"Supply Chain 3.0" represents the next step forward in a natural evolution, driven by global supply chains, says Kevin Cornish, chief technology officer of Aravo Solutions. "We think it's key to buyer-supplier relationships," Cornish says. Companies are moving away from a strict reliance on just-in-time (JIT) supply strategies to a more collaborative approach in working with vendors.
The word "collaboration" means that a typical relationship has evolved into something more "symbiotic," he says. At this stage, buyers and suppliers share detailed knowledge about the conditions they're facing, and the challenges of serving local markets.
Good supplier management is especially critical in a poor economy. In addition, it puts companies in a position to compete when recovery occurs. They will already have focused on measuring the performance of key suppliers, and brought them into the "virtual enterprise." In the process, they improve product quality while making better use of limited capital. And they are able to respond more quickly to actual demand signals.
Mere access to information won't do the trick. "The bottom line is, you want actionable data," Cornish says. Companies need to look beyond the particulars of basic transactions to include such factors as a supplier's access to capital, its banking relationships, the security of its information pipeline, and other companies with whom it's dealing.
A company just beginning to develop a risk-management program needs to identify the gaps in its supply chain. The best place to start, says Cornish, is within the organization's own walls. "Ask employees [about] the issues they see. Put together a holistic view. You should be looking at the entire supply chain, not just the 10 percent." The company also needs to engage with its Tier 2 and 3 suppliers, he says.
Beyond that, businesses have to engage in truly collaborative relationships with outside suppliers. "That means having an investment in their success," says Cornish. "Enterprise" risk management means taking into account all challenges related to the global marketplace, especially in emerging markets.
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