- The complexity of hard goods’ supply chains makes them more vulnerable to major disruptions. The risk results from having disconnected supply chain processes and information.
- Without supply chain collaboration, brands and retailers are exposed to major risks such as poor supplier performance, lack of resilience to disruptions, and inefficient resource allocation.
- To reduce risk, companies can use data analytics to build transparency, create supply chain collaboration, invest resources in high value-added activities, and monitor critical events in real-time.
It’s only recently that technology has made true supply chain collaboration possible. Here’s what it looks like: imagine all of the different parties in your global supply chain working together in real time to accomplish shared goals.
For those in the hard goods industries, the benefits of supply chain collaboration are far-reaching. Your business becomes more resilient to disruptions from natural disasters to pandemics and beyond. Your supply chain is suddenly agile in the face of changing demands. You have the ability to orchestrate changes across your entire supply ecosystem with less inertia and with clearer communication, since everyone in the network shares the same incentives for success.
However, the complexity of hard goods’ supply chains makes them more vulnerable to major disruptions. This higher risk results from both reduced efficiency and from the number of internal and external stakeholders affecting the supply chain.
So, let’s start with an important question: what are the risks of not building supply chain collaboration?
The risks of a disconnected supply chain
When you can’t speak with your suppliers and don’t know what’s happening in your supply chain, you open the door to a number of risks:
Poor supplier performance
When a supplier fails to deliver on an order, having a disconnected supply chain means you can’t manage the problem effectively. You risk receiving orders that are:
- Misaligned with your requirements
This type of underperformance costs significant resources, and since you can’t sell defective products, you ultimately have to pay for your suppliers’ mistakes.
This type of underperformance can damage your brand’s hardest-earned asset: its reputation.
Without a system in place to quickly remedy the issue, your brand is assuming significant risk.
Lack of resilience to disruptions
Supply chain disruptions are increasingly common and aren’t going away. A recent study by Deloitte revealed that 85% of surveyed global supply chains had experienced at least one disruption in the past year. Disruptions can spring from both internal and external sources:
- Natural and man-made disasters
- Financial problems
- Cybersecurity threats
- Compliance issues
- Geopolitical instability
Supply chain collaboration and connectivity helps supply chains weather even the most major disruptions without breaking.
With modern technology, you can connect your supply chain to have more visibility over critical events, communicate in real-time with your suppliers around the globe, and build trust with suppliers to overcome challenges together.
A lack of risk resilience stems from not knowing where suppliers are located, what their capacities are, and where they’re vulnerable — in other words, poor collaboration leads to risk blindness.
Inefficient resource allocation
When you don’t know where the risk or underperformance lies, the same problem will keep recurring no matter how many resources you throw at it. Without a connected supply chain, you can’t observe trends or predict risk to prevent issues that may arise with your suppliers.
Matters are made worse by the prevalence of time-consuming manual practices. Employees in your supply chain, from facility managers to those inspecting the quality of hard goods, must spend time on inefficient, outdated activities such as:
- Using emails and calls to communicate
- Sending reports via Excel and PDF files
- Pen-and-paper or half-manual analytics and assessment
These repetitive tasks keep the staff from focusing on higher value-added activities. For example, people stay focused on carrying out established inspection and reporting processes, rather than driving improvements or dealing with problematic areas.
Having the right infrastructure in place leads to higher ROI across the supply chain, with time savings ranging from 31% to 100%. By sticking with manual and repetitive tasks, your company cannot access these savings.
How to reduce risks and build supply chain collaboration
It’s worth restating: in order to proactively manage risk, you must know where that risk lies.
That means having visibility over your supply chain structure. It means knowing where your suppliers are. And finally, it means building interconnectivity across all tiers of suppliers.
Here’s how to do it:
1. Use data analytics to build transparency and improve performance.
Network analytics are not only the future, they are presently the force behind today’s most resilient supply chains.
“Network analytics can be used to quantitatively diagnose the relative fragility of the supply chain, and draw meaningful comparisons with peers and industry benchmarks.”
The first step to acquiring network analytics is digitizing your supply chain. This allows you to:
- Objectively evaluate risk at the facility and product levels
- Obtain actionable data on supplier performance
- Establish strategic relationships and accountability with your suppliers
With digitization, verifiable data continuously aggregates from every corner of your supply chain. This not only provides real-time visibility over all levels of supplier performance, but as time goes on, it strengthens the accuracy of predictive insights.
2. Build risk resilience with full supply chain collaboration.
Supply chains are complex entities. Complicating matters further is that buyers typically only interact with Tier 1 suppliers, which excludes communication with the vast network of other suppliers below.
Full collaboration starts with mapping out your entire supply chain and assessing the capacity of each supplier. With this information, you can invest in the right infrastructure and personnel to manage performance together in the long term.
Building collaboration in your supply chain is not a quick fix, but it’s an effective one, and the payback is substantial. Successful collaborations involving 2-3 separate initiatives can increase profits by 5-11% in that category through reduced costs and increased sales, according to McKinsey & Co.
3. Invest resources in high value-added activities.
One of the most revolutionary benefits of automation and digitization is that they allow your company to allocate resources directly to areas of high risk.
Data analytics allow you to objectively manage risk by receiving actionable data on supplier performance.
Furthermore, new learnings are incorporated into each subsequent round of production so your supply chain will continuously improve. And because digitization frees up people’s time across the supply chain by automating previously manual tasks, it allows employees to spend their working hours on higher value-added activities.
4. Put a production monitoring control tower in place.
In the production of your company’s goods, think of a control tower as a system that alerts you to risks and critical events in your supply chain. This allows you to respond and pivot quickly.
By zeroing in on ongoing and potential risks in real-time, you can fix them with precision by effectively allocating resources. This requires end-to-end visibility, which along with supply chain collaboration is only possible with digitization.
The high capacity required for true supply chain collaboration is only possible with technology. With the use of a sophisticated network platform, you can transform even the most complex supply chain to one where end-to-end visibility, communication, and accountability are the rule and not the exception.
Read more about what Quality 4.0 is and how to modernize your quality control to build risk resilience and connect your supply chain.