The majority of businesses are leaving themselves open to perilous levels of risk by failing to build collaborative and strategic relations with their suppliers, a leading supply chain professional warns.
Mydat says that with chaos being the “new normal” for supply chain it has never been more important for organisations to mitigate risk by having end-to-end visibility of their value chain.
“Yet according to Harvard Business Review, 92% of businesses lack close relationships with their suppliers,” he points out. “This will be bad news for many.”
Supply disruption 'new normal' - Suppeco
Mydat says supply chain disruption is fast becoming the de facto operating model - the ‘new normal’.
Many influential supply figures agree with him. In an FT article for the Financial Times, David Bowers of Absolute Strategy Research, says the seismic effect of the pandemic has changed the complexion of global economics, and that we are witnessing the biggest shock to supply chains since British logistician Keith Oliver first coined the term ‘supply chain’ in 1982.
Mydat feels that with supply chain disruption expected to continue “for as long as we can realistically divine” risk and resilience solutions will be key both to maintaining competitive advantage and keeping shareholders happy.
“Solutions will require a more pragmatic approach,” he says, “such as managing trade-offs between deliverables like digitisation, sustainability, innovation and cost control.
Chips shortage shows why supply diversity is key
He says in today’s uncertain world having too many eggs in one basket “is a grave and dire threat”, and points to the semiconductor crisis as a case in point.
Mydat goes on to point out that a big problem is that organisations might not realise they are relying on too few suppliers, because they lack end to end visibility of their value chain.
He says: “Without a holistic view of your end-to-end value chain you can never have a clear picture of supplier diversification.
Although looking at first-tier suppliers may give the impression you’ve managed to diversify, when you drill further down into tiers two and three you may well discover your suppliers are reliant on the same source for the same critical raw material or component.”
Mydat says that, increasingly, companies are competing for scarce materials and resources offered by a relatively small number of suppliers.
He also points out that as fundamental supply chain resources such warehousing space and ocean containers run short, the movement of goods - as well as the manufacturing of them - is at risk.
“In this new norm, supply chains suffer volatility and uncertainty,” he says. “Identifying risks and safeguarding continuity of business requires transparency and customers of choice.
Become customer of choice to avert supply risk
“By taking the focus away from cost reduction, and instead engaging on initiatives to drive improvement and innovation you can become a customer of choice,” says Mydat.
He adds: “When sellers hold the cards becoming a customer of choice is a strategic play and a significant competitive advantage that leads to lasting resilience, allowing you to mitigate risk by securing preferential treatment in all areas - cost, technology, innovation, risk and availability of supply.”
Getting granular on risk, Mydat says today’s interdependent global supply chains are riven with all manner of risk and including:
Security and movement of assets
Poor quality or service levels
Legal and regulatory compliance requirements
Sustainability and ethical sourcing
Cybersecurity and data protection
Geopolitical uncertainty, leading to increased tariffs, embargos, trade bans or economic sanctions
"Countering such risk makes it even more important that organisations establish themselves a customer of choice,“ Mydat says.
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