Major global events of the last five years have sent shockwaves through supply chains, accelerating pre-existing trends toward diversification and introducing an array of new risks. If businesses weren’t already uprooted by rising operational costs in China, or pummeled by tariffs arising from the U.S.-China trade, they’re almost certainly now impacted by the colossal disruptions and mass unpredictability caused by the COVID-19 pandemic.
The supply-chain landscape is likely to remain turbulent for some time, especially as consumption habits change and demand remains volatile in the face of ongoing trade tensions, quarantine provisions and travel restrictions. Diversification is key to survival, but a shift of sourcing is more than a matter of flipping a switch. It involves dealing with mounting compliance hurdles, and potentially high costs for onboarding new suppliers.
Many brands are digitizing their supply-chain networks so as to acquire a 360-degree view of suppliers’ production, quality, social and environmental compliance standards. In a July survey of over 200 brands conducted by QIMA, two-thirds of respondents reported that the pandemic had accelerated their company’s resolve to digitize their supply chains in 2020, including the use of new remote-inspection tools.
Here are five benefits those companies are likely to see.
Fewer pain points from manual processes. Supply networks are complex operations that engage hundreds and sometimes thousands of people, ranging from suppliers to factory owners, laborers and inspectors. While recent technological advances have improved traditional supply-chain management processes, many brands still operate manually when it comes to data processing.
For example, manual inspections use paper sheets for measurements and produce hand-written reports, which are submitted to the quality-control manager, who then needs to review disparate reports coming from a multitude of sources. When this repetitive effort is applied across multiple transactions, it accounts for a great amount of time that the employee is spending on data input. Furthermore, such manual processing is subject to human error, and is largely inconsistent from inspector to inspector. This yields poor visibility and limited insights, making it difficult for brands to make smart, data-driven decisions, or even know what’s happening in their supply chains at a given moment.
Centralized and streamlined data. A strong digital platform automates the data entry needed across business operations, automatically collecting and updating data points from all relevant sources within a brand’s supply-chain ecosystem. It then makes these data points accessible within a single system, rather than having it fragmented across multiple systems that don’t communicate with each other.
When data sets are automated and centralized, workflows can be streamlined, and hours of effort can be saved. Saved time and resources can be reallocated to more valuable efforts. This could mean automating in-line inspections at factories found to be at risk, or automatically approving reports to ensure fast-paced shipments. Essentially, automation allows managers to spend more on other activities that help grow the business, such as negotiating better vendor prices and building supplier relationships.
Faster speed to market. Whether it’s a Lyft, Amazon.com or Venmo, companies gaining share in today’s marketplace have at least one thing in common: speed. Thanks to smart technologies and mobile devices, consumers have grown increasingly impatient, and want their products as quickly as possible.
Brands that fail to deliver quickly and efficiently will lose sales opportunities and surrender market share to swifter competitors. But speed is largely contingent on supply chains. A digital supply chain offers real-time visibility into the transit of goods across supply networks, tracking everything from product conception to inspection, transportation and arrival at destination.
Real-time visibility into the entire supply network empowers brands to make decisions based on accurate data, ensuring that products are delivered in a timely and efficient manner. For example, if an early warning emerges that a typhoon will occur where certain factories are located, remedial action can be taken, such as shifting sourcing to sites in safe locations.
Flexible risk response. Since 2018, global brands that source from China, the world’s unrivaled manufacturing leader, have been caught in the crossfire of the unfolding U.S.-China trade dispute. High tariffs have driven many brands to shift sourcing to alternative geographies, especially for final product assembly. But these sourcing pioneers have encountered underlying risks for quality and ethics, especially when securing new suppliers in less-developed manufacturing markets.
Assessing the effects of the U.S.-China trade war before the pandemic, a Q1 2020 QIMA Barometer Report found that inspection demand among U.S. buyers in China had plummeted 14% from the prior year, whereas demand had soared in neighboring markets in Southeast Asia (rising 9.7%) and South Asia (rising 37%). However, ethical indicators, such as labor compliance and sustainability, were more likely to suffer in regions that experienced an influx of buyers, with the report tracking a 4.3% drop in ethical scores in factories in Southeast Asia, and a substantial 7.1% drop in Bangladesh.
In an environment laden with trade disputes, tariffs and closed markets, brands must accept that global trade issues and COVID-19-related disruptions will continue to steer their supply chains. In response, they will need to adopt a nomadic sourcing model, boosting their ability to shift production and sourcing to the lowest-cost and highest-value geographies. A digital supply chain enables the real-time visibility and capabilities needed to adopt such a model.
Stronger supplier networks. An MIT Pulse Survey conducted earlier this year found that 38% of respondents hadn’t mapped their supply chains. Even more alarming, 65% hadn’t mapped their supplier’s suppliers. Why not? They simply lacked the tools to do so.
This disturbing trend suggests that a considerable number of brands are being left in the dark when it comes to supplier relations, lacking data and real-time visibility into what’s happening on the ground. Without these critical insights, it becomes nearly impossible for brands to respond to the rapidly evolving, unprecedented changes of the present. Such cracks and kinks in the supply chain leave brands vulnerable to external risks, especially when it comes to supplier relations.
A digital supply chain provides a single platform where all of a brand’s supply-chain partners — including vendors, logistics partners, suppliers and inspectors — can communicate and collaborate. This capability builds teamwork within supplier networks, allowing for misunderstandings and problems to be detected early on in the production cycle, rather than being manually reported before it’s too late. A collaborative environment helps brands to future-proof their networks with suppliers they can trust.
Sébastien Breteau is founder and CEO of QIMA, a quality-control and compliance service provider for brands, retailers and importers.
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