Supply chains, more than ever, play an important role in defining competitiveness. However, emerging strategies for better managing spend and supplier relationships are helping to strengthen supply chain resilience and drive business growth.
There’s no going back. We don’t visualize any situation where supply chain organizations can begin taking their foot off the pedal. Economic conditions, global competition, risk and uncertainty, innovation expectations and a lot more will just not allow for this. Not in 2020 or beyond, sorry.
It’s not all bad. If anything, it represents an opportunity to shine for those supply chain and procurement organizations that have a good handle on things. Things such as stronger and more collaborative supplier relationships, deeper understanding and influence over product cost drivers and the ability to truly engage suppliers throughout the product lifecycle.
That said, here are some of our expectations for 2020:
Geopolitical turmoil continues. There has been a long history of politics complicating trade and business relationships. Unfortunately, in 2020, this will only increase creating further uncertainty, affecting both the cost and availability of materials and components but also impacting customer demand.
Punitive tariffs imposed by the U.S. prompted retaliatory tariffs from China; some items subject to Section 301 tariffs have now reversed, leaving the U.S. government to refund importers. Complexity is the word. Separately, although the situation is now far from being resolved, the uncertainty produced by the UK’s Brexit initiative is taking a serious toll on trade and business relationships between Britain and many other countries – particularly those in Europe. To be continued in 2020…
Regulatory pressure rises. A surge of new regulation is happening worldwide, and many of them impact global supply chains. Some involve product safety. Some concern the supplier’s working conditions. More are likely to focus on sustainability.
Several them concern the uses and permissible exchange of personally identifiable data, sharply reducing the largely unregulated patterns of personal data use in recent years. They come at a time when highly granular consumer data has become a key element of product design and strategic marketing.
And they raise questions affecting a company’s supply chain. For example, how often does a company need to assess its suppliers regarding applicable regulations? Regarding cyber-security? When issues are found, is a corrective action plan in place? And how is the company documenting the compliance of its supply chain partners? Closer attention to compliance is likely to mark supplier relations in the coming year.
Acceleration to market is paramount. As global competition grows for just about everything, being responsive to rapid changes in consumer demand is now a fundamental business requirement. For manufacturers, launching products to market on-time, at cost, equipped to respond to demand and do so profitably is no easy task. Suppliers play a critical role in this and those that engage and collaborate with suppliers throughout that process, from design, are the most likely to succeed at this time and time again.
Quality. Customer expectations of product quality continue to grow, and company warranties of quality – often reinforced by legal statutes – are keeping pace. To meet those expectations, a variety of shop-floor strategies have been developed and continue to spread. For suppliers, it means implementing and then verifying their industry standards, along with documenting repeatable processes that minimize defects. It means making sure that a supplier’s quality testing processes are in place and that their own Tier 1 suppliers are also monitoring and managing the quality of the materials that ultimately go into the company’s final product. In addition, in means putting contingency plans in place in the event an issue arises. Collaborative quality efforts will continue growing in 2020.
Supply Chain Collaboration. There was a time when manufacturers and their suppliers were adversarial – beating up one another over price, specifications, schedules and more. That was then.
Today, they need to think of themselves as partners, not just order takers. Product manufacturers need to be certain that their suppliers can meet forecasted demand expectations. Getting the planning, forecasts, orders, deliveries right to meet those expectations requires consistent communication and collaboration, but not the manual kind.
To accomplish that, companies need to develop and nurture supplier relationships that lead them to better understand one another’s businesses, directions, and requirements for becoming a good customer. Sharing data regarding product changes, quality issues and process changes will become even more characteristic of successful supply chain relationships in the coming year.
Technology. Until recently, the collaboration between suppliers and their customers that leads to effective business partnerships involved time-consuming manual engagement activities like information gathering and reporting. As a result, they were sometimes neglected.
Today, however, a new generation of digital collaboration tools is available to companies up and down most supply chains. Their use leverages automation to save time, reduce effort, and improve decision-making throughout the product’s lifecycle – a lifecycle which is constantly growing shorter as a result of intense competition and innovation. The ongoing adoption of these digital tools will be instrumental in re-defining supply chain relationships for years to come.