due to inflation and global disruption costs Increased Where are you in your sustainability journey?
Knowledge is power Performance management of strategic partners can help to provide vital information about what’s happening elsewhere in your supply chain
Interest in the ability to map supply chains, which was steadily building over the past few years, shot up in the past 12 months. A surge in disruptions, mounting transparency legislation, and increased consumer interest in the provenance of goods, have all contributed to this shift. While many companies have gathered some information on their suppliers and the people who work in their supply chains for some time, there is now growing demand for greater transparency deep into lower tiers. The environmental, social and governance (ESG) agenda is boosting scrutiny in general. And specific laws, such as modern slavery rules in the UK and Australia, and new transparency legislation, particularly in Norway and Germany – which put the onus on organisations to ensure they have no human trafficking or enforced labour in their entire chain – have driven interest.
“It is incumbent on procurement teams to discover more about those in their supply chain. Successful supplier performance management can act like a superpower providing you with access to this information. Regular, open and honest communication with your suppliers means you are more likely to have early warning of issues either with them or in their own supply chains. It will also enable you to obtain vital market intelligence through their shared knowledge.” This occurs not only through conversations. Correctly using the right KPIs and leading indicators can help to flag issues before they bite you. In addition to close monitoring of performance, creating relationships with suppliers on whom you indirectly depend, yet lack contractual ties, can create influence without the need for legal authority. It may also help to improve efficiency and effectiveness for all. “One piece of work we did led a customer to discover that four parts of its supply chain were hedging the same material. Reviews and conversations that happen through the performance management process can open up multiple opportunities for improvement.” Investment is increasing into technology that uses AI and algorithms to help predict patterns and problems in supply chains; but there is no replacement for relationships as a means of reducing risk and building resilience.
Businesses are more aware than ever of their interconnectivity and interdependency with each other, and the heightened vulnerability and risk that brings to their resilience and reputation should they run into trouble. However, tracking products or services all the way to their entire root inputs is a complicated task. Technology, which can be used to help with data gathered on a single platform that can be used to flag potential issues and facilitate analysis, is gaining ground. The State of Flux SupplierBase platform, for instance, can be used to not only hold information on your most strategic suppliers, but can also link to their suppliers and so on. “Every supplier on the platform has an account, so we’re able to put tier two and three on there as well,” says Alan Day. “So long as you know who they are, or your key partners can tell you, you don’t have to contract directly with that company, they could be a couple of levels below.” This information can be vital to the customer, he says, because while there may be no direct legal relationship, they may rely on their services to deliver or help produce their products. “Customers typically need good relationships with their key partners to find out information about the other suppliers further down their supply chains. At the moment there is generally little incentive for first tier suppliers to provide you with such information.”
To achieve your sustainability goals, you must first understand your organisation’s strengths and weaknesses. Start by completing a ten minute Supply Chain Readiness Assessment.
“Successful supplier performance
management acts like a superpower, providing you with access to vital information.”
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