These days, many companies operate on a global scale. They have supply chains consisting of several suppliers and crossing multiple national borders. In order for the outsourced processes and the supply chain as whole to work, companies need to redesign them to master the challenges of today’s business world. This article looks at some of these challenges and how technology can help you deal with them.
The global economy is currently in supply chain shock. Alongside the continuing COVID-19 pandemic, events such as the freighter Ever Given blocking the Suez Canal for several weeks have been causing sustained global supply issues. However, it’s not always global events which are responsible for disruptions in the supply chain. Even localised issues can cause a link to break in the supply chain, whether these be weather events, a supplier going bankrupt, technical issues or IT problems. You can read more about the fragility of global supply chains and the reasons for this in part 1 of this series.
This article looks at how to build a future-oriented global supply chain. Discover how the newest technology can help strengthen your supply chain and read on for tips on how you can react quickly to the external factors threatening your supply chain – even in a crisis.
Value-adding and non-value adding steps in the supply chain
As companies have started to focus their attention on their core business over the last few years, they have outsourced a number of services and processes to third parties. As well as manufacturing components and pre-work, these also include non-value adding elements such as running and maintaining a building or plant machinery, security services, catering, providing IT infrastructure and services, and other support services. The result is an unwieldly network of interdependent supply relationships that needs to be carefully planned to ensure that the chain does not snap at its weakest points. In order to anticipate risks, your business continuity management work should not be limited to inside the company. It should encompass the whole supply chain. Any disruption or change within your global supply chain needs to be addressed with appropriate counter measures to ensure your company stays competitive.
Challenges in redesigning a supply chain
Redesigning a supply chain is complex and presents a company with significant challenges, which are discussed in more detail below.
Keeping track of the whole supply chain
One of the biggest challenges is to fully understand and nurture the network of relationships along the value chain. This is no mean feat; a large corporation’s direct supplier relationships alone usually go into the thousands.
Analysing risk along the entire supply chain
As a result of the sheer number of companies involved in a supply chain, you need to take a structured approach and set clear priorities when redesigning a global value network. A company needs to assess the significance and threat if all parties – upstream and downstream – to the value chain as a whole and, if necessary, take measures to safeguard the supply chain from these risks. A supply chain needs to be designed with an eye on both cost and risk at all time.
Ensure legislation is complied with along the supply chain
Another challenge is legislation, particularly when outsourcing parts of the supply chain. In 2021, for example, the EU introduced the Supply Chain Act, making companies liable for the actions of their suppliers. Companies also need to know and follow the e-invoicing rules for the countries with which they do business. These vary from country to country, making it tricky for global players.
Define and communicate expectations upstream
Ensure that your suppliers and service providers know exactly what you need from them, and that this is set down in a contract. You need to regularly check that they are complying with this contract. An EDI connection can be helpful for this as it automates the agreements between your company and suppliers during onboarding, making it easier for you to comply with or monitor these requirements.
Get information flowing throughout the supply chain
Another challenge is establishing a fast and reliable flow of information throughout the supply chain. All partners in the digital value network need to be able to communicate with each other quickly and flexibly with the latest technologies, whatever the circumstances.
You need current data to make the right decisions for your company. If you cannot see what is currently happening in a particular process, you can’t react to the issues. This may involve adjusting the delivery date, changing the source of supply or the type of transport. Harness the advantages of industry 4.0 beyond production and enable
- complete transparency,
- networked processes
- small batches,
- more product variety
- decentralised supplier and customer management
along your entire supply chain.
Transparency in the supply chain
Recent research has shown that the Covid-19 pandemic has made it even more important to have transparency in a supply chain. According to the 13th Hermes Barometer, an annual survey run by the German logistics giant, 47% of the logistics decisions makers they asked felt that transparency was extremely important in a supply chain. Equally, 40 % of those surveyed agreed with the statement that information needs had significantly increased in their own supply chain due to the current pandemic and increasing economic uncertainty.
According to the 13th edition of the Hermes Barometer, the biggest obstacles to building a more transparent supply chain are:
- Security issues (46%) and lack of trust
- Exchanging data with partners (43 %)
- Insufficient human resources for creating a digital supply chain (53 %)
Those companies that already have a digital and transparent supply chain and actively protect it against potential risks currently have a competitive edge. Companies whose supply chains are still not very digital, networked or transparent should therefore act quickly in order to remain competitive.
