Business Networks: The Supply Chain Shock Absorber for the Bumpy Road Ahead
When it comes to managing supply chains, “smooth” has long been the ideal state to achieve. Smooth is good. It’s predictable, even pleasant – like smooth sailing on a glassy ocean or skateboarding along a freshly paved road.
But the global supply chain dynamics of today are anything but smooth. This has been true for some time – even before the pandemic. Climate events, human-made disasters, political upheavals, trade policy changes, cyberattacks, transport mishaps, and now infectious disease on a global scale – all of these can cause disruptions that make for a bumpy road.
The extended nature of global chains only exacerbates the risk of disruptions. Take semiconductors for example. As described in our recent podcast, the silicon in a semiconductor crisscrosses the globe several times, stopping here and there for various specialized processing tasks before its ready for purpose. Just one disruption at one of these stops – or during transport – can delay production schedules dramatically.
The Herald highlights another supply chain model in their profile of the fishing industry, entitled “Scotland to China and back again … cod’s 10,000-mile trip to your table.” Cod caught off the coast of Scotland is frozen, packaged, and transported to China, where it is then unfrozen, filleted, refrozen, and sent back to Scotland for consumption. Why? Because of lower labor costs in Asia and a highly efficient globalized supply transport system.
But what if the ship carrying the cod gets stuck in a canal – or the city where the cod is to be processed is on lockdown because of COVID-19? Increasingly, risks such as these are wreaking havoc in supply chain efficiency.
What’s needed is some sort of shock absorber to soften the impact of unforeseen supply chain events. Organizations need the visibility to see what’s coming, the insight to make informed decisions in increasingly short timeframes, and the agility to move quickly and with confidence.
Business networks can help
In a car, a shock absorber minimizes the impact of bumpy roads for the driver and passengers. A business network, similarly, can minimize the impact felt by the business and its customers when it comes to bumpy stretches along the supply chain.
Typically, communications between, say, manufacturers and suppliers have been managed by phone, fax, and e-mail. Arguably, this is a digital system, but it’s far from efficient. Signals get lost as different versions of spreadsheet data are exchanged and reentered into systems that are not connected.
Business networks for supply chain management, on the other hand, facilitate new levels of efficient collaboration. All information is stored in a single system where buyers and sellers (manufacturers and suppliers) can access up-to-date information in real time.
An antidote for manufacturing complexity
Business networks also facilitate the management of more complicated scenarios – such as contract manufacturing. Let’s say you’re working with a specialty manufacturer overseas to produce a subassembly that goes into a larger product your organization is manufacturing. As discussed, such arrangements introduce risk. Now, in order to deliver as promised to your customers, you’re depending on a third party to hold up its end of the bargain.
With a business network in place, you can peer into your partners’ operations and get signals about potential delays or the risks of low inventory – and then take proactive action to head off bumps in the road ahead.
Of course, if the situation turns dire, you may have to find a new supplier. Here, the network helps you discover and qualify new partners capable of delivering as required. Once you find a new partner, the business network should make onboarding as easy as receiving a link and establishing a profile – but without sacrificing robust capabilities. The business network should have the scalability to meet volume requirements as needed. It should also have the flexibility to support varied use cases and unique trading partner relationships.
As you work with partners through the business network, you share data – lots of data. This result is greater transparency – which fosters strong trading partner relationships and honest communication with customers. During the early stages of the pandemic, a number of companies received kudos not for their ability to deliver the goods (which was just not going to happen), but for their clarity about what was happening and their ability to communicate the realities to the customer base. This is the kind of transparency that a business network supports.
More than supplier collaboration
A business network can be extended beyond materials collaboration between manufacturers and suppliers. Here at SAP, for instance, logistics and asset maintenance collaboration are key ingredients in the SAP Business Network. Broadening the scope helps companies break down siloed operations. The result is an agile environment more suited to thrive in the face of changing market and environmental dynamics.
On the logistics side, aligning transportation and material traceability helps decrease logistics cost, increase customer satisfaction, and protect the company brand. On the asset maintenance side, data feeds from sensors on critical equipment supports condition monitoring. Manufacturers can use the incoming data to better predict maintenance needs for equipment. This can help ensure uptime and availability for business-critical assets.
The Van Genechten Packaging Experience
A business network provides value to all parties. Supplier participation and value realization is vital. The experience of Van Genechten Packaging sheds some light. A longtime SAP customer, Van Genechten Packaging uses the SAP Business Network for Supply Chain to deliver better experiences to its customers. For more information about this use case, watch the on-demand webinar and visit www.vangenechten.com.
In summary, collaboration on demand helps to smooth out bumps along the supply chain. Real-time insight into inventory signals drives greater visibility into demand. And the ability to forecast inventory requirements reduces the need for time-consuming follow-ups. This collaboration manifests in real business outcomes – optimized inventory levels, reductions in stock-outs and revenue loss, and happier, more productive employees who focus on strategic initiatives instead of tracking down shipments and suppliers.
Have you or your partners experienced some of these scenarios in recent months? Join the conversation below and let us know how you continue to address supply chain disruption and mitigate risk. Check back for new discussions or follow me here on the SAP Community. Get your questions answered and read other perspectives on the Direct Spend and Business Network Community page.