How to Identify the Blind Spots in Your Supply Chain

As the global economy has become more interconnected, supply chains are increasingly complex and distributed. This allows companies to work with a broader range of suppliers and source materials on demand, which has made supply chains more efficient and reduced costs.

However, modern supply chains also pose more daunting logistical challenges than they used to—with more links in the chain, it’s more difficult to maintain end-to-end visibility and address any problems when they arise.

Consider what would happen if a critical link of your supply chain suddenly broke (if a supplier closed its doors, for instance). This could bring a company’s operations to a standstill overnight, which would mean unfilled orders, unhappy customers, and lost revenue.

But a crisis like this isn’t the only threat posed by complicated and opaque supply chains—there’s also the fact that disconnected partners and systems make it difficult to collect actionable data on everything from the efficiency of day-to-day operations to the presence of systemic risks.

There are other blind spots in today’s supply chains, too—from manual processes that eat up capital and waste time to a general lack of collaboration between suppliers, distributors, and retailers. All of these issues need to be addressed to make supply chains as resilient and financially sustainable as possible.

Why supply chains need to be more transparent

It’s vital for companies to have visibility into every aspect of their supply chains—from the financial health of the vendors they work with to any potential disruptions in the development and delivery of products. However, while a recent EY survey found that supply chain executives consider end-to-end visibility the most important factor in creating a successful supply chain, just 6% reported that they’re “very confident” in their ability to maintain that visibility.

When companies have supply chain visibility, they can take action to prevent and mitigate crises. For example, if a company recognizes that one of its suppliers is having financial or performance issues, it can divert business to a different supplier.

While failing to manage potential supply chain disruptions can damage a brand’s reputation, supply chain transparency can improve it. According to a 2020 study conducted by researchers from MIT, the University of Pittsburgh, and North Carolina State University, supply chain visibility “always strengthens consumer trust,” which can also lead to increased revenue.

The best way to ensure that your supply chain is transparent is to use a centralized digital platform for all vendors. That way, data can be collected and reported in a systematic and consistent way across the supply chain, giving companies a clear view of how products are being produced and delivered at every stage.

Developing data-driven supply chains

It’s impossible to have supply chain visibility without rigorous data collection, but this is an area where many companies are falling short. A 2019 Deloitte survey found that, while more than three-quarters of companies say the development of “digital and analytics capabilities was most important/very important to delivering the overall supply chain strategy,” their investments in these capabilities don’t reflect this fact. Meanwhile, Gartner reports that more than half of companies have “not yet actively started to build a roadmap for supply chain digital transformation.”

Companies’ failure to make the digitization of their supply chains a core priority means they’re missing an opportunity to significantly increase revenue. According to research from McKinsey, companies that “aggressively digitize their supply chains can expect to boost annual growth of earnings before interest and taxes by 3.2%—the largest increase from digitizing any business area—and annual revenue growth by 2.3%.” A 2019 survey of retailers found that the primary benefits of digitizing supply chains include lower operational costs, improved speed to market, and quicker reactions to supply chain threats.

As supply chains become increasingly complex and segmented, there are too many different systems for keeping track of rebates, production numbers, deliveries, and other components of supply chain management. These data silos prevent companies from identifying threats and opportunities, which is why supply chain management solutions that provide access to real-time information across operations are becoming more crucial all the time.

Collaboration is essential for supply chain management

Although forces like globalization and digitization have made supply chains more efficient and cost effective, companies still face major challenges—from the logistical obstacles that come with larger and more distributed supply chains to the ever-present threat of disruption. For example, 94% of Fortune 1,000 companies reported they experienced supply chain disruption as a result of COVID-19.

It’s impossible for companies to address these challenges on their own. The whole point of a supply chain is to create a division of labor that allows companies to focus on what they do best and get high-quality products to consumers as quickly as possible. This is why it’s no surprise that a 2020 Forrester survey of finance, procurement, supply chain, and sales professionals found that the key elements for “unlocking innovation from suppliers” were payments visibility (88%), improved relationships (77%), and digital maturity (75%).

When companies work with their supply chain partners to gather and share data, provide visibility on opportunities and risks, and work toward more integrated and effective processes, they will optimize their supply chains and ensure that they’re as resilient as possible.