Were supply chains blindsided by a lack of visibility?
As the COVID-19 outbreak sends global supply chains in tatters, manufacturers and suppliers have faced a rude awakening.
The pandemic had spotlighted its vulnerability (and the consequence thereof), forcing thousands of companies to either throttle down or shut manufacturing plants.
The pandemic was indeed unprecedented. However, many of the struggles suppliers faced were not new, and are elephants in the room that might’ve already been present pre-pandemic.
The lack of visibility across the chain is one such elephant, and it is a huge one.
Transparency hasn’t quite been a priority for various reasons, such as the fear of losing trade secrets, or the risk of sensitive data getting compromised. Though justified, transparency cannot be compromised – it is crucial to understand and reduce the impact of disruption on all in the ecosystem.
This can start with eliminating paper-based processing. Trade is miles behind other industries in this: take the “Bill of Lading”, for example, which is still filled out by hand.
When COVID-19 struck, physically coming into the office for wet signatures and paper printouts was no longer possible, drastically slowing down the already lagging process.
For the most part, however, companies are just short-sighted, blinded by the hefty price tag and complexity in going digital. Digitization helped in risk management – those who adopted digital means like e-signatures fared much better than those who didn’t.
Suppliers may be wary about sharing business details, with concerns of losing commercial advantage, or having customers side-step them.
To have data distributed to more than two parties and concurrently maintain data integrity, the current Electronic Data Interchange (EDI) and Excel communication systems will not suffice.
Blockchain can, and is already, serving as a good technology to use in this respect: Permissioned blockchains can give suppliers control over who to share their data with, without point-to-point integration.
Buyers are already offering programs that incentivize suppliers to share their data, but this often stops at Tier 1 suppliers.
Visibility issues thus stem from Tier 2 suppliers or even further up the supply chain. Financing across all tiers is crucial. Blockchain, again, can be used to ensure that crucial data such as performance and risk is shared safely with financiers and other parties that they might not have a direct relationship with.
After the COVID-19 crisis dissipates, suppliers will be faced with a choice: heed the lessons learnt from this crisis, or cross their fingers in hopes that such a disruption would not happen again. But shakeups are bound to happen, and it is those that developed from this crisis who will be winners in the long run.