The pressures on the supply chain right now are enormous. Three years after the global pandemic created a tsunami of backups and disruptions that are still reverberating today, brands and retailers are navigating a seemingly endless cavalcade of new threats ranging from inflationary pressures to trade wars and the Russian invasion of Ukraine.
Conditions seem unlikely to improve soon. In a new survey from PwC, 46% of CEOs report adjusting their supply chains in response to recent geopolitical conflicts. These CEOs also report enormous worries about the impact of climate change, with 78% predicting climate risks will impact their supply chains within the next year.
As you work to build more resilient supplier networks in response to economic and political volatility, you must start by investing in a comprehensive digital transformation. Once seen as a competitive advantage, digitalization has become an indisputable necessity as supply chains have grown more complex and more outsourced, with more brands and retailers relying on vast overseas networks to supply and manufacture as they’ve increasingly invested in their own private label lines.
After the pandemic wreaked havoc on sourcing operations, it’s imperative to not get caught flat-footed again. According to the 2022 Annual Industry Report from MHI and Deloitte Consulting, 78% of supply chain leaders reported accelerating their digital transformations in the wake of the pandemic, and those investments were long overdue. In truth, however, some of the systems they’ve implemented are too narrow and don’t integrate as frictionlessly as they need to.
Brands and retailers that outsource their supply chain need to optimize processes end to end. That means implementing a multi-enterprise platform that can streamline workflows from sourcing, logistics and product development to vendor, order and quality management. All of these parties are integral to improving efficiencies that will reduce costs. Such a platform allows these processes to work together seamlessly as a complete unit while helping mitigate supply chain risks by creating guard rails and notifications.
A multi-enterprise platform helps businesses more efficiently identify, select and onboard suppliers. This includes rapidly adjusting your supply chain based on sudden pressure points such as raw material shortages and shipping bottlenecks. It also facilitates smarter, more cost-effective material procurement. The right platform can not only identify missed cost saving opportunities and show landed costs for different commodities based on country of origin, but also help predict demand and identify alternate or future supply sources.
Digitalization 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’re better able to mix and match materials during the specification and procurement process. This visibility is key to sourcing competitively.
Comprehensive Systems Create Agility
The needs of supply chain teams are vast and varied. As port backups have become more pervasive, logistics departments require timelier, more reliable data. Sourcing managers need 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. They need to ensure that any changes to those orders are received and approved by suppliers. This is often more difficult than it should be, since the industry’s reliance on spreadsheets means parties are often working from inaccurate or outdated information. Too often, key product details are siloed across disparate emails, Dropbox folders, WeChat and WhatsApp messages.
Quality managers, meanwhile, need better systems for controlling risk and viewing and auditing vendors’ historical performance. They also need a smarter way of managing inspection schedules, a system for quickly tracing the root cause of defects and for communicating between factories and third-party testing and inspection agencies. Otherwise, delays in the inspection process can slow a product’s time to market.
And, of course, all departments need to know whether shipments are arriving on time, since 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 those problems. A connected supply chain management software suite can extend the data you’re already entering into your PLM, making it available to all stakeholders across departments. This software serves as a central conductor of all supply chain operations, monitoring orders and suppliers and keeping departments on track.
For compliance teams and supply chain sustainability managers, the benefits of digitalization with 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 law, large brands and retailers face more stringent requirements. To meet them, you need complete documentation of all suppliers, from raw materials to finished goods. You also need to document the full chain of custody of materials, including where they were shipped from and where they were made, as well as all transformations from raw materials to finished goods.
Brands and retailers that have started adopting standalone digital solutions have made an important first step. But to reap the full benefits of digitalization, you need to ensure you digital transformation covers end-to-end supply chain processes. It’s the surest way to prepare for the unknown, setting yourself up for success regardless of pressures, disruptions and surprises that challenge the supply chain in the years to come.
Eric Linxwiler is Senior Vice President of TradeBeyond