Embrace the ones and zeros

With nearly all industries embracing the digital revolution in one way or another, it sometimes seems as if the world has been reduced to ones and zeros. As with all things, though, there is always room for improvement. TradeBeyond’s ERIC LINXWILER* explains how digitalisation fosters more resilient, geographically diverse supply chains.

Until recently, brands and retailers had discussed diversifying their supplier bases as part of their long-term plans – something they aspired to do eventually, but not necessarily anytime soon. The last few years, however, have accelerated that timeline. Recent global events, including mounting geopolitical conflicts, climate disruptions, port closures, and raw material and component shortages, have opened retailers’ eyes to a more urgent need to geographically diversify their supplier bases.

Forecasts now predict that more than 60% of US and European manufacturing companies plan to relocate some of their Asian production over the next several years. This is likely to translate into more business with India and Vietnam, countries that 67% of US companies say they view as attractive alternatives to Chinese manufacturing.

It could also mean more nearshoring, a practice that would help companies meet long-term sustainability targets. The shorter shipping distances reduce the environmental footprint of products, while moving production to countries with tighter labour regulations could help companies to alleviate concerns about enforced labour in the supply chain. Some US companies have already started relocating production to Mexico as competitive wages, lower transport costs, and environmental benefits have made sourcing from that country more attractive.

As businesses work to build more resilient supplier networks in response to economic and political volatility, they must start by investing in digitalisation. Once seen as a competitive advantage, supply chain digitalisation has become an indisputable necessity as the supply chain has grown more complex and more outsourced, with many brands and retailers relying on vast overseas networks to supply and manufacture their products as they have increasingly invested in their private label lines.

Businesses have recently made some progress toward digitalisation. Nearly 80% of supply chain leadersreported accelerating their digital transformations in the wake of the pandemic, and those investments should help them better navigate the obstacles that lie ahead. In truth, however, some of the systems they have implemented have a narrow application and don’t integrate as frictionlessly as they need to.

Businesses that outsource their supply chain should be optimising their processes from end to end. That means implementing a multi-enterprise platform that can streamline everything from sourcing, logistics, and product development to vendor, order, and quality management. All of these are integral to controlling costs and helping businesses mitigate supply chain risks.

A multi-enterprise platform helps businesses more quickly identify, select, and onboard suppliers, allowing companies to diversify their supply chains faster. It also facilitates smarter, more cost-effective material procurement. The right system can identify missed cost saving opportunities and show landing costs for different commodities based on countries of origin. Additionally, it can help predict demand and identify alternate or future supply sources.

Digitalisation creates visibility into prices, supply bases, and costs, enabling predictive sourcing and allowing buyers to negotiate more transparent agreements. When brands and retailers have visibility into sources and suppliers they weren’t already using, they are better able to mix and match materials during the specification and procurement process. This visibility is key to sourcing competitively, especially for businesses that are geographically diversifying their supplier bases or branching out into new product categories.

A unified view of supply chain operations

For businesses to stay agile enough to navigate global volatility and respond to consumer trends while capitalising on market opportunities, they must take a unified view of their supply chain planning and strategising processes.

The needs of supply chain departments are vast and varied. As port backups become more pervasive, logistics departments require timelier, more reliable data. Sourcing managers require efficient systems for managing enormous global networks of suppliers, selecting and onboarding new vendors, and collecting and comparing quotes.

Merchandisers also require smarter systems for confirming orders with suppliers and for getting status updates on orders after they’ve been issued. This ensures any changes to those orders are received and approved by suppliers. This is often difficult, since the industry’s reliance on spreadsheets means that parties are often working from inaccurate or outdated information.

Quality managers, meanwhile, need better systems for controlling risk and viewing historical vendor performance. They also need a smarter way of managing inspection schedules – as well as a system for quickly tracing the root cause of defects and communicating between factories and third-party testing and inspection agencies – otherwise delays in the inspection process can slow a product’s time to market. Of course, all departments also need to know whether shipments are arriving on time, since all too often teams only find out about delays after it’s too late to prevent them.

A digital transformation with the right multi-enterprise platform addresses all these problems. A connected supply chain management software suite can extend the data that businesses are already entering into their product lifecycle management, making it available to all stakeholders across all departments. This software serves as a central conductor of all supply chain operations – it monitors orders and suppliers and keeps departments on track, even as the order volume they manage increases.

For compliance teams and supply chain sustainability managers, the benefits of digitalisation via the use of a multi-enterprise platform are especially profound. Due to recent regulations like the United States’ Uyghur Forced Protection Act and Germany’s Supply Chain Due Diligence Act, large brands and retailers face more stringent requirements.

To meet these requirements, businesses require complete documentation of all their suppliers, from raw materials to finished goods. They also must be able to document the full chain of custody for materials, including where they were made and shipped from, and encompassing all transformations from raw materials to finished goods.

Brands and retailers that have already started their digital transformation have made an important first step toward a more responsible and agile supply chain. To reap the full benefits of digitalisation, however, they need to ensure their digital transformation covers their supply chain processes from end to end. This is the surest way for businesses to set themselves up for success, regardless of how their supplier base evolves in the years to come.

* Eric Linxwiler is senior vice president of TradeBeyond – a leading provider of multi-enterprise platforms for extended supply chain orchestration. He has over 30 years’ experience in enterprise software and cloud-based service companies, with a speciality in supply chain optimisation and workflow management.