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Mark Morely

Establishing Diversification and Resiliency within the Supply Chain

By Mark Morley, Director, Strategic Product Marketing, OpenText

The global pandemic has been wreaking havoc across global business operations, with production stoppages, staff shortages, major event cancelations and concerns about supply chain stability increasing. Approximately, 94% of Fortune 1000 companies are experiencing supply chain disruptions.

A recent report by Deloitte described this as a “black swan” event, whereby its impact on companies will force them to completely restructure their supply chains and embrace new technologies, such as cloud-based solutions to improve business operations. Companies that do not take tangible steps to restructure their business operations to create a more resilient business will ultimately lag behind competitors and risk failure.

To overcome these pressures, the supply chain must not only be resilient, but also become increasingly diverse. Companies need to evaluate their overall sourcing strategy while diversifying sources.

Adapting in the face of supply chain uncertainty 

As the pandemic grabbed a stronger hold on global economies, especially the global healthcare sector, many organisations were asked to answer government requests to help produce medical equipment, gowns, masks and hand sanitizer. Many automotive manufacturers, including GM, Ford, Jaguar Land Rover and even the Formula One race teams in Europe, reconfigured parts of their production operations to manufacture critical medical equipment. Distilleries across the UK switched production to make alcohol-based hand sanitizer to slow the rate of coronavirus transmission. More than 20 companies – including Ford, Rolls-Royce, McLaren and Siemens UK – formed the Ventilator Challenge UK Consortium, designed to help offset the shortage of medical equipment. 

Diversification of Supply Chains 

According to a recent survey by PwC, a growing number of CFOs expect to change the breadth of their supply chains as a result of the COVID-19 pandemic with many focusing on diversification. Over the past two decades, the concept of supply diversification has focused on continually driving down costs. Many companies are now learning the hard way that relying on a single supplier is at best risky and at worst catastrophic. Establishing supply chain diversification requires organisations to adopt more robust digital tools and make a fundamental change in their approach to business practices. 

One of the first initial steps organisations can take to mitigate future risk, is to reduce how much of their supply portfolio originates from a single supplier and eliminate their dependence on single regions or countries. What businesses can do instead is incorporate a combination of multiple trusted near-shore and offshore suppliers dispersed globally which can be easily switched out should a specific region become disrupted. 

Given today’s global levels of disruption, organisations should not only infuse diversification within their sources, but also incorporate four elements within their supply chains models. 

Agility

Adopting technology which enables supply chain flexibility and agility allows for vital channels of information to remain open and accessible anywhere. In today’s market, cloud-based technology deployments that facilitate the effective integration, management and secure exchange of data across people, systems and things is essential, providing businesses an opportunity to be more cost-efficient and manage risk without sacrificing competitive advantage, customer satisfaction or product innovation. 

Alliances

Another important aspect of business continuity for supply chains is maintaining collaborative connections and alliances with external partners. Deploying a cloud-based platform allows trading partners to easily access, share and collaborate on the use of information. Organisations can work with their supplier partners to actively monitor and supervise the execution of dual sourcing strategies. It also means they can use the centralised management of all trading partner contact information to quickly establish the post-disruption condition of a supply chain – providing a significant competitive advantage while also leading to more accurate risk assessment and prevention steps for future disruption.

Operational transparency

Suppliers seeking to adapt their operations and continuously provide products and services to their customers should shift towards technologies that provide transparency, giving them a better opportunity to improve decision-making processes. Suppliers can integrate secure, expanded visibility into their multi-enterprise operations using integrated third-party data sources. This allows suppliers to self-monitor the functionality of critical components that could be impacted by unforeseen supply chain and operational disruptions.

Incorporating the information advantage 

By capturing and analysing an entire data set, a supplier can derive insights which improve operations, drive innovation, and open up more new business opportunities, producing a competitive information advantage. Stronger information management layered with analytics and machine learning technology can provide the insights required to remain on top of potential issues and maintain workflows – both vital for the viability of operational excellence within the larger supply chain ecosystem.

