Supply chains have never been more complex. Many of today’s biggest companies rely on tens of thousands of suppliers or more all over the globe to keep goods and materials stocked. Even smaller organizations depend on overseas suppliers to gain access to low-cost labor and specialized capabilities that others have developed over decades. Long gone are the days of simple, vertically integrated supply chains.
While there are advantages to how our supply chains have evolved, there are also downsides. Companies are now more exposed to disruption. They carry greater risk and are more sensitive to unforeseen events or issues that arise halfway across the world. At the same time, consumer expectations are rising, and people have more buying power in the marketplace.
It’s easier than ever for shoppers to compare multiple options and find trustworthy reviews before making purchasing decisions. They can also switch seamlessly between brands without consequence, which means the pressure is on companies to keep buyers engaged. And all this happens on superpowered mobile devices that are growing increasingly accessible to the masses. There’s more opportunity out there but capitalizing on it is easier said than done. It’s also more likely than ever for finished goods manufacturers to seek alternate suppliers should their traditional vendors not be able to meet demand.
Together, all these factors create a challenging landscape for companies and their supply chain planners, at least those who haven’t kept up with the times. The old ways of doing business don’t work as well in the modern economy, and supply chain executives have to make changes rapidly. But what exactly needs to change? How should leaders transform their supply chains to align with our current reality?
The answer lies in increasing end-to-end visibility and transparency across the entire supply chain. This includes extending digital platforms, data and workflows beyond the organization so that external partners can participate as well. But to fully understand why transparency is foundational for next-gen supply chains, we need to first dive deeper into what exactly is more complex about supply chain management today.
Our Supply Chains Have Grown Beyond Our Control
One of the more obvious drivers of rising supply chain complexity is globalization. Our supply chains now look more like webs than they do straight lines. Many companies partner with a multitude of suppliers who each have their own unique networks and dependencies, creating a wide array of relationships.
A North American brand might commission inventory from suppliers in Southeast Asia, Central America and the Middle East, forcing planners to coordinate across many time zones, languages and cultures. In turn, each of those suppliers may also work with entities on six continents to source components and fulfill their service obligations.
Similarly, the economies of individual countries are also more interconnected. Prosperity or hardship in one region has a tendency to spill over international borders. For instance, rising wages in China due to rapid industrialization means customers are paying more to have products made. This is obviously good for Chinese laborers, but bad for companies trying to keep their prices down.
Furthermore, products are also getting harder to make. Mechanical designs are more intricate, and a higher percentage of goods require electronic components. As a result, companies are having to resort to sophisticated manufacturing techniques and new materials. This complicates product development and raises performance expectations for external suppliers.
Moreover, the existence of same-day delivery and next-day delivery models have altered consumer expectations permanently for goods purchased online. In response, companies have had to onboard new suppliers and invest in their distribution infrastructure to accelerate go-to-market timelines. Consequently, supply chain planners and logistics managers have to oversee more activity and keep more manufacturers accountable to certain benchmarks.
So, managing supply chains today is in many ways a balancing act. Companies can’t rely only on one supplier in one region for a particular component, as they tie themselves to the success of that individual manufacturer. At the same time, enterprises with highly diverse, distributed supplier networks are vulnerable to disruption from every direction. As we’ve seen recently, global crises, like a worldwide pandemic, can have major performance implications—delays, shortages and lost revenue—for companies with outdated supply chain strategies.
The Pandemic Exposed Global Supply Chains
The COVID-19 pandemic made it clear to supply chain planners that disruptions are an inevitable consequence of doing business in an interconnected world. Since early 2020, companies have had to pivot and adjust constantly to navigate factory closures, material shortages, economic volatility and other factors that affect supply chain performance. We’re still recovering from the chaos of the pandemic, but the important thing going forward is that we don’t view the pandemic as a once-in-a-generation global catastrophe.
Extreme weather events, global financial crises, military conflicts, cyberattacks and more can wreak havoc. We can’t view these as one-off problems. The Suez Canal Blockage in 2021 revealed how much damage even isolated disruptors can cause. A 20,000 TEU container ship got stuck mid-canal, blocking hundreds of other vessels from passing through and disrupting the travel of $9B worth of goods each day.
What’s the lesson? Being able to handle these disruptors is now table stakes for operating in the global marketplace. The pandemic revealed weaknesses in our diversified global supply chains that we have to address. And one of the best tools for building resiliency against disruption is cultivating end-to-end supply chain visibility.
Visibility and Transparency are Paramount
In a world prone to disruption, supply chain visibility is essential. Although being able to forecast accurately is important, what supply chain leaders need today is better insight into what’s happening all across the supply chain ecosystem. Historical forecasting is useful in stable and predictable times. It’s less helpful for responding to unforeseen variables and challenges that throw existing models out of the water.
When disruptors emerge, planning teams must be able to rapidly evaluate all aspects of their operation, such as on-hand materials and inventory, capacity constraints, and order statuses, as well as problem-solve alongside external partners who have access to the same information. Companies have to encourage transparency between themselves and their suppliers so that all parties know what is unfolding in real time.
For instance, planners need to know immediately if one supplier is overstocked on a certain SKU or if they are struggling to source a specific component. In an ideal world, the company wouldn’t have to wait for the partner to share this information or even expect the supplier to do so amid all the other tasks at hand. On the flipside, suppliers should be able to see instantly when new orders come in or when changes are made to existing orders. They shouldn’t have to depend on their brand customers for this information.
It’s this two-way transparency and visibility that speeds up the flow of information and empowers cross-organizational teams to make better decisions. When disruptions emerge, all stakeholders can collaborate from a single source of truth and align on next steps more easily. For this to happen, companies have to digitize their operations and extend easy-to-integrate technology to their partners. They need to replace static spreadsheets, monolithic ERPs and phone calls with cloud-native systems where all information is available to those who need it.
A shared platform for managing orders, materials and capacity breaks down barriers that have long prevented companies and their suppliers from working together as efficiently as possible. No matter how many suppliers companies use or where they are located, the right software can facilitate the visibility, resiliency and collaboration needed to handle disruption when it surfaces.
Companies can worry less about improving their forecasting abilities and focus more on empowering all people throughout the supply chain, even those who work for external suppliers. And leaders can move forward confidently knowing they are better equipped for whatever the world throws at our supply chains next.
Manda Schweitzer-Miller is industry marketing director with Kinaxis, a provider of supply chain management and sales and operation planning software.
