In a world of shortages, supplier visibility is key

posted by Alex Saric
23 August 2022

How collaboration and technology are a saving grace in challenging times 

Consumers have more options than ever, so from retailers to telecommunications, firms can’t afford to fall short of expectations. And yet product and resource shortages are becoming more frequent. If organisations are to overcome current challenges, they must play the long game, fostering more collaborative, transparent and data-driven relationships with their suppliers.

No area of industry and society is immune to the prospect of shortages. In the UK alone, food has battled to reach shelves, energy has failed to power homes, CO2 has struggled to facilitate industry. Even magnesium’s absence has impacted manufacturing operations across the country, continent and, indeed, the world. The latter event is particularly interesting as it highlights the global nature of supply chains and the significance of international ripple effects. The magnesium deficit, originating in China, was itself a result of a lack of fuel. But this ripple in East Asia soon vibrated across the supply chain to hit factories in the EU and UK.

Even more recently, six months of turmoil in Ukraine has inevitably impacted supplies from the region in a variety of ways, many unexpected; one example being a halt on production of electric vehicle components which are produced in the country.

Many of these events occur without warning, or pose challenges that aren’t addressed by the business continuity strategies already in place. And, in these unpredictable times, shortages as a result are almost inevitable. When this happens, only the strongest links in the supply chain will remain intact and resolute for the good of end consumers and the business.

Technology is critical to drive the transparency and collaboration between procurement and suppliers required to build that strength.

Collaboration combats commotion

It sounds obvious, but too few organisations value the work that goes on outside of their walls. Often these relationships are only put under the microscope once something has gone wrong. At this point it is usually too late to rectify and the reputational or revenue damage is done.

A potent cocktail of Brexit, Covid, winter shortages and rising energy prices has tested the resolve of many business relationships in the UK over the past two years. But organisations which had bonded with their suppliers were the ones to reap the benefits. For instance, Tesco managed to offset the challenge of increasing demand against these hurdles, by virtue of its strong supplier relationships. Admittedly working into an ongoing ‘headwind’, the retailer claimed that deep, long-standing partnerships with suppliers had helped it to mitigate the impact of shortages faced much more acutely by competitors, and to at least cushion the blow of inevitable cost rises for its customers.

The same rationale applies to organisations of all sizes and serves as a reminder that suppliers aren’t just separate entities. They are a platform from which a company can either grow or fall depending on the relationship’s stability.

Strength from togetherness

Of course, the question remains, how can organisations improve supplier relationships at a time when their operations (and their suppliers) are being tested on so many fronts? Why should they invest time, resources, and money into strengthening a partnership that has likely been built and run without so much as a hitch to this point?

The answer has been laid bare by the volatility of the past few years, and that continues today. Simply, just because something has worked to this point, doesn’t make it bulletproof. In fact, without the right tools, supply chain relationships remain the most vulnerable chink in a company’s armour.

That protection may come in the form of tech-enabled visibility and collaboration – clearer data, insight, knowledge sharing, administration, and communication off the back of company-assisted investments. Such open and mutual insight during times of shortages can improve resilience, lead to more seamless product or component replacements, alternative supply route establishments, or more aligned forward-planning for new events on the horizon.

But, deeper than that, a smarter and more collaborative approach to procurement will instil a sense of togetherness in the process, nurturing critical relationships. This approach can be a way for organisations to show that, during difficult periods, it isn’t a case of every person for theirself or laying blame at supplier doors. And it’s a way for providers to prove that supply decisions under duress are based on longevity, need, kinship and, above all, logic, rather than simply distributing to the highest bidder as and when.

It sounds cliché, but by going through the toughest times in partnerships, stronger relationships are formed as a result. And when supply chains are as disparate, global, complex, and vulnerable as they are today, a sure way to achieve this togetherness is through digitising the procurement and supply chain management process.

By building stronger relationships off the back of greater visibility and collaboration, resiliency and competitive differentiation can be achieved. More significantly, organisations have a better chance of assuring long-term supply even in the face of shortages.

 


Alex Saric is smart procurement expert at Ivalua

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