How Tech Can Heal Wounds of the Past and Make Us More Resilient for the Future
While many of the wounds inflicted on Procurement and Supply Chains seem irreparable, Technology may prove the magic elixir we need for the healing to begin. We speak to Alex Saric, CMO – iValua.
‘Every day is a new beginning,’
– T.S.Eliot
And when it comes to procurement, that advice seems to ring especially true in terms of what many of us now feel we want – and need – to do. As anyone in the industry would know, just about every paradigm we know was challenged last year, and, as Procurious’ Founder Tania Seary so eloquently put it, the questions we now need to ask are complex, important, urgent and without easy answers. While we may not have the answers just yet, what we do know is that things have changed irrevocably, and while we care to our recent wounds we must also learn from them to avoid new ones in the future. Fortunately, tech may just be the bandaid – or even magic elixir – we need.
Are the sores on your supply chain still festering? Here are five common wounds many of us suffered over the last year, and how tech may ensure that we heal stronger than before.
Wound One: Supply Disruption
While the term ‘supply disruption’ technically explains what we all felt last year, it still feels like a huge understatement for the mad scramble many of us experienced, almost overnight. Rapid sourcing, vetting and onboarding of alternate suppliers, especially in the vital few months when most of our Chinese suppliers shut down. It was in this very period that many of us started asking ourselves whether China could continue to be trusted as the world’s factory, or whether alternative options such as Mexico might be required to temporarily (or permanently?) take over.
Regardless of the supplier strategy employed, effective risk management requires technology, which can help in several ways. First, it is essential to maintain 360-degree visibility into your suppliers. The challenge has been that the relevant information resides in multiple places – internal performance assessments, third-party providers of financial and risk data, and the suppliers themselves. Technology that unifies supplier records across the organisation, enables suppliers to easily upload their own certification and other details, and integrates with important third parties can provide the comprehensive overview required, and even flag potential issues proactively.
Second, technology enables the scale to do that across all suppliers, not just the few strategic ones, saving time and minimising potential for surprises. An effective supplier risk program needs to look not just into individual suppliers, but into and across categories, considering risk at a category level. Technology can automate much of that and provide the right reporting to make better and more timely decisions.
Lastly, if there is one thing Covid-19 reinforced, it is the vulnerability of organizations to sub-tier suppliers. While just over 100 of the Fortune 1000 had tier one suppliers in Wuhan, virtually all had tier two suppliers there. Most realised only when impacted. Technology that can map sub-tier suppliers provides the depth of visibility required to have a truly 360-degree view of risk. Remember, visibility must be 3-dimensional.
Wound Two: Onboarding new suppliers
The speed with which many of us needed to source new suppliers resulted in us needing something we never knew we lacked: the ability to onboard suppliers at lightning speed.
Whether it was a complete shutdown of a factory, a COVID outbreak, or something as big as a change in the geopolitical situation in a particular country (or indeed, a lockdown), many of us were forced to quickly identify and onboard new suppliers. And that often involved a fair bit of trust and circumvention of processes and checks we were used to, in light of the urgency.
Yet this is another wound that tech can help us fix. First, technology can drastically cut down the time to identify new suppliers, and improve qualification. Many solutions offer matchmaking capabilities, helping identify suppliers that meet certain requirements (commodity, location, certifications, etc.). At the same time, they can provide information to help accelerate the vetting process and ensure at least a modicum of qualification even in the most rushed cases.
Second, the right technology can greatly accelerate onboarding of suppliers, enabling simple, self-service enablement by your supply base. If the process is simple and there are no fees, vendor conditions to accept, or limits on activity, suppliers readily adopt and appreciate the speed and ease of connecting to customers.
Wound Three: Financial stability of suppliers
2020 has been called the “bankruptcy apocalypse” by some commentators, and it’s not far from the truth: in all countries, there was a double-digit increase in the number of companies who filed for bankruptcy, with at least 100,000 companies of all descriptions now out of business once and for all. And with those kinds of statistics, it’s of little wonder that one of the many wounds that we’ll need to heal from last year is the ability to better check liquidity, alongside the ability to change payment terms if required.
Fortunately, tech is here to help us heal. A typical challenge is accessing all relevant information. Technology platforms have increasingly robust ecosystems of partners, including third-party sources of data such as D&B, BvD and many others that provide either factual information on supplier finances or predictive risk scores for likelihood of default. Technology can not only provide such information upon request, but also notify you of changes.
Furthermore, procure-to-pay solutions increase control over payments, giving you the flexibility to optimise your cash flow based on your needs as well as those of your suppliers. You may choose to pay early, likely in return for discounts to increase your return on cash and inject liquidity where needed. Or pay later to preserve cash. In either case, the increased transparency into payment status means suppliers can better plan.
Wound Four: Risk monitoring
There was once certainty above all others last year: COVID, in some way, shape or form, felt like it occupied our every thought and action. But just when things felt like they couldn’t be any more different or disrupted, along came other challenges to our supply chains. Whether it was bushfires and typhoons, or the sickening increase in cyber attacks (estimated to cost businesses USD $6 billion), it seems as if every day, there’s a new risk that we need to monitor and plan for.
As terrifying as these risks seem, tech can mitigate the impact. Besides the benefits technology can afford described in the first point, technology can sort through the noise resulting from today’s information overload, to make data more actionable; available when and where you need it. Technology is increasingly being proactive and, in some cases, predictive, so it can help notify you of likely risks, for example when a natural disaster or political event strikes a distant country where you have supplier exposure.
Wound Five: Increased focus on sustainability
Among all the darkness of the pandemic, there were definitely some moments of light, especially when it came to the environment. Whether it was air pollution dropping by unprecedented levels (so much so that the residents of Punjab, India could see the peaks of the Himalayas), or animals reclaiming towns during lockdown (including this super cute example of pink dolphins returning to Hong Kong), nature won big in 2020, and many people and companies want to keep it that way.
Investors and consumers are both increasingly demanding that the businesses they deal with (and the businesses that supply those businesses) have shining sustainability credentials. Fortunately, tech can help us ensure this occurs. In the most passive way, it can support your supplier decisions with information on the sustainability performance of your suppliers. For example, solutions that offer seamless integration to Ecovadis, a leading provider of supplier CSR scoring, can help you select which suppliers to continue working with or who to shift greater supply to.
But more importantly, technology can help improve collaboration with suppliers. The reality is that all organisations have room to improve. You can offer to have a greater impact on the environment by working with those suppliers most willing to improve than just those with the highest scores today. This is especially true when it comes to direct materials suppliers, where joint product planning and development is important. Platforms that integrate true collaboration capabilities can help improve sustainability in a myriad of ways, including:
· Enabling secure sharing of confidential product data
· Supporting automated improvement plans to set targets and monitor performance
· Automate communication among stakeholders, both internal and external