Using cutting-edge technologies in the supply chain
Companies use technology in their supply chain to automate their processes. This reduces sources of error, eliminating the need to manually transfer information between systems, or even paper-based steps. Adopting these modern technologies in the supply chain is an important step towards designing lean processes and reducing costs. Below are some of the technologies companies are adopting in the digital transformation of their supply chains
Companies are starting to focus on new and hybrid IT architectures when evaluating their IT infrastructure. Alongside the classic locally installed IT systems, we are starting to find more cloud technology in global supply chains. Cloud-based applications have become an integral part of many companies’ transformation strategies. In recent years, most projects have tended to involve migrating established applications to a cloud environment. The benefits of cloud-based IT solutions in the value chain are as follows:
- Cost and process transparency
- High availability
A significant value in using cloud-based applications in logistics is that this lets you quickly and cost-effectively integrate external partners and suppliers into your back-end processes. And, you will soon discover that a cloud-based integration platform has an innovative effect on the entire supply chain worldwide.
The supply chain of today is characterized by complex process management and countless trading partners. It is therefore difficult to ensure error-free processing without adopting a form of electronic data interchange (EDI and/or API). This is because today’s supply chain management is not just about goods moving from supplier to customer. It’s also a stream of complex information and data, from transmitting product details to automatic order processing and payment. To prevent breaks in the chain, each party has to receive the information it needs, including last-minute changes, and process this as quickly as possible. This would be simply impossible with manual methods such as paper, fax or even e-mail. The power of EDI or an API and professional API management is that a company and its business partners are networked and integrated in real time. This was previously only possible within the four walls of a company.
Using a blockchain allows data from the supply chain to be stored in an immutable, verifiable, and traceable manner, while still being viewed by all participants in the value chain. One advantage of blockchain is that customers can seamlessly trace the origins of their goods. This makes it easier to shop sustainably. On the other hand, when automating part of the supply chain, it is the producers who benefit from blockchain as a low cost way to prove the quality and origin of their products. Blockchain technology can help make consumption and production more socially just, ecological and integrated. And this helps sustainability grow. You could even complement blockchain technology with other technologies such as the internet of things (IoT), or others to further strengthen your global supply chain.
In order to avoid empty spaces on shelves, you need to plan ahead. Artificial intelligence (AI) can help you make more reliable predictions, and can be used particularly effectively in supply chain management. However, although AI technology is promising, its use in supply chains is still in its infancy. Currently, the most common applications are sales and activity forecasts and inventory management.
The graph above illustrates the economic effects companies expect if they start using artificial intelligence (AI) in their supply chain management. For example, 80 % of those surveyed expect that AI would improve the availability of their goods.
Sustainably redesigning a supply chain
Climate change and the environment have come to the public’s and media’s attention at the latest since the Fridays for Future movement. More purchasing decisions are being made from an environmental perspective, and parties along the supply chain are being put under pressure to improve a product’s environmental credentials. Companies are now having to find solutions for completely new demands. While those in supply chain management are needing to look for more sustainable packaging and transportation options, there are also calls to improve the transparency of the chain so that the individual components and raw materials can be traced to source.
The Supply Chain Act in the EU makes a company liable for any human rights violations committed by their suppliers. This will further increase the need to ensure a sustainable chain, and companies need to start preparing for this now.
Gain a competitive advantage with a transparent supply chain
Pandemics, natural disasters and political factors have increased the risk of disruption to supply chains worldwide, and intensified the trend toward digitalisation and automation within the supply chain. At the same time, customer demand for sustainability is constantly shaping the supply chain. Even members of the supply chain who at first glance would seem to have no relationship to the end consumer are affected. They may be required to ensure their methods are sustainable, or to provide a certificate of origin, or to comply with specific legislation. And that’s why having a transparent supply chain is an underestimated competitive advantage.
Companies need to examine their supply chains now so that they’re not late to the party. They need to ask themselves, what needs optimising and how they can do it. And with a trilogy of a clear supply chain strategy, comprehensive knowledge and targeted use of new technology, this will succeed.
SEEBURGER has a number of solutions to help you digitalise your logistics chains and accelerate your processes. Our flexible on-premises, cloud and hybrid operating models let you stabilise your supply chains, innovatively redesign them and make them more cost-efficient.
 cf. hermes-barometer-13.pdf (hermes-supply-chain-blog.com) (accessed 26th October 2021).
 Cf. KI in der Supply Chain – com! professional (com-magazin.de) [AI in the Supply Chain](accessed 27th Oct 2021).
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