When global supply chains are running smoothly, you don’t tend to hear much about them. However, when availability of everything from cars to medical equipment to toilet roll becomes scarce, people start to look around for someone or something to blame. Supply chains are an obvious place to start.
Henrik Smedberg is Head of Intelligent Spend Management at SAP UKI.
The coronavirus pandemic rattled global supply chains; increasing demand for some products while simultaneously slowing or stopping access to the major distributions centers that supplied them. For consumers, this shined a spotlight on the complex systems that bring us food, medicine and other goods. Suddenly, supply chains became a hot topic. In fact, research shows that 79% of consumers are more aware of how supply chains impact the availability of products than before the pandemic.
With this increased awareness comes an opportunity for businesses to rethink the future of their supply chains. To safeguard themselves against the disruptions of the past two years and create a more sustainable supply chain for the future.
Informed consumers are a powerful force and having a greater understanding of the impact of supply chains is influencing what they expect from brands. Here are some of the ways brands can get their supply chain woes out of the headlines, get ahead of the challenge and meet their customer’s expectations in the process:
Employ digital supply networks
Recent events have shown that traditional, linear, fragmented supply chains are no longer fit for purpose. Instead, companies must turn to digital supply networks which are built to anticipate disruptions and mitigate risks.
Digital supply networks leverage technology and data analytics to provide continuous, real-time information which gives business leaders a holistic view into all areas of the business. They can forecast, anticipate and respond quickly to whatever risks or opportunities the future brings.
For many businesses, implementing or updating digital technology will require fundamental changes to their whole business process from strategy, to procurement to inventorying. That shouldn’t hold them back. The ability to keep up with fast-moving market dynamics is only achievable through digital resources and it is essential in today’s business environment.
Place ethics over profits
In recent years, sustainability has become front and center for both consumers and brands to reduce the impact and effect of climate change. Ethical sourcing is at the heart of almost every sustainability initiative. Ethical sourcing is the process of ensuring that products are obtained in a responsible and sustainable way. While we have seen more companies promoting ethical sourcing, does the consumer really care?
Research suggests they do. A global report from The Economist Intelligence Unit, commissioned by WWF, shows a 71% rise in online searches for ‘sustainable goods’ globally over the past five years. According to SAP research four in five (83%) consumers would be more likely to buy from a brand that supports and sources from local suppliers.
The findings from both studies show that consumers are increasingly seeking out and championing brands that commit to sustainability and behave ethically. They want to shop with brands that share their values. So, incorporating social and environmental considerations into global supply chains is becoming a business imperative.
Here too, digital supply chains have an important role to play. Businesses that have full visibility into their supply chains and access to the right data can make informed decisions about who to do business with. Simultaneously, cloud-based models enable partner ecosystems to reconsider the way in which they interact with one another, pushing supply chain innovation where greener practices are prioritized and rewarded.
Think local
The impact of the coronavirus pandemic showed the fragility of linear, highly dispersed and complex supply chains. As our world became more local over the past two years, consumers actively seek out local suppliers. According to recent Opinium research, 8 in 10 consumers say they would be more likely to buy from a brand that supports and sources from local suppliers.
Diversifying supply chains and sourcing from more local suppliers not only helps mitigate risk, but it also has the potential to attract more customers and build brand loyalty. Retail supply chains must seek out local suppliers and be agile to meet these consumer demands.
Build risk mitigation into your business
If the past two years have taught us anything it’s that the only certainty in supply chains is uncertainty. Yet, according to an Oxford Economics study, less than half (49%) of executives surveyed regularly refresh risk mitigation plans to address potential supply chain disruption. This has not gone unnoticed with one in five customers blaming supply chain woes on businesses who have not properly planned ahead or invested in the right technology.
Addressing supply chain risk more regularly and comprehensively needs to become a top priority.
This involves looking ahead, which isn’t to say ‘knowing’ what’s going to happen but rather preparing for what could happen and making the necessary arrangements in advance of coming trends. Digital procurement tools will play a major role in helping organizations to effectively respond to such changes, but also will help them to withstand future disruptions and pivot them toward recovery when disruptions do occur.
Overall, the pandemic has highlighted the need for linear models to be replaced by agile supply chain networks and for organizations to take advantage of the digital solutions now widely available. It’s now 2022, and it’s up to leaders in the industry to commit to restructuring business models that place ethics at the heart of all initiatives. While nobody knows exactly what’s in store for our supply chains, it’s essential that companies plan and look to technology to provide the flexibility to navigate through any disruptions.
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