During this festive time of the year I, like millions of children and adults, look forward to watching a range of holiday classics. Rudolph the Red-Nosed Reindeer ranks high on my list. Full of memorable characters and wonderful songs, the perennial classic has helped set the holiday mood for generations. Yet, viewed from a procurement point of view, it also showcases that even Santa is not immune from the challenges facing corporate supply chains. Here are four issues Santa needs help with—and how the Digital Economy can give Santa the tools he needs to ensure a Merry Christmas for all.
Let’s start with an obvious one – supply disruptions. This is the core challenge facing Santa as the severe blizzard reduces visibility to a level too dangerous to make his journey. As we all know, Rudolph’s nose unexpectedly saves the day. Lucky for Santa and the millions of children who received their gifts. But what if Rudolph had not been there?
Fortunately, in today’s Digital Economy, we need not rely on luck to solve such conundrums. First, Santa can now receive real-time notifications of weather changes on his mobile device, providing more time to react. He can then properly equip his sleigh with storm lighting and navigation equipment. But these are items he rarely needs, so is unlikely to have sourced or to have an established supplier. Hence, they wouldn’t normally appear in his purchasing system, requiring him to make a special trip to search for the emergency equipment. It’s a waste of time and money on the most important night of the year! And his controller won’t appreciate him having gone outside of systems, avoiding controls and visibility. That’s where business networks save the day, by enabling off-contract purchases. Santa can go into his existing procurement system and see available sources of supply from pre-screened suppliers at competitive prices. Christmas is back on!
Supply Chain Visibility
Perhaps even worse than the risk that Santa was nearly unable to deliver presents was the complete lack of visibility to those children and their parents. No one outside of Santa’s circle knew whether Christmas would have to be canceled due to the blizzard. Unless parents hoarded excess toy inventory, children would have found themselves out of luck on Christmas morning. If parents knew, they could have adapted by finding local sources of supply and providing gifts on behalf of Santa, mitigating the impact on Christmas.
Thinking it through, the problem actually goes much further back, to the original order. As a child, I mailed a letter to Santa every year, yet I never received a confirmation that Santa received that letter. This resulted in much anxiety as to whether Santa would come and, if so, bring the right gift. Corporations often face similar issues with their orders, especially for highly critical direct materials where a supply disruption could shut down production.
In the Digital Economy, this risk/anxiety can now be mitigated to a great extent. With cloud-based solutions and business networks, companies can easily connect to their suppliers and collaborate digitally to enable visibility through the entire procure-to-pay process. For direct materials, supply chain collaboration can include electronic notification of order confirmations, ship notices and much more. This not only reduces risk and anxiety, it also allows optimization of inventory and working capital and improved buyer-supplier relationships. A win-win indeed.
Imagine the comfort to a nervous child when electronically notified that Santa has received his or her letter. And to parents upon notification that Santa is on his way, or that he won’t make it and they should bring out the back up gifts. In any case, parents can kick back and enjoy a glass of eggnog, calm in the knowledge that no surprises are coming.
One would expect some toys produced for Santa to have flaws, but viewers of Rudolph the Red-Nosed Reindeer learn that Santa has a major quality problem in his supply chain. The true extent becomes clear when we discover an entire island populated by hordes of misfit toys (a.k.a. production defects). Once Santa is informed of the situation, he kindly acts to save the misfits and deliver them to children that Christmas.
Very nice, but this does not solve the quality control issues that created the problem in the first place, probably resulting from the elves being a monopoly supplier in the North Pole. I suspect they felt little need to address their production issues as Santa historically had no choice of supply. Fortunately, today Santa could leverage business networks to discover new, alternate sources of supply. These can be distant suppliers or perhaps even local ones Santa was previously unaware of. (Inuits or Aleuts come to mind). Furthermore, Santa could obtain peer review, financial, and other valuable insights into potential suppliers to make an informed choice. This would both put competitive pressure on the elves to improve quality and offer alternates should they not.
While Santa was kind to deliver the misfit toys to children that Christmas, I’m not so sure that the children appreciated it. Who wants a defective toy, after all? Admittedly, some of the defects were quite minor. I don’t see a big problem with receiving a Jack-in-the-Box named Charlie for one. And if you get a water pistol loaded with jelly, you can just clean it and fill it with water. But others (a boat that sinks) have some serious flaws sure to dampen a child’s enthusiasm. Business networks and cloud-based solutions with a consumer-like shopping experience could help address this by allowing effective matching of buyer requirements and clear descriptions of the products available, including pictures. For example, a boat that can’t float is not a problem for a child that only plans to play with it in his room.
Fair Labor Practices
Our beloved Christmas classic reveals a much darker side to supply chains as well. We have all glossed over it in our viewing pleasure, turning a blind eye, but we know it’s there. Yes, I am sorry to say that Santa seems (one must assume unknowingly) to have a child labor issue in his supply chain. I am of course referring to the clearly underaged elf Hermey, who should be in Elf School or playing but is instead working on Santa’s toy assembly line. Hermey doesn’t want to make toys, does he? He most certainly does not. He dares to make that very clear to his manager but is quickly told in no uncertain terms that he had better sit right back down, shut up and continue painting wagons. Elf management has clearly forgotten the true meaning of Christmas, absorbed by thoughts of silver and gold.
Hermey takes the only option available, to escape into the bitter cold of the Arctic. His story ultimately has a happy ending but in real life, for the estimated 30 million forced laborers globally, the outcome is often very different. Just like Santa, corporations unknowingly support this global epidemic in their supply chains. But in today’s Digital Economy, companies can finally tackle this scourge by leveraging the insights made available by organizations such as Made in a Free World and accessible via cloud-based solutions and business networks. Leveraging historical and real-time intelligence from hundreds of global government, business, and other data sources that live in the Ariba Network in conjunction with Made in a Free World’s FRDM database – which maps the bill of materials of countless number of products and services right down to their raw materials and labor inputs, we can shine a light on the materials, regions, and suppliers that are most likely to have forced labor and offer alternatives so that companies can do something about it.
I hesitated to introduce such a serious, dark topic into what is otherwise a light-hearted look at the supply chain issues evident in a holiday classic. Yet it seems appropriate given the spirit of the season to end with a call to action to make the world a better place. The Digital Economy has empowered us as individuals and as organizations. Even Santa’s supply chain. Our lives have been transformed and increasingly so is our work. Let’s all do our part to leverage the tools now at our disposal to bring peace on Earth and goodwill to man. Happy Holidays.