Global supply chains are becoming increasingly complex, as businesses juggle multinational suppliers and service providers, constantly shifting regulations, and more informed consumers demanding increased responsiveness and sustainability.
This high level of complexity is a challenge for many organizations. It highlights the need for more transparent supply-chain networks to help mitigate risks and stay competitive.
To better understand how today’s leading organizations approach supply-chain transparency, Bloomberg Environment surveyed 350 executives responsible for overseeing supply-chain operations and frontline management practices. The survey assessed the level of supply-chain complexity and visibility within each organization, rating it as:
- Low complexity: one or two parameters in the supply chain
- High complexity: three to six parameters in the supply chain
- Low visibility: in the bottom percentile for average visibility
- High visibility: in the top percentile for average visibility
Following are key findings from the survey, as well as strategies that can help your organization build a more transparent, responsive supply chain.
Complexity breeds risk, but transparency can help mitigate it. Companies with low complexity in their supply chains are exposed to fewer risks, yet they report experiencing more disruptions than those with highly complex supply chains. In contrast, companies with high complexity and high visibility in their supply chains report increased risks, but fewer disruptions throughout the chain.
What this means for you:
Whether your company has a high- or low-complexity supply chain, inadequate transparency will likely lead to increased risks or more disruptions.
As an example, imagine that your company sources a hinge from a manufacturer, and you’ve discovered that it’s repeatedly bending and breaking. That one little hinge probably isn’t a big concern to the manufacturer. But if your business is planning to use that hinge in a child’s toy box, it quickly goes from being an issue of product quality to one that puts children at risk, becoming a major liability.
This scenario underscores the importance of gaining transparency into all players and products in the supply chain. Breakdowns across the chain can lead to risks that impact a company’s reputation, business growth and consumer trust. In an increasingly global economy, consumers expect even greater responsiveness and visibility into the companies they do business with.
The right technology is critical to increasing transparency. Companies with high visibility into their supply chains are initiating technology improvements more often than those with lower visibility, including investments in network infrastructure, network security, supplier-analysis tools and the use of connected devices throughout the chain.
What this means for you:
For many organizations, driving greater transparency starts with first understanding supply-chain complexity. A digital approach to supply-chain management can help your business get a handle on these complexities, giving you greater insight and control over end-to-end operations.
Christian Anschuetz, chief digital officer at UL, recommends that companies consider putting technology to work by investing in trusted systems and digital-core service collaboration with partners that offer big data capabilities and tools. For real-time, accurate transparency, a trusted technology partner can be a valuable ally in centralizing and interpreting vast amounts of data throughout the network. In addition, tools like artificial intelligence (A.I.) and machine learning have made the impossible possible, enabling many organizations to better manage complexity in their supply chains. As you expand your capabilities, it’s vital to immerse your leaders in the digital journey, so they can help you develop data-focused acumen throughout your organization.
In today’s increasingly complex regulatory landscape, a digitally driven approach is even more essential for achieving transparency. For instance, a retailer may have thousands of SKUs sold in markets with ever-changing national, regional and state regulations. Given that reality, it’s not possible for mere mortals alone to manage all of the inherent complexities. With the help of machine learning-enabled tools and collaborative thought leadership, however, compliance and risk mitigation become more manageable.
Highly transparent companies invest in a hands-on approach. To increase visibility into their supply chains, highly transparent companies invest in resources such as dedicated oversight committees, on-site supplier inspections and third-party consultants. For example, 84 percent of high-visibility companies conduct on-site inspections, while nearly half (42 percent) of low-visibility companies are unsure if they even have inspections.
What this means for you:
In today’s world of multi-level supply chains, companies must fully understand who their suppliers are, the products they supply, their costs, and their lead times. For those that don’t, a more hands-on approach to optimizing every level of the supply chain is critical.
To accomplish this, consider designating on-site supply-chain managers or supervisors who visit each site, track business operations and production, and report back to the executive team. In addition, individual oversight, coupled with automated systems, can ensure that suppliers and those working within the supply chain are accountable at every step.
Companies with highly visible supply chains pursue sustainable business and corporate social responsibility (CSR) initiatives. Nine out of 10 companies with high visibility into their supply chains have either launched CSR initiatives or are in the process of doing so, compared with 58 percent of low-visibility companies. The need for a sustainable supply chain is increasingly important to companies, thanks to the emergence of new laws and growing customer preferences for sustainable brands.
What this means for you:
Increasing concerns about the environment and sustainability issues have stimulated governments and international organizations to create and enforce new laws. Thus all players, including suppliers and manufacturers in the supply chain, should take steps to increase their own sustainability efforts. Furthermore, companies are obligated to meet the standards and criteria to stay competitive and continue with sustainable growth.
However, it doesn’t stop there. In addition to environmental issues and regulatory concerns, social issues are becoming increasingly more important, with pressure coming from customers themselves. Although CSR activities require a great amount of investment, companies that integrate CSR concepts into their business processes achieve higher customer satisfaction and loyalty, better corporate image and reputation, higher productivity, lower costs and thus higher profitability.
By leveraging the right mix of digital tools, strategic partnerships and hands-on tactics, global organizations not only can increase supply-chain transparency, but also greatly benefit from it. The ability to connect ecosystems and drive insight can help to streamline operations, reduce risk and further company growth in a fiercely competitive business environment.
Mark Kozeal is director of product management with Bloomberg Environment.