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Is Your Supply Chain Worth Re-Examining in a Pandemic?

supply chain in pandemic

The COVID-19 pandemic hasn’t just been hard on people. Supply chains everywhere are struggling. 

Shortages of masks have made headline news. Meat processing facilities around the country have closed, causing grocery stores and restaurants to run low. Across the business world, companies are having trouble getting the goods they need to operate. 

The good news is, shortages also present opportunities. You may not see weak spots in your supply chain until a shipment is late, or the cost of something you take for granted, like paper or ink, skyrockets. 

Seize the silver linings of this crisis. To shore up your supply chain:

1. Map it Out

In our globalized world, supply chains are complex. The first step to strengthening yours is to understand its full scope. 

You know your first-tier suppliers, but what about those down the line? How would your company be impacted if a second- or third-tier supplier shut its doors? Does that first-tier supplier have backups?

Beware that vendors may not tell the truth about their own suppliers. The reason is that they don’t want to show weakness. If customers worry about their ability to deliver, they may take their business elsewhere.

Supply chain security and simplicity are popular reasons companies work with group purchasing organizations like Una. A direct purchasing strategy is simply too complex for all but the biggest procurement teams. Plus, GPOs always have backups in case a supplier of a certain good goes bust. 

2. Avoid Risky Suppliers

If you do decide to stick with direct procurement, check your mapping for risky suppliers. These suppliers are likely to be adversely affected by economic or political conditions. They may engage in deceptive or immoral practices, such as child labor. 

Another place to look for risk? Product recalls. Suppliers who tend to ship a lot of defective products have weaker foundations than their peers. Not only is something they send you less likely to be usable, but they may not be in business for long. 

When in doubt, work with regional suppliers. With regional shipments, there are simply fewer miles and national borders to cross. Proximity is a primary reason why 33% of global supply chain leaders have moved their operations out of China, or plan to in the next few years. 

3. Digitize Your Supply Chain

Despite the trend toward paperless offices, many companies still rely on paper invoices and book-keeping. Not only does that make errors more likely, but it makes managing the whole procurement ecosystem more difficult. 

Experts suggest that identifying points of volatility and waste in a supply chain requires 70-90% visibility, but most companies have just 20% visibility into theirs. These companies may be able to track shipments once they’ve left a supplier’s office, but they’re in the dark about pre- and post-shipping processes. 

Do all that you can digitally. Invest in an inventory management system, and encourage your suppliers to hook their own systems up to yours. Set up notifications so you and your suppliers know when you’re running short. 

4. Understand the Impact of Tariffs 

When the pandemic hit, employers found it difficult to secure personal protective equipment. While part of the reason for PPE shortages was demand, a close second was tariffs. The United States levies tariffs of 15-25% on many imported medical products. 

It only takes a small supply chain hiccup for the same dynamic to play out with other products. What if your office was suddenly unable to get computers, printers, or keyboards? What if shortages caused them to double or triple in price?

Tariffs add risk to a supply chain. If any of your goods are imported, find out whether they’re subject to import taxes. If so, be sure you have a backup in each category from a nation that isn’t affected by them.

5. Keep Just Enough on Hand

If there’s one thing this pandemic has taught supply chain professionals, it’s the importance of being prepared. Stockpiling ensures you aren’t left empty-handed if a critical supply runs short.

Although having a safety net of supplies is important, you don’t want to go overboard. With perishable goods, in particular, stockpiling may result in you having to throw out unused supplies. Even if not, stockpiled supplies take up valuable warehouse space and cost money to move.

Inventory management is a balancing act. If in doubt, ask your procurement team’s opinion: How much of each supply should be kept on hand? Which supplies tend to run short soonest? Which ones are easy to get, even when the economy hits a bump?

6. Have a Backup Plan

Keeping extra supplies on hand is never a bad idea, but they won’t last forever. What if your supplier is still shut by the time those extras run out?

You can’t predict the future; what you can do is prepare for it. Have a plan of action for each key supply, whether it’s printer paper or product packaging.

Build your backup plan with a 360-degree approach: What alternative suppliers can you call on? What money do you have saved that can be used if an emergency strikes? How will you communicate with your customers if there’s a delay?

7. Be as Transparent as Possible

The reality is, supply chain disruptions happen to every company. However well you prepare for them, you’ll eventually have to make some hard choices. 

