Business continuity for the networked economy
In this blog post I will share how organisations can leverage digital supplier collaboration to improve their supply chain resilience, support business continuity during challenging times, and be better prepared for the new normal.
I have always been fascinated by the complexity and fine balance of our global supply chains. Having spent several years in China, I was privileged to experience how ‘stuff’ is made and be part of the ‘where-from’ and ‘where-to’. From garments, automotive parts, consumer electronics, construction materials, chemicals, all kinds of industrial materials, to packaged seafood.
Every procurement and supply chain professional knows that it doesn’t take much to disrupt this fine balance and put business continuity at risk. The 2010 floods in Queensland, Australia led to a significant shortage in food supplies. When explosions ripped through the port in Tianjin, China in 2015, at the time the world’s 10th busiest sea port, the impact of disruption was widespread across several industries. And, with the recent Coronavirus (COVID-19) events, many of us are experiencing supply chain disruption first-hand, both personally (think face masks) and professionally across a wide range of product categories.
In 2018 the Business Continuity Institute’s Supply Chain Resilience report found that more than 50% of companies had suffered a supply-chain disruption event in the last 12 months. What do we estimate this percentage to be when we ask the same question in 2021?
Responding to and mitigating the impact of a supply chain disruption is a challenging task, which requires close cooperation of several internal departments and, more critically, tightly aligned supplier management and procurement activities.
Organisations need to quickly understand and forecast demand, stock on-hand, stock in-transit, continued delivery capacity of incumbent suppliers, and where required, quickly identify, vet and assess the feasibility of alternate sources of supply. To effectively and efficiently accomplish this task, organisations need a continuous, fast and accurate flow of data, to and from suppliers. Ideally flowing directly into the enterprise resource planning (ERP) system. This is where a digital supplier collaboration network can make all the difference.
Digital supplier collaboration networks have been around for about 20 years, which is about the same age as Google. During this time, they have been tried, tested and adopted by many leading companies across all industries. The technology has come a long way from the point-to-point B2B integration mechanisms, such as EDI. They leverage modern system integration protocols, support 50+ transaction types, and are smart by default. And, they now balance value creation for both, buy- and supply-side participants.
The technology has also become more accessible, particularly for small and medium sized businesses. In the case of SAP’s digital supplier network (aka SAP Ariba Network) you will now find more than 4 million participating companies in 190+ countries, transacting about USD 3 trillion in annual commerce – that’s close to 9x of Amazon’s 2019 gross merchandise volume.
Most organisations start with digitalising relatively straight-forward collaboration processes: send an electronic purchase order directly from the ERP and get an electronic order confirmation back from the suppliers, confirming critical information such as need-by-date and quantity, including any unexpected variation. The ERP can then process this data in-context, alert if required and make this data available for further analysis such as scenario modelling and predictive analytics.
Once simple processes run smoothly, many organisations start solving for more complex scenarios: want to collaborate on demand forecasts, include your logistic provider in the transaction flow, track issued materials to subcontract manufacturers, or simply process electronic invoices without delay, so you can finally get on top of your pay-on-time promises? No problem.
Despite the broad capabilities and tremendous business benefits, here described by one supply chain leader: “we went from poor receipts, bad POs, long payment terms and bad services to transparency, speed of process, accuracy, and better data”, only 21% of procurement & supply leaders have truly embraced this proven technology, potentially leaving significant value on the table and putting their supply chain’s resilience at unnecessary risk.
No doubt, shifting supplier collaboration onto a digital supplier network requires strategic dedication, focused effort and investment – although less than you might think. Often companies find that a significant portion of their spend is with suppliers who are already participating on the supplier network. This means there can be quick adoption and fast time to value, which accelerates an already highly attractive ROI. As organisations expand into more complex business scenarios and beyond the early quick wins, additional value is unlocked, often adding new capabilities that drive value far beyond the immediate supply chain process.
It is probably safe to assume that supply chains disruptions are not going away anytime soon. While many industries have experienced significant demand declines due to COVID-19, others have faced unprecedented demand surges. Adequate and secure supply will remain a hot topic while regions and countries go through challenging times. It will become even more critical once economies ramp back up and demand establishes a new normal across industries: to ensure mission critical supplies are available to keep the business running, and revenue opportunities are not lost due to stock-outs.
In summary: the SAP digital supplier network is here to stay. It has been broadly adopted by millions of both buy and sell-side organisation, with 76% of the Fortune 2000 already on, solving for simple to complex supplier collaboration scenarios. Implementations can be achieved in as little as 6 weeks, and adoption is accelerated by the overall network effect facilitating fast time to value. Integration is native with both ECC and S/4HANA (on-premise & cloud) truly enabling your digital transformation & evolution into a truly intelligent enterprise.
Why wouldn’t you prepare for this now, by truly strengthening your supplier collaboration and re-emerge stronger out of these challenging times.