup. This conflict is often hard to diagnose due to the complexity inherent in the natural supply chain balancing act.