As semiconductors become scarce in 2021, companies in the electronics supply chain are seeking better visibility into long-term chip demand. Two research reports shed some light on why visibility, in general, is so hard to achieve.
More than half the companies recently surveyed by the Economist Intelligence Unit (EIU) rely on their own data for intelligence on their supply chain. Only half the companies surveyed by Dimensional Research can access supply chain information to glean business insights.
These two data points are crucial as companies strive for resilience following the Covid-19 debacle. Many electronics companies found they had an adequate view into their top-tier suppliers but lacked visibility farther up the supply chain where a materials shortage could stall production.
"While each industry faces unique supply chain dynamics, in a time of increased turbulence it has become critical to reconsider the balance between efficiency and resilience," said Association for Supply Chian Management (ASCM) CEO Abe Eshkenazi in a statement. The ASCM sponsored the EIU’s research.
Consumer electronics companies have improved their forecasts by integrating vendors into their supply chains earlier, and at a higher level, than other industries, said Claire Casey, EIU global head, policy and thought leadership.
The Covid-19 pandemic also shined a spotlight on integration gaps in supply chain processes and how those gaps impede revenue and threaten business survival. The Dimensional Research report, commissioned by Cleo, queried hundreds of IT decision makers and found:
- 74 percent of companies lost more revenue due to integration issues in 2020 than in 2019
- 88 percent of businesses lost orders, and more than half said they lost more orders in 2020 than in the previous year
- 25 percent admit they really don’t know how many orders they are losing
Businesses must be able to access their supply chain information from end-to-end to garner valuable data, the research found.
An end-to-end-to-end supply chain refers to the entire process starting at the procurement of materials from suppliers and ending when the product reaches the customer. According to the EIU research, just over half of the companies surveyed rely on their own internal data. In addition, 37 percent of companies reported that their visibility was hampered by either internal siloes or was not data-driven at all.
This limits companies’ ability to detect emerging threats or calculate how a disruption will unfold. In addition to improving visibility, data from across the supply chain can unlock higher-level capabilities that lead to greater supply chain resilience and innovation.
A benchmark developed EIU shows that high performers build an “outside-in” picture through the integration of supply chain partners into demand forecasting and planning.
The benchmark is based on October 2020 survey data from more than 300 public companies and input from IBM Sterling, Intel, Novartis, AbbVie, the Consumer Technology Association (CTA), and the Retail Industry Leaders Association (RILA).
Even in the midst of a crisis, said Casey, companies should plan for the next disruption.
The EIU survey also found:
- Companies ranked supply chain sustainability as a top way to build resilience over the next three to five years, but there is a gap between rhetoric and reality. Less than half (42 percent) of companies have set targets to reduce supply chain-related carbon emissions, even though climate change is among the biggest risk factors of the 21st century.
- Business continuity plans and playbooks should include triggers outlining actions to be taken across a range of disruptions. Overall, only 57 percent of companies benchmarked claimed that they had business continuity plans that met this criterion. The pandemic has revealed that business continuity planning needs to include practical guidance on all processes including those that seem less critical.
- Companies are building strategic supply chain resilience by forging strong long-term relationships with key suppliers and customers. High performers work together with their supply chain partners by sharing best practices, joint long-term planning and providing financial assistance to preserve supply chain networks. Over half (55 percent) of companies benchmarked stated that they directly helped suppliers remain solvent during times of crisis.
Cleo’s research indicates that companies that have embraced digitization still fall short of end-to-end visibility, largely due to poor systems integration. The survey revealed that companies lack sufficient visibility into, or control over, what’s really happening with their supply chains:
- Only about half of the companies surveyed indicated they could access supply chain information to glean business insights. Yet nearly 9 out of 10 companies said having end-to-end process visibility was important for their business.
- Most companies added new supply chain partners in 2020, and while onboarding generally happened faster than in the previous year, the pace woefully lagged what the business needed, contributing to negative impact on revenues.
- Legacy systems and insufficient application integration capabilities were key reasons companies encountered difficulty onboarding new partners, highlighting the importance of having API and EDI integration capabilities on the same platform.
Organizations have gained a new appreciation for the value of cloud integration, the report concluded.
“Digitalization of business and cloud integration initiatives are not new to B2B organizations, but in 2020, the pandemic shined a light on how important these initiatives are to revenue growth – and for some, survival,” said Tushar Patel, CMO of Cleo, in a statement. “Organizations have gained a new perspective on how important modern integration platforms are to dynamically respond to market conditions, whether those are new revenue opportunities or supply chain disruptions."
Survey respondents have taken steps toward cloud integration, including:
- Going digital: 66 percent said they increased their digital business capabilities (e.g., eCommerce, digital supply chain).
- Targeting new audiences: 34 percent said they started targeting new audiences, while thirty-two percent created altogether new lines of business, while 17 percent terminated some.
- Creating new business models: Nearly one-third (30 percent) decided to fundamentally change their business model; for example, one-quarter making a shift to a direct-to-consumer (DTC) model, or 32 percent deciding to increase their focus on customer loyalty programs.