Engage Your Partners in a Digital Supply Chain

How manufacturers can help smaller supply chain partners embrace the changes needed for a successful digital supply chain.   

On a recent Manufacturing Leadership Council (MLC) call, member participants discussed their most pressing issues and priorities for supply networks in 2022. Strategies for helping smaller supply chain partners to embrace digitization wasn’t one of the top five topics ranked (it was slotted eighth), but it consumed a good part of the discussion. This wasn’t a surprise. It’s consistent with what we’re hearing from many of our manufacturing clients: Lack of digitization in the supply chain is hampering visibility and agility.

Increasing visibility into the supply chain was already a priority for manufacturers of all sizes before the pandemic, but it’s now become critical given the levels of volatility, instability, and unpredictability. In a Gartner study, 80% of respondents said they have insufficient supply chain visibility.

Pandemic May End, Instability Will Remain

We believe the supply chain issues brought on by the pandemic and recent geopolitical events will persist for some time. Companies that were in a steady state a year ago are seeing new challenges emerge.

Consider the example of a contract manufacturer that produces and packages beverages. The company’s customer buys packaging materials, orchestrates the logistics, and sends the materials. The company suddenly found it was having issues getting raw materials for cans on time. The materials were coming from a new supplier. While the raw material was in spec when the manufacturer put the material through its process, it found cans were tipping over due to small variances for which their machines were not optimized. This caused significant downtime. If the manufacturer had better visibility into its supply chain, it could plan better for the changes by qualifying the new cans and optimizing machine settings ahead of planned production runs. But because of the nature of the relationship, the contract manufacturer was in the dark. Many other manufacturers have similar stories.

Even when things do stabilize, there will continue to be new and unexpected challenges. Agility and resiliency will be key to reacting quickly: rerouting orders, developing distribution center bypass programs with high-volume customers, or switching plants or lines within the four walls of an existing plant, for instance. Consumer and industrial brand owners and their suppliers and other supply chain partners will need to advance digital capabilities to increase visibility and, thus, agility.

Brand Owners Must Take the Initiative

Many larger manufacturers are already on the journey toward developing a digital supply chain, but their Tier 1, 2, and 3 suppliers are medium-sized to smaller companies that may be in the early stages of embracing smart, digital technology — or have not even begun. When smaller suppliers do not have the technical footprint to manage data or enable the necessary interfaces — for example, APIs between ERPs or EDI between logistics partners, customers, and manufacturers — the relationship must rely on spreadsheets and manual processes, such as on-the-water reports. Manual processes are not just slower, but also prone to errors. In a survey conducted by Supply Chain Dive and West Monroe, nearly 75% of manufacturing and distribution executives said they are primarily using Microsoft Excel in their S&OP processes.

Engage your supply partners. If the goal is to become digital, you need to solve analog problems with a digital mindset. That starts with focusing on the end user, business stakeholders, and supply partners, and working to solve the problem from their perspectives.

Dialogue is key to increasing supply chain visibility, and the good news is that doesn’t require (much) investment. Establish monthly meetings with a clear agenda around goals and setting the strategy for sharing data. Start by understanding what is important to each party and plans for focus over the coming year. This discussion should work toward establishing data standards and governance — including the types of data that will and will not be shared and how that will happen.

Once a good dialogue has been established, this can proceed to an assessment of what is required to achieve the desired level of integration. A simple SWOT analysis may suffice, or in more complex relationships, it may be necessary to dedicate resources to dig into the issues and opportunities. This will involve detailed discussion around master data, APIs, EDI, integrations across multiple applications, and middleware layers and how exceptions are managed. These are essential points to making supply chain visibility happen.