The Future of Supplier Collaboration
Supply chain resiliency took on a new meaning in 2020. In the first few months of the pandemic, suppliers and procurement teams alike were left scrambling, desperately trying to maintain business continuity. The situation called for unprecedented levels of collaboration and visibility, which many organizations were not able to meet.
New research from Oxford Economics and SAP provides an inside look into organizations’ ability to respond to supply chain disruption across the globe. Conducted in June 2020, Oxford Economics surveyed 1,000 procurement and supply chain executives, nearly 500 of whom are responsible for direct spend. The findings revealed a significant chasm in the way organizations manage spend and critical supplier relationships.
Using detailed spreadsheets to manage supply chain issues involving trading partners is ineffective in managing real time supply chains. In times of economic uncertainty, even the most dependable supplier is at risk to abrupt, crippling issues. Over the past year, procurement and supply chain executives have learned that effective supplier collaboration requires transparent, real-time visibility into operational data, such as inventory levels, output capabilities and shipment status.
Industry goal posts have moved significantly as a result, threatening the future viability of businesses across the supply chain. In response, procurement leaders are turning to digital business networks to level the playing field. Here are some factors organizations are considering as they prepare for a post-pandemic world.
Suppliers Graduate to Partners
Supply chain collaboration has taken a significant leap forward in the past decade, but the research revealed that many organizations still have significant room for improvement when it comes to collaborating with their direct spend suppliers. Less than 50% of organizations had visibility into a suppliers’ ability to meet demand. In a normal year, poor visibility into inventory levels or inbound shipment status typically leads to inconvenient, yet mostly innocuous delays. During a global pandemic, the consequences of poor visibility into a supplier relationship can break a supply chain and even shut businesses down.
Ineffective collaboration is partly caused by a technology deficit and an unhealthy reliance on manual processes. According to the research, about one-third (32%) of executives said they still use phone, email and spreadsheets as their primary means of collaborating with external partners on key supply chain processes. While this manual method is no longer the industry standard, it highlights the gaps and inefficiencies that still exist across the global supply chain. Case in point: Only 26% of executives said their organization’s collaboration with top suppliers is highly effective in remediating potential shortages or overages.
Nevertheless, by isolating the companies in the survey that are further along on their digital transformation journeys and thus have more sophisticated supply chain processes, data shows a very different narrative unfolding. These “leaders” are building strategic partnerships with key suppliers that go far beyond the traditional transactional-focused relationship. For example, 76% of those leaders give critical suppliers visibility into future demand for their goods, versus 44% of others. This gives their suppliers the chance to better plan their own inventory needs. Transparency and digital capabilities can elevate the buyer-supplier relationship to a true symbiotic partnership.
Without visibility and collaboration, buyer-supplier relationships are merely built on sand rather than a strong foundation. Leading organizations have established a technology infrastructure to automate and speed up transactions with suppliers and collaborate on key supply chain processes. Procurement technology today can automatically detect patterns in the data and flag exceptions, triggering certain actions to help remediate issues. It is this type of agility that was needed during the outbreak of the coronavirus, and what will be necessary to withstand any future disruption.
Even the process of finding new trading partners can be time consuming and, frankly, mundane. With no easy way to discover suppliers with proper certifications and the right raw materials, at the right price, in the right geography, businesses expend a lot of time and energy before the onboarding process even begins. Alternatively, a digital trading partner network will help buyers find new sources of supply quickly and easily.
Join the Networked Economy
As global threats begin to dissipate and the economy rebuilds, procurement and supply chain executives still find themselves in uncharted territory. The further removed they are from supply chain intelligence, the more blind they are to risks and threats of disruption. This is why leaders are relying on network intelligence to inform spending decisions. A unified network allows businesses to discover and connect to trading partners of every type through a single portal, then collaborate across all of them using shared, near-real-time data and lean workflows. According to the research, 92% of leaders — versus 69% of others — use a network to collaborate with suppliers, which includes benefits such as the ability to discover new trading partners, and to use data from every transaction and contact point to make each decision and interaction more informed.
Without a unified business network for all trading partner collaboration, global supply chains are at a disadvantage with isolated, siloed attempts to connect a hodgepodge of suppliers, producers, distributors and service providers. By harnessing the reach and power of connected networks, organizations will be able to learn from the past, better predict the future and drive desired business outcomes together with a global community of partners.