Companies Need More Supply Chain Transparency Amidst COVID-19
Although more companies have begun to re-open stores, offices and other facilities, business is anything but usual. No one knows how quickly economic activity will rebound and many businesses need to adjust their operations to meet current health and safety protocols.
Yet repositioning your own operations is only part of the challenge. Your suppliers likely face significant obstacles of their own, such as in terms of their ability to ramp up production, navigate freight delays and price increases, and source materials for their own needs.
As such, businesses need more transparency into their supply chains so that they can more easily understand what to expect from suppliers in terms of their pricing, speed, compliance risks, etc. By gaining this transparency, organizations can then better position themselves to succeed in this new environment by making adjustments like adding redundancy into their supply chains or sourcing items further in advance to reflect current shipping speeds.
Using Technology to Increase Supply Chain Transparency
To gain a better understanding of their supply chains, companies need to be able to track and analyze supplier activity.
For starters, some companies aren’t even fully aware of all the suppliers in the network, having worked with a wide range of service providers and manufacturers over the years. So procurement teams and other departments involved in managing supply chains need to create an up-to-date catalog of vendors and track purchasing with each one, rather than just Tier 1 suppliers.
Using an e-procurement or spend management platform can help in this regard, as spend data associated with each vendor can automatically get captured with each purchase. From there, companies can identify issues such as being exposed to geographic risk by allocating a large proportion of spend to vendors in a certain region.
Instead, a company might want to add more suppliers within their own region and add a layer of redundancy. That way, if one state continues stay-at-home orders longer than the state your main office is located in, for example, you won’t be fully reliant on suppliers that need to scale back operations.
Diving deeper, companies should aim to track and analyze supplier-specific data such as delivery quality and speed. These areas might get overlooked compared with base pricing, but if you can identify issues such as suppliers taking longer than usual to deliver orders or making more order errors than they have in the past, you can then make adjustments such as switching suppliers or negotiating new terms with a vendor to reflect their current capabilities.
In addition to data tracking and analysis tools, newer technologies like blockchain can also increase transparency, such as by tracking and verifying how and where products are sourced. For example, amidst COVID-19, IBM released a new blockchain-powered tool to quickly qualify and identify new suppliers that organizations might not have worked with in the past. The tool can also track inventory in real-time.
Improving Supplier Relationships to Increase Transparency
While technology can play a significant role in helping organizations gain transparency into suppliers’ inventory, reliability, speed, etc., some aspects of improving supply chain insights rely on forming stronger relationships with suppliers.
For example, in this new operating environment, companies may want to understand how their suppliers practice physical distancing in order to get a sense of the risk of an outbreak at their facilities or to see whether there could be a reputation risk from working with suppliers that disregard safety protocols.
As procurement and finance teams build relationships with suppliers, they can ask specific questions on these issues with suppliers, rather than simply ordering from a company where they have no insights into their operations. And as organizations build trust with suppliers, vendors might be more forthright with any challenges they’re facing so that together both parties can work out a solution.
For example, the data might not show any issues with suppliers hitting their targets, but a supplier might be struggling to keep up internally. If they’re transparent with you about this issue, you might be able to work out an arrangement such as reducing order sizes and spreading out delivery windows, which could be a better alternative to receiving rushed orders that have reduced quality.
Gain a Full Picture of Supplier Health
Due to COVID-19, the top area of supply chain strategy that CFOs plan to change is understanding the financial and operational health of suppliers, according to PwC. Getting this full picture of supplier health requires a combination of technology and building relationships to dive into areas that data might not uncover.
By gaining this transparency, companies can build resilience and flexibility into their supply chains to improve their chances of succeeding in this new environment.
Want to learn more about how e-procurement/spend management technology can help your company improve supply chain transparency? Request a complimentary consultation with our product experts today.
If your organization needs to source PPE or cleaning supplies during this difficult time, we may be able to help. Please reach out to request access.