This is a contributed op-ed written by Sean Thompson, EVP of network and ecosystem for SAP Procurement Solutions. Opinions are the author's own.
No supply chain has been spared from the impact of the coronavirus. From small shops to multinational corporations, organizations continue to face challenges in manufacturing, distribution, logistics and demand functions, as well as with their overall financial well-being and that of their business partners.
A contributing factor to this disruption is the traditional, linear supply chain model, where each step is dependent on the one before it. Inefficiencies at one stage result in a cascade of inefficiencies down the line. And when the buyer and supplier are located at either end of the chain, it’s easy to see how collaboration breaks down, and end-to-end visibility is nearly impossible.
The resulting reactive and uncoordinated response makes it challenging for procurement teams to know exactly which suppliers, sites, parts and products are at risk. It is, therefore, extremely difficult to secure new sources of supply in a timely manner.
The network model
Our global, shared experience with COVID-19 has made it abundantly clear that organizations must innovate beyond the traditional, linear supply chain model and lean into a dynamic, collaborative supply network.
Unlike traditional supply chains, supply networks shift away from singular, point-to-point processes to a many-to-many structure that enables 360-degree visibility.
Once connected to a network, businesses become a buyer and a supplier, and they gain broad visibility into the interconnected operations of their trading partners. Beyond allowing companies to identify emerging trends or issues more easily, access to a network also enables them to collaborate with new partners, improve cash flow, develop new products and accelerate sustainability.
Connecting to a network that includes producers, vendors, distribution centers, warehouses, transportation companies and retailers contributes to a business’s overall ability to move with agility and address unforeseen circumstances.
Resiliency, profitability, sustainability
Not only are supply networks critical to the overall efficiency of an organization, they also play a pivotal role in advancing three key business pillars: resiliency, profitability and sustainability.
Recent data demonstrates that companies with resilient supply chains grow faster, because they’re able to move quickly when market demand shifts. Digital transformation is critical for organizations to withstand future disruptions and pivot toward recovery when they do occur. Supply networks offer greater transparency between trading partners and help organizations make decisions in real time.
Resiliency, in turn, plays a major factor in the overall profitability of an organization. Businesses that run reliable, automated supply chains generate increased revenue. The efficiency afforded by a digital supply network results in minimum friction and maximum output.
But automation and transparency are just the beginning. When business leaders think of the network as a profitability-driving tool across a network of business partners, they will discover that the ROI handles itself.
Businesses should take sustainability goals into consideration — not only across their organization but within their supply network, too. Beyond creating long-term value, sustainability can foster innovation and new ways of thinking that can ultimately lead to increased revenues, better customer relationships and improved brand perception.
Minimizing the carbon footprint of business operations is a concrete and important step to take. But organizations cannot ignore sustainability deep within their supply chains — from eradicating modern slavery to intentionally moving away from single-use plastics, to using sustainable or alternative materials. By using technology to spot inefficiencies and risk, companies can dig into the supply chains of their partners and suppliers, prioritizing those who are also making sustainability a priority.
Improve efficiency with a digital network
Transforming from a supply chain to a supply network should support a business’s total digital transformation strategy. By taking advantage of the latest digital tools, businesses can remain resilient and scale at a rate that creates a competitive advantage. Optimizing operations and breaking down functional silos allow digitally enabled supply chain networks to reduce costs and create opportunities for growth.
Velux Group, a large manufacturing enterprise, automated 64% of its 20,000 monthly order lines after digitally transforming supply chain operations and streamlining supplier collaboration. Now, Velux Group conducts transactions with more than 200 vendors and enjoys improved processes, accelerated delivery dates and more time saved.
Digital supply networks are built to anticipate disruptions and mitigate risks. They leverage technology and data analytics to provide a continuous flow of information. And while moving to a supply network requires fundamental changes to many aspects of an organization’s planning — from strategy, to business processes, to information technology — the ability to keep up with fast-moving market dynamics is essential.
This story was first published in our weekly newsletter, Supply Chain Dive: Procurement. Sign up here.