You might be tempted to hide disruptions from your customers, but that could do more harm than good. If anything, you should be more transparent than ever.

Tell the truth: Why aren’t you able to honor your product or service commitments? When might you be able to deliver what your customers ordered? What are you doing to expedite the process? The sooner you level with them, the more they’ll respect you for it. 

The coronavirus pandemic was a once-in-a-century disruption. But there are all sorts of other reasons your supply chain could take a hit. Don’t be blindsided. It’s time to adjust to the “new normal,� and that means buttoning up your supply chain sooner rather than later.

Image credit: Tom Fisk; Pexels

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Prioritizing Revenue Capture: Why Sales Order Management Needs to be Automated

sales order management

Businesses have known for years that digital transformation needs to happen. However, many companies have struggled to initiate Digital Transformation in an effective way, and most DT initiatives have failed to fulfill their goals. Here is: prioritizing revenue capture and why sales order management needs to be automated.

Digital transformation: no more delaying.

Historically, a big cause of DT struggles has been a lack of buy-in from the executive level. Without the support of this kind, initiatives tend to flounder. Why? Because DT is less about technology and more about a top-level business strategy that can drive investments and business decisions.

Without this momentum, the best technology in the world will struggle to take hold.

The turbulence of recent months is putting an end to DT sluggishness.

Executives are properly turning their attention to the potential of DT initiatives, and driving their implementation. Organizations that were dabbling in digital transformation are now rushing to prioritize it, acutely aware that the proper prioritization of digital transformation projects can lead to hundreds of millions in savings.

And so what is the broader, executive-level vision that should underpin this newfound executive enthusiasm for DT?

A key part (perhaps the key part) of digital transformation is automation. As Forrester put it, in December of 2019: “The organization of the future depends on automation to create massive efficiencies and new capabilities,� and embraces automation as a way “to unleash human capital to pursue more creative, higher-value goals.�

Where to start with automation?

Automation is at the core of most successful digital transformation projects. This is why we are seeing various forms of AI enjoying massive adoption across multiple industries. But lots of organizations aren’t sure where to start executing on automation-driven digital transformation projects. Which part of the business? What department? What are the goals?

Here’s the answer: start with low risk, a fast time-to-value process that impacts the most important part of your business: revenue.

One of the easiest places to locate such processes is in the supply chain. The supply chain is benefitting from a range of automation and automation-adjacent technologies (including Blockchain). And one element of the supply chain that is ripe for automating is sales order management.

Sales order processing: Ditching the manual.

A large portion of small business owners is still running manual supply chains. In the US alone, 49% of total B2B sales — totaling $7.37 trillion — are still processed manually.

These stats mean that the conversion of purchase orders into sales orders still happens the way it did decades ago: By hand, one by one. Customer service representatives take a purchase order and manually key it in, doing their best not to make a mistake.

That process is terribly inefficient. With manual sales order processing, you see:

  • 20-30 minutes of manual entry time per order
  • An average cost per order of $9.05
  • CSRs spend 2 to 3 hours a day re-entering orders with errors
  • The order to cash cycle stretches out to an average of 45 days

Some businesses have tried to improve this dated approach with robotic process automation. But RPA is a hit and miss technology. According to Gartner, 50% or more of RPA implementations fail to deliver sustainable returns on the investment. Instead, by 2022, 80% of organizations that pursue a cloud-first strategy will forego the use of RPA in favor of low-code integration platforms.

What sales order processing needs is true automation.

With real automation, a company can automatically convert purchase orders from its customers into sales orders and directly enters those sales orders into their clients’ ERP systems. This isn’t OCR, which still comes with errors. This is a data extraction technology that lifts the text out of a document with 100% accuracy, removing the need for someone to manually review the document.

With a sales order automation solution, over 80% of orders can be “touchlessâ€� – meaning there is zero human involvement in the process of a purchase order turning into an (error-free) sales order. This drastically increases an organization’s capacity to process their customer orders, while substantially shortening the fulfillment time. The outcome? Better revenue, better ROI, and better customer experience.

With this level of sales order automation, you can go from order emailed to shipment in less than 15 minutes. Cost per order falls drastically, to less than a dollar per order. And FTEs who were previously spending hours entering orders can be freed up to focus on increasing the level of customer service and engaging in activities that actually drive revenue.

The future is digitally transformed.