The future of the global supply chain network  

The pandemic has revealed many gaps in the global supply chain model. Many businesses are already having to rethink entire manufacturing and distribution models. Despite the fact that COVID-19 dislocated many areas of the global supply chain, it also presented an opportunity to drive real change in the supply chain ecosystem. It is critical now more than ever for organisations to not only respond with agility in the short-term, but also improve supply chain resilience for the long-term. A cloud based integration environment provides the digital foundation required for all employees to have secure access to essential business information and systems, collaborate effectively with dispersed internal and external stakeholders, synthesise data into timely insights and maintain supply chain visibility. Companies that capitalise on this moment and take the appropriate steps to incorporate cloud-based architectures will be able to respond quickly to changes and remain competitive within their industries. 

Establishing an ethical and sustainable supply chain

Insight from Mark Morley (pictured), Director, Strategic Product Marketing, OpenText

What factors are driving businesses to reconsider their supply chain and whether it is set up for ethical sourcing?

“Last year, supply chain research specialists APICS found that 83% of supply chain professionals thought ethics were extremely or very important for their organisation. When you consider the brand and reputational damage – not to mention the legal implications – of unethical labour, it’s not difficult to see why. Every company operating in the supply chain now has a part to play when it comes to Corporate Social Responsibility.

“Additionally, customers are more informed than ever before. They are asking more questions about the products that they are purchasing and the vendors that they buy from. Vendors need to be able to answer these questions. Otherwise they risk their reputation. Thanks to modern technologies, companies can no longer absolve themselves of responsibility for what happens in their supply chains. The transparency and visibility that supply chain professionals worldwide can build into their operations are exactly what’s needed to ensure ethical policies and practices are being followed.”

What can organisations do to ensure their supply chain is ethical?

“In complex global supply chains, ensuring ethical operations is up to everyone – from a company’s employees to its suppliers, customers and trading partners. Each has a vital role to play.

“When a company doesn’t have a clear understanding of its suppliers’ operations – even at the start of a contract – how can it monitor and manage supplier performance against a backdrop of continually evolving environmental, market and political conditions?

“Ultimately, at the heart of delivering an ethical, sustainable supply chain is visibility and the key to achieving that visibility is information. An organisation must be able to access information on their suppliers and their activities. They must also be able to make that information accessible to partners and customers. Key areas such as workers’ contracts and conditions, the provenance of materials, environmental performance and financial process need to be able to be monitored, and organisations need to be able to identify any supplier breaches of their ethical policies so they can take remedial action quickly.

“As a result, the entire supply chain needs to ensure that areas such as provenance of materials and overall environmental performance are monitored and that the data accumulated is easy to access. After all, brands cannot sell stories of ethics and suitability if they cannot see the exact routes their products take, from creation to market, for themselves.”

How can setting up a more ethical supply chain create a competitive edge for the business?

“Nowadays, the majority of modern supply chain operations have become much more customer-facing, and many companies strategically use their supply chain to drive business initiatives and improve customer experience. Delivering on customer experience means understanding their needs and expectations. Today sustainability and ethical business are key differentiators. To remain competitive, leaders need to dramatically alter how their supply chains operate, including a shift away from wasteful linear models to circular models that reuse, renew and focus on responsible sourcing. Supply chains will need to limit waste production, as unnecessary waste will be viewed by society and consumers as unacceptable.

“According to EuroMonitor International, 65% of consumers now say that they attempt to make a positive difference through their choice of everyday purchases. Therefore, ensuring your supply chain promotes ethical practices throughout is a good form of marketing. It is only through achieving and being able to prove this that you can convince your customers that they are buying sustainable products from an ethical brand.

“It’s not just the right choice, it’s the smart choice and makes business sense. If you have the processes in place to ensure ethical practices are followed, you can also use these to monitor operations and ensure that processes are as smooth as possible throughout the supply chain. It can also help to ensure that your business is able to attract and retain the best talent. Job seekers often want to work for companies that are seen as more ethical and taking sustainability seriously. Attracting the right people can improve overall morale, business satisfaction and even productivity.”