Driving Connectivity In The Increasingly Complex Global Supply Chain

Only a small fraction of organizations say they are able to have full visibility into their supply chains. According to Geodis research, only 6 percent of organizations have obtained this visibility — despite visibility remaining a top-three priority.

Visibility is growing even more important as supply chains become more complex. There are more players involved, more transactions, more actions and more data flowing around. If something goes wrong, it’s more difficult than ever to pinpoint where — and why — it happened, and, more importantly, how to fix it. By the same token, increasingly complex supply chains mean greater risk exposures and greater chances for something to go wrong.

Pawan Joshi, senior vice president of product and strategy at supply chain management solutions provider E2Open, says there are a few main factors driving the increasing complexity of today’s global supply chain, and they’re adding weight to the pressure of gaining complete visibility across all players and actions of a supply chain.

“The biggest challenge that large enterprises face is that companies are not necessarily relying on people that they employ, or their own facilities, to make a product,” he recently told PYMNTS. “Even the design of some of their products is outsourced.”

At the same time, product lifecycles are getting shorter, Joshi added. Now, not only are multinational companies working with more entities, with more processes displaced, they’re also accelerating the pace at which their supply chains operate. While this is happening, organizations are struggling with what has become one of the biggest points of friction for companies undergoing digital transformations: the inability for their systems and platforms to speak with each other.

As Joshi explained, the platform that forecasts demand is not necessarily interconnected into the platform that is used to decide what product to create, or where to put product. The technology deployed to decide inventory levels may not be connected into a supply chain planning or forecasting system.

In short, supply chains are getting more complex, making it both more difficult to obtain full visibility, and more important to do so.

Adding another level to this challenge is the fact that often, all of the players in a supply chain — the brand, manufacturers, suppliers, logistics service providers, and others — are rarely on the same page, creating mountains of friction that prevent operational and financial efficiencies.

To illustrate this point, recent research published in May from JDA Software and KPMG explored some of the ways that retailers and manufacturers in their supply chains differ in their strategic approaches. While both sides acknowledge real-time product visibility as a key driver for investment, retailers said they are more driven by their need for end-to-end traceability of items as they move through the supply chain, while manufacturers are instead driven by the need to accelerate innovation and lower costs.

At the very least, the disconnect between supply chain participants yield inefficiencies. According to Joshi, when a supply chain is truly interconnected, companies involved all have the same visibility into production levels, inventory, shipping statuses, manufacturing forecasts, and more.

“Every single one of them looks at what is the true demand, true production, what inventory they’re carrying,” he said. “They can make intelligent decisions on their own.”

This visibility also means more seamless flow of money throughout the supply chain, and the ability to more quickly identify, flag and fix any disputes or errors — for instance, Joshi noted, being able to flag a shortage of items being shipped at the time of shipping, not at the time of payment.

The risk of inefficiencies explodes when an external force enters the fold. Take, for instance, Brexit or the ongoing trade disputes between the U.S. and China that have pressed some companies to readjust their supply chains. Natural disasters and weather-related events can force such changes with even less warning, giving rise to the importance of “resiliency and redundancy” for companies to be able to withstand these risks, Joshi said.

Many of these factors aren’t just essential for companies themselves to understand; according to Joshi, understanding these inefficiencies and lack of connectivity presents an opportunity for technology to address the issue. A single solution that can interconnect all supply chain participants can present the “same page” on which everyone must be able to operate with the greatest efficiency. A single platform into which an array of supply chain tools, from forecasting to accounts payable, can integrate means seamless operations (and payments).

But what supply chain management technology firms cannot provide is the ability for a member of the supply chain to overhaul their own processes and embrace connectivity, Joshi said. Not only are technologies and platforms failing to communicate with each other, but businesses — and the people behind them — are struggling to communicate, too.

“The challenge we face today is to change the old practices, the siloed nature of decision-making, the unconnected systems,” he said, “and to really bring to bear the fact that technology can connect all of this — but in absence of people changing their business processes, it is very difficult to leverage technology.”