Digital transformation can be a daunting task. It’s hard to know where to begin, and hard to be sure you’ll succeed. This is why starting with sales order automation is smart. It’s an easy-to-understand business process that directly impacts revenue. If you could allocate fewer resources to it, then you will recapture revenue.

Global connectivity means that sluggish and inefficient supply chains hurt everyone. For companies that hesitated to digitize, the end is now.

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Why Our Supply Chain Failed Us During the Pandemic

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We may have crested the wave of COVID-19 that has already taken more than 116,000 lives (count yesterday), across the U.S., but we are far from out of the woods. An insidious problem continues to threaten our ability to combat future pandemics.

I’m talking about America’s sluggish and antiquated supply chain.

At the height of the pandemic in March and April, nurses in New York were working without adequate personal protection equipment while California warehouses brimmed with supplies — and mask production lines in Fort Worth sat idle.

The Department of Health and Human Services shipped ventilators to Florida in droves while the Northeast desperately needed them.

The problem wasn’t a lack of equipment.

America had plenty of equipment. But we didn’t know where it was located — or how to get the supplies where they needed to be. As a result, we missed the opportunity to slow the outbreak and protect patients and our first responders. Lives were needlessly lost — because of supply chain inefficiency.

“The lack of information transparency is the single biggest impediment to the global supply chain,� notes Dr. Nick Vyas, Executive Director of the Marshall Center for Global Supply Chain Management at the University of Southern California. “It costs us billions of dollars each year and significantly impacts the environment.�

I’ve been investing in people who move goods throughout the world for nearly 30 years.

Moving goods across the globe is a complex ballet that normally has about as much sex appeal to most people as discussing fertilizer brands. Why is that? The best way I can explain it to you is that, until now, a breakdown in the supply chain meant your plaid shirt arrived a week late. Now, this complex system breakdown could mean, unfortunately, that your Uncle Harry dies.

America’s supply chain is the nervous system of our economy.

At present, the supply chain of our nation is a chaotic mess of competing companies speaking in their own peculiar codes. There are no data standards, common language, or transparency among users. It would be as if we asked a hundred emergency responders to work together at a disaster scene, but no one used the same radiofrequency.

Guess how that would turn out?

We lead the world in the technological capability to track goods and get them into the right hands — a process called Geospatial Intelligence. All we need is congressional willpower to streamline the data.

There are five steps to streamline the data to track goods.

  • First — The United States needs to establish a secure “data highway,â€� so that users can see where things are, and how they’re moving through the system.
  • Second — Congress needs to adopt data standards so everyone in the supply chain speaks the same language.
  • Third — Our country needs to mandate registration of certain critical assets, so we can reposition them quickly in a crisis.
  • Fourth — We must develop a tracking system to identify where new outbreaks or crises occur.
  • Fifth — We need to utilize technology to measure and track how things are moving within the system so as to minimize impedances and to maximize flow.

Streamlining the supply chain requires a coordinated effort among businesses as well as at the federal level.

Think of the way the airlines operate. There are standards and a common language that enables every carrier to see the entire system in real-time.

Supply chain modernization would be nowhere near as costly or require as much congressional resolve. Yet, the results would provide big dividends to our country, especially in times of disaster. Ambivalence, rather than opposition, has been the key impediment to modernization until now.

We must have enough courage to change our ambivalence.

Without a user-friendly data highway and standard information protocols, we are doomed to a repeat of the chaos and needless suffering we experienced during the COVID-19 crisis.

China knows this is a weakness of ours — as do many other countries.

If you are working in the supply chain industry — you can see that China is working hard, and quickly, to launch their own data highway for the rest of us to use.

Haven’t we learned that information is power? Haven’t we seen that other countries want to control that power — and us?

If Congress doesn’t work to get U.S. companies to adopt a common, universal system, we will lose information transparency, and we will hand over control to those system architects whose motives may be self-serving.

Until now, our supply chain has been taken for granted. The pandemic has shown us the folly of our indifference. Now it’s time for Congress and industry to address this need.

Supply chain modernization may not sound like a sexy topic, but it gets pretty vital pretty fast when lives are at stake. Let’s work together now to innovate the supply chain learning from repeating the tragedy we’ve just witnessed.

Let’s work quickly and efficiently to create a better world with available resources for all.

 

Image Credit: Korhan Erdol; Pexels

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