The world is a riskier place. Before COVID hit, companies expected to see disruptions to their supply chains lasting one to two months every three-and-a-half to four years, interspersed with several shorter-lived hiccoughs.
This grim outlook reflects two realities. One, the climate is warming and serving up more frequent, more severe weather events. Two, globalisation has led to increasingly complex supply chains that have been built for cost and efficiency, not resilience. In the face of a harsher world, we’re brittle when we need to be malleable.
We’ve known for a while now that the modern supply chain simply isn’t resilient enough, but COVID has given the call to action more urgency. The first step, however, is always the most daunting. Where to start? Let’s take a look at what we think are the most important aspects to consider when introducing supply chain resilience.
Look within, not without
What do you use? A crystal ball? Tarot cards? Palm reading? Whatever your preferred method for predicting the future, keep it away from your business. Unless you have a DeLorean sitting in your garage (or you’re Bill Gates), you have little chance of predicting when the next disaster will hit, natural or otherwise.
Instead, you need to look within. Don’t predict disasters – predict failures in your supply chain. Where are your vulnerabilities? In which areas are you single-sourced? Where are you blind?
Mistakes are the greatest teacher. One way of answering these questions is ensuring that you run a full analysis whenever you experience a non-conformance event. Figure out what went wrong and why. You need to know how well your current processes are functioning, and how this compares with other organisations if you are to achieve supply chain resilience. Benchmarking is an invaluable tool.
Supply chain to value chain
Who makes up your supply chain? Ask this to your typical procurement manager and they’ll reel off the names of first tier suppliers like they’re siblings. Second tier suppliers? They’re more like cousins. A little hesitation, an um and an ah, scratch of the head. Third tier and beyond? Forget it. Distant relatives. Second cousin to a step-brother’s first ex-wife.
This ignorance is dangerous, considering a fifth tier supplier has just as much potential to disrupt your supply chain as a first tier. In fact, it’s not uncommon to have one third-tier supplier providing materials to several second-tier suppliers. It’s the domino effect; if they go down, so do you.
We used to trust our direct suppliers to monitor and be responsible for their suppliers. This is no longer feasible. In 2011, Toyota’s Japan-based operations were shut down for two months when a tsunami hit north-eastern Honshu. To reduce the likelihood of this happening again, they’ve compiled a database of thousands of suppliers, along with hundreds of thousands of parts, to identify where it’s possible to shift the manufacture of components as needed.
Earthquakes hit Japan in 2016 and again in 2019. Toyota saw stoppages of less than two weeks.
Transparency is a win-win
Of course, all of these measures mean a lot more transparency in our supply chains. This is a win-win situation.
For years, we’ve been aware of consumers’ changing attitudes. It’s no longer just about price. They want to know how far a product has travelled, how environmentally harmful its production was, and how much (if any) slave labour was involved.
And now the government wants to know too. Modern slavery reporting is now mandatory for any organisation that turns over more than $100,000,000. This is huge. Companies simply have to get a handle on their supply chains. This isn’t only about compliance with law, it’s also about resilience and customer demand. There is no downside to supply chain transparency.
It encourages ethical behaviour, an agile supply chain and a loyal customer base.
Do what you do best, outsource the rest
A procurement team worth its salt requires appropriately trained staff, which we’ve written about very recently. But your skilled workers are useless if they aren’t being put to appropriate use. You need to focus on doing the tasks relevant to your area and expertise, and outsource as much as you can to those you can trust.
Digitisation and cutting edge software are your allies. Some businesses spend four or five working days compiling monthly reports. Four or five days every month. 25 per cent. At Comprara, we have the software necessary to automate this process. Imagine finding four or five extra days in the month.
When done correctly, outsourcing is about reducing labour costs by getting your existing workforce to focus on areas that directly impact the procurement function.
Digital transformation
Think of doing a jigsaw puzzle without the picture to guide you. That’s modern day procurement. We have all the pieces necessary, we just don’t know what it all means. This is why digital transformation is the buzz phrase of the past several years.
Value chains, transparency, uncovering vulnerabilities – none of what we’ve looked at is possible without AI and ML. The sheer volume of data involved in modern, complex supply chains means things will get lost in the churn without advanced machine learning and artificial intelligence to parse it all.
The first step in digital transformation is figuring out what can be streamlined in your organisation without digital help. Are there areas that can be improved before making an outlay on software? Only then will you know the specific type of digital transformation appropriate to you.
For instance, do you need to implement bots that reply intelligently to suppliers’ invoicing queries without human intervention? Do you need to perform a comprehensive spend analysis to uncover non-compliance or multiple purchasing orders that could be consolidated? Do you simply need to create a better online user experience for your customers? Should you take advantage of applications that analyse what the market is saying about your suppliers and benchmark your contracts?
The potential of artificial intelligence is expanding with every passing day and the longer you procrastinate, the further you’ll fall behind.
Breeding supply chain resilience
It’s decision time. If companies predicted significant disruptions to their supply chains every four years before the pandemic, imagine what they’re forecasting now. The world is riskier today than it was yesterday, and the same can be said again tomorrow. This decade has to be about transforming our supply chains from the brittle, Jenga-style skyscrapers they currently are to supple, agile and responsive networks. If you’re not sure where to begin, Comprara has the experience and the software to run a complete analysis of your procurement functions and highlight your most dangerous vulnerabilities. Book a consultation today.
