Given the events of 2021, it’s safe to say that supply chains do, in fact, run the world. Covid-19 brought the world to a grinding halt. Around April 2020, supply chains were a mess, with zero predictability and complete uncertainty, a tough time for procurement, sourcing and supply chain professionals to say the least.
While Covid-19 will have long lasting effects due to its severity and global nature, unsurprisingly there were other things that caused supply chain disruptions. The tariff and trade wars, the ship that blocked the Suez Canal, the rising tide of environmental, social, and corporate governance (ESG) and of course, one that hits the electronics industry directly, the global chip shortage.
For me, 2021 was a stark reminder of just how closely the world is connected. It further confirmed that the more businesses operate and think like individual entities the more exposed they are. Throughout uncertain and difficult times, organizations that are least impacted are those that have built up some resilience and have the ability to be agile. Not only within the organization but amongst its ecosystem, particularly suppliers. Within the highly competitive electronics industry there were already challenges such as rapidly shifting consumer demand and shrinking product lifecycles. Staying competitive in this environment already requires some level of agility and resilience, and always will. But, what does it really mean, to have agility and resilience?
They may sound similar but they are not. Resiliency enables an organization to withstand a shock or disruption without being permanently impacted. Agility is the ability to think and understand quickly in order to move rapidly, with ease. So, in fact, having one without the other, seems incomplete. For instance, an organization may be resilient to changes but not have the agility to bounce back rapidly, or, may be fantastically agile but in doing so, has weakened its safeguards. Either way, from a procurement and supply chain perspective these are both abilities that need to be developed and matured and one of the foundational components to building agility and resilience, is the right technology.
Resilience requires data
Without technology, achieving a resilient and agile supply chain is simply not possible. Procurement and supply chain platforms are what digitally connect an organization to its suppliers, providing the necessary information on suppliers, the data to understand and plan supply and demand, the infrastructure to communicate and collaborate, the processes and automation to enable efficiency and much more. Too many organizations still suffer from poor data, a lack of standardized processes, manual activities around suppliers, poorly managed costs, contracts, performance, risk and more. All of this, exposes an organization to disruption and weakens resiliency and agility.
For supply chain and procurement platforms to be most effective however, data quality and accuracy must be addressed. Quality master data is what fuels the efficiency of other procurement and supply chain processes. Too often, organizations band-aid the data problem, which can cause issues in the long run. Procurement and supply chain platforms centralize data and processes, providing the necessary level of visibility, automation and insight to make better decisions across end-to-end processes such as source-to-pay.
When it comes to complex supply chains, such as within the electronics industry, visibility and information on suppliers beyond tier 1 can be a true game changer. Many procurement teams lack any visibility beyond their tier 1 strategic suppliers for each product line, limiting the ability to secure that the necessary materials required to produce a product are consistently available. With supply chain disruptions and shorter product lifecycles, this level of visibility can make a huge difference.
Supplier performance and risk have been a big concern throughout 2021 and will continue to be a hot topic for the years ahead. Understanding and getting early warning signs of poor performance or rising risk levels amongst suppliers is another critical part of building resilience. With visibility into such issues, organizations can respond and plan together with those suppliers or find alternatives, as opposed to being caught off guard.
Another area where supply chain platforms offer improvement is in the communication and collaboration around demand forecasts and orders between buyers and suppliers. Due to fluctuating market dynamics, the automation of this process is critical. This ensures that changes in demand are being accurately communicated to suppliers and that suppliers are confirming what they can supply and when. Surprisingly, this back-and-forth collaboration that is critical to supply chain efficiency, is often a mess.
The single-platform solution
These are just a few examples of how procurement and supply chain platforms can help build resilience and enable agility. Such platforms bring efficiency, visibility and automation to key process areas such as strategic sourcing, contract lifecycle management, supplier relationship management, procure-to-pay, supply chain collaboration, inventory management and more. Having all of the activities between a buyer and its suppliers on a single platform versus multiple disparate solutions are significant and largely centered around data quality. End-to-end visibility regarding everything going on with your suppliers is immensely important and goes a long way in building supply chain resilience.
Overall, yes, technology is core to building agility and resilience but so is organizational mindset. A mindset that focuses on long-term supplier relationships, supplier development, collaboration and innovation is far more likely to survive than one that focuses solely on costs. Achieving more savings might help improve margins but doesn’t do much for building resilience or agility.
As far as the technology goes, organizations should always keep in mind that software is simply a tool and often it is a tool that can impose restrictions and limitations. For example, not being able to change a workflow or not being able to add new fields to capture new data. However, there are platforms that have been designed for flexibility and can evolve and adapt along with business needs and these can truly help build agility and resilience that is tailored specifically to that business or industry.