In the face of evolving market dynamics, technological advancements, and unforeseen disruptions, supply chain management has become a complex and ever-changing puzzle for organisations worldwide.
As the global trade landscape changes and recalibrates it will be supply chains that enable a new era of globalisation; as such the success of businesses will be dependent on the ability of their supply chains to adjust and flex with the changing market dynamics.
To reach that point, supply chains must undergo their own evolution and meet the significant and immediate demands being placed on them.
Compliance and resilience: a double-edged sword
Recent disruptions have caused an irreversible shift in the way businesses source, onboard and manage suppliers. COVID-19 for example has changed the way most organisations view their supply chain and the way they approach resilience.
During the period, more or less every company experienced supply chain failure of some kind and will have had services or product lines disrupted as a result. In that scenario, new suppliers were being sourced and onboarded at pace for companies to maintain services and product lines.
That rapid onboarding could cause problems in the immediate future because suppliers may not have been vetted adequately or at all; and with the pace of regulation coming in, there is a chance that some suppliers won’t meet the required standards.
While the approach taken in the pandemic was in good faith it does not alter the fact that supply chains will now be under greater regulatory scrutiny than in any other era. Combined with the fact that we know that disruptions will occur and that resilience needs to be embedded, the task for supply chain managers now is to ensure their networks can withstand constant disruptions while remaining compliant.
The biggest task in that respect is not with your tier ones or the larger companies that you work with, but with the SMEs in your network. Because they are smaller and therefore have fewer resources, they may not be able to adequately meet the standards you require. Having a compliance programme that can assess and address those issues and that is fit for every company in your network goes a long way to solving that problem.
Visibility, transparency, and traceability
Another part of the compliance-resilience solution lies in having visibility into your supply chain. As the business landscape changes and as environmental legislation comes into force, having a complete understanding of your product’s journey and a complete understanding of how your supply network operates will be an operational imperative. Moreover, it will become a competitive advantage.
According to industry research, companies with traceable supply chains outperform their rivals with limited visibility. And as technology starts to evolve and become more powerful, that gap will increase.
A key factor in establishing traceability within the organisation is building an ecosystem of collaboration across the value chain. Research shows that it is essential for organisations to establish strategic partnerships at every node of their supply chain.
However, the task of establishing traceability programmes is complex and daunting, and much of the industry is at an early stage. Potential partners must therefore be prepared to support the journey, either in full or in part if they are to lay the foundation for advanced supply chain performance.
Getting a handle on inventory
Just-in-time was the supply model of choice for most organisations pre-pandemic but given the way it was mercilessly exposed it has rapidly fallen out of fashion. Companies are no longer prepared to operate on lean inventories, especially given the frequency and severity of disruptions that we’ve seen since 2020.
That said, just-in-case, a supply model in which inventory is held, isn’t altogether more efficient or cost-effective. Indeed, for organisations that use perishable inputs its not always viable, while for companies that rely on in-demand or scarce raw materials holding high levels isn’t financially viable.
It’s a conundrum whose solution is leading to a recalibration of the supply chain in a couple of different ways. To secure supply, organisations up and down the supply chain are moving their sourcing closer to the site of production, either through regionalisation, diversifying or near-shoring.
Given that supply chains don’t just spring up over night, it’s a calculated and strategic move that has long-term implications. Investment in infrastructure and supply partners is essential, though given the collaborative nature of the future of supply not altogether a bad thing.
With that in mind, we’re starting to see more companies vertically integrate either by building capacity themselves or investing in key partners. While its typically the preserver of larger organisations, its ability to guarantee supply, foster resilience and meet with compliance make it an appealing option for organisations of all sizes.
As companies across industries meet commercial, environmental, and technological challenges business models are changing and so too is the way we move goods around the world. Building supply networks that can meet those demands both now and in the future is fundamental to that process and will be a defining factor in the future success of organisations.
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