Industry TalkRegular Industry Development Updates, Opinions and Talking Points relating to Manufacturing, the Supply Chain and Logistics.
What Is Preventing Visibility in Multi-Tier Supply Chains?
A recent Deloitte survey estimated only 15% of CPO’s have visibility beyond their tier one suppliers. I found this striking. With so many companies feeling the urgency to build resilience and better manage risk, with all the growing pressure to operate sustainability and with greater transparency on how and where products are manufactured and sourced, and with today’s ease and ubiquity for connectivity and information at one’s fingertips, what is preventing supply chain visibility?
The Same Underlying Issues Have Been Holding Companies Back for Years
Years ago, I was the CEO of a key supplier to a leading hardware appliance OEM (original equipment manufacturer). The manufacturer undertook a big initiative to get all their major suppliers on a hub with the goal of achieving full visibility over supply and demand, faster response to planning changes, and more effective collaboration with supply chain partners. Although promising in theory, none of us wanted to share our performance data; we each saw the other suppliers as competitors and feared the visibility could disadvantage us in the marketplace. The manufacturer was a significant customer, so we capitulated, but the initiative was inadvertently cut short by market events. Nevertheless, looking back now, I can appreciate it as advanced for its time, and as the type of solution we ‘re all clamoring for today.
Even though supply chain visibility is far more achievable now, we’re still held back by the same underlying issues we had then.
Hesitancy around trust
Visibility comes at a cost – one we’ve spoken about before: trust. Some supply chains are trying to overcome this using blockchain, whose core function is to verify trustworthiness and reliability. Blockchain still poses numerous issues around entry and ownership within the growing and dynamic network environment, but chain-of-custody traceability is a must for visibility. That means looking beyond the materials provided by a company’s Tier 1 suppliers and the first line of customers who purchase their goods. The broader value chain includes every supplier’s supplier and every customer’s customer. Successful traceability efforts require collaboration. No company, no matter how large, can collect all the relevant information needed for robust traceability. Partnering strengthens the competitive advantage of individual companies as well as the ecosystem.
Siloed decision making
Another typical holdback is that many companies still believe supply chain visibility is an operations and procurement function and relegate it to that silo to manage. I’ve learned over the past few years that the presence or lack of visibility has company-wide implications and cuts across and impacts all functions. High level steering is required to not only encourage but insist on cross-functional communication and decision making. No longer can a company expect results from an up-over-down approach to decision making.
Deciding when to pull the trigger
Companies make more dramatic gains or losses during downturns than stable periods according to Bain & Company. With the looming recession, they suggest avoiding the typical three traps: burn-the-furniture, spray-and-pray, or wait too long before acting. The reality is a purely reactive approach is the wrong answer. This is the time to decide if you’re better suited to play defense by paring back on non-core products and services, focusing on core strengths, or to play offense by pushing the envelope on growth.
Why It’s Worth Pushing Past the Discomfort
We’ve all been in situations where we felt uneasy or uncertain of an outcome. Begin by expanding multi-tier visibility with those in your ecosystem you trust. Open and willing supply chain partners allow you to test the value of data exchanges, helping to better understand planning impacts, trace orders and shipments from allocation to delivery, and improve supply continuity, on-time shipments, and responsiveness to changes in supply and/or demand. Multi-tier upstream and downstream visibility will also enable you to dramatically reduce buffers and safety stocks.
Supply chain ecosystems that overcome initial concerns will likely do so to great advantage and these results can be shared with more hesitant partners. Common benefits include:
- Better asset utilization
- Reduced overhead from fewer expedites
- Lower cost of doing business with clients
- Ability to easily scale with partners
- Improved customer satisfaction
- Factual basis for performance management
Depending on your current digital maturity, company size, and complexity of operations, it’s not uncommon to see a remarkable return on investment (ROI). Founder and CEO of Alkimius Group: “The Innovation and Transformation Platform,” Mauro Gonzalez, shared with a Nucleus Research analyst that in his experience, businesses can save 3-7% in operational costs, as well as 3-5% in efficiencies across inventory, warehousing, distribution, and other parts of the supply chain just from implementing digital control tower and supply chain visibility technology. Moreover, neutral, cloud-based supply chain technology with support for real-time integration can typically help partners scale as fast as 2-4-month increments – sometimes even weeks.
Organizations would do well to make the initiative cross functional. Reimagining one’s entire business model and technology strategy isn’t easy, but it guarantees long-lasting, meaningful results. Think about it: The market and supply chain have evolved significantly over the past few decades, let alone the past couple of years, yet most systems of management haven’t changed that radically. Many organizations are trying to juggle unprecedented pressures – from supply chain shortages to sourcing challenges to the rising costs of raw material and logistics – using spreadsheets, legacy systems, and siloed processes and technologies.
Given the magnitude of change and demand, companies simply can’t apply the same purchasing models and strategies they used to. Supply chain visibility can no longer be seen as a pure operations function; the impacts of visibility affect the whole company. Create cross-functional teams to bring wide-ranging perspectives to the table. Learn how the lack of visibility affects all areas of your business, from customer satisfaction to compliance with contracts. Doing so will build a fuller picture about the objectives, standards, and key results you should be striving for. It will provide operations with a well-rounded understanding of the breadth and scope of visibility solution they need in terms of how success should be measured.
In today’s volatile market, it’s critical for businesses and their networks to push past their hesitancy around implementing multi-tier, multi-enterprise visibility and realize the benefits far outweigh the consequences. Implementing supply chain visibility helps create efficiency, reduce costs, and better serve customers. It is foundational to any sustainability initiative and integral to continued digital growth and transformation. But supply chain visibility alone is not enough. What will you do with what is revealed to you? In my next post, I’ll discuss how businesses can act strategically on what they see.
Ready to create transformative change? The MPO Multi Party Orchestration platform provides diverse businesses the critical foundation of multi-tier, multi-enterprise visibility they need to mitigate risk and impact, control cost, and maintain operational excellence and high customer service levels under changing conditions. To learn more, contact our team at [email protected] or by requesting a demo today.