When retailers, brands and consumers think of supply disruption, they usually look at the last mile of the supply chain: the delivery of finished product to its end destination. Most of us think about the types of problems experienced this past holiday season like when UPS miscalculated daily shipping volumes and was overwhelmed with last minute orders, and thousands of gifts didn’t arrive. The damage was significant.
The impact of failing to deliver is severe. It impacts brand. It reduces revenue. It erodes customer loyalty. But how do brands and retailers assess their exposure to the risk of supply disruption? What steps are they taking to ensure the flow of supply, starting all the way back at the source? Brands and retailers often have minimal track and trace capabilities. Some have portals to communicate with tier 1 suppliers. A few have team members tasked with monitoring trading-partner risk. But ensuring the uninterrupted flow of inventory is a much broader task requiring a bigger outlook on the supply chain. Here are seven questions brands and retailers can ask themselves to assess their risk and assure the flow of supply:
1. How early and often are you collaborating with suppliers? Are you sharing forecasts?
2. How are you placing and managing your POs? Do you change quantities and deliveries after you have given your supplier a firm PO?
3. Do you have true visibility into key events in the production lifecycle, into WIP?
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4. Do you have accurate information regarding inventory and raw materials?
5. Do you have granular visibility into shipments to know exactly the location of packed items and the exact date they will arrive? What about as the shipment crosses borders or switches transportation modes?
6. How are you handling invoices and settlements? Is handling supplier email and phone calls still part of the common workflow?
7. Do your suppliers have access to capital? At what rates are they borrowing? Are they leveraging your credit strength to eliminate capital costs? Are you aware of your suppliers’ financial health?
The Big Picture
Hiring more staff in warehouses, adding more trucks, or opening offices overseas are short-sighted moves that address only a slice of the risk picture. Handling volume surges or a natural disaster are only a couple of the problems to be concerned about. The real challenge is the everyday hiccups that occur in the supply chain that impact the flow of materials.
Companies tend to dabble in collaboration. Some have planning collaboration or order management solutions. Occasionally, companies have limited production visibility into suppliers. But most companies fail to look at the full picture to assure supply goes undisrupted. Quite often, multiple departments within a retailer deal with different aspects of the supplier. Sourcing negotiates the price, logistics determines how to ship, supply chain tracks the shipment and finance determines when to pay. Each internal department has a different goal, which can lead to heavy strains on a supplier. Picture a supplier getting squeezed on cost, while being held to stringent quality and delivery standards, while late order amendments come in, and while having payment terms extended. This fragmented approach to supplier management leads to the haphazard reliability of supply. The status of each process is tracked separately and there is no way to look at the big picture.
Instead, a holistic alignment with suppliers across the corporation can help ensure a seamless flow of high-quality goods to the right place at the right time. Looking at the big picture to deploy an agile supply chain that can handle the day to day questions and concerns that arise from things like order amendments or material shortages sets up a retailer or brand to also address the natural disasters and e-commerce surges. Transparency in the supplier collaboration process is key to assuring supply. Partnering with suppliers to provide them with the information, tools, documentation and capital they need is essential to assuring success for the entire supply chain. Retailers and brands have to rethink their supplier management approach, shifting instead to an approach that emphasizes supplier collaboration; this occur when a network connects all parties and the necessary data, tools and visibility are delivered to everyone. That same collaborative approach has to take place internally at the brand or retailer to ensure the health of suppliers and the undisrupted flow of goods.
Bryan Nella is Director of Corporate Communications at GT Nexus, the world’s largest cloud-based supply chain network. He has more than twelve years of experience distilling complex solutions into simplified concepts within the enterprise software and extra-enterprise software space.
Prior to joining GT Nexus, Nella held numerous positions in the technology practice at global public relations agency Burson-Marsteller, where he delivered media relations and communications services to clients such as SAP. In previous roles he has worked with clients such as IBM, MasterCard and U.S. Trust.
Nella holds a BA in Mass Communications from Iona College and a MS in Management Communications from Manhattanville College.