Economic recovery poses fresh supply chain challenges

Nigel Crunden
29 January 2015

With the economy in gradual recovery, businesses are more aware than ever of the need for every aspect of their operations to support growth, not least the supply chain.

Anticipating risk and potential breakdowns are therefore key to meeting demand and enhancing customer relationships – crucial elements of ensuring growth at a time when competition is arguably fiercer than ever.

Understanding potential risks comes from maintaining constant visibility throughout the length of the supply chain, consolidating the number of suppliers used and ensuring exchanges are rooted in strong relationships. When combined, not only do these attributes help maintain a competitive advantage but also drive long-term partnerships and growth in innovation.

While these statements are useful, it is necessary to drill down to exactly how this can be achieved on the ground:

1. Ensure appropriate checks and measures are in place throughout the supply chain

2. Select clear key performance indicators (KPIs) from the outset and ensure these are adhered to by partners

3. Put a robust system in place that allows these KPIs to be regularly monitored

4. The time spent monitoring each supplier should fall in line with the value of an individual contract

Understanding is as important as visibility, as the activities of the second and third tier vendors used by each supplier cannot simply be ignored. Buyers have a responsibility to monitor these to ensure that stringent health and safety, as well as employment laws, are adhered to. Ignorance is the enemy when it comes to supply chain visibility so buyers must make it their responsibility to audit their supplier networks to minimise the risk of unlawful practices.

It is vital not to over-complicate the supply chain by working with too many suppliers. Consolidating the number of suppliers used is therefore advisable. Of course, the selection of suppliers should be squarely based on key criteria, with quality as well as cost being top of the considerations list.

Furthermore, it is essential there is close collaboration between buyers and their suppliers. There must be a degree of trust between parties, as confidential information often needs to be exchanged in order to feed a deeper understanding of mutual needs. However, parties can protect ownership of key data when backed up by a non-disclosure agreement, putting a guarantee in place to allow this kind of activity to continue freely.

It may be straightforward to put supply chain agreements in place and leave them to their own devices. But backtracking once an issue arises is far more difficult than putting the right checks in place to address problems before they arise – and many have only discovered this through experience. It is therefore crucial businesses take a consistent and detailed approach to supply chain management in order to properly take advantage of the ongoing upturn in the economy.

Nigel Crunden is a business specialist at Office Depot, who have produced a downloadable guide.

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