A shocking number of Procurement groups are operating in the dark. Last year's Deloitte CPO survey found that 65% of leaders have limited (if any) visibility past their first tier of suppliers. Companies that fail to improve visibility and gain new insights aren't just hampering their potential "Many organizations," the report reads, "are leaving themselves exposed to potential supply chain disruption and margin erosion by having limited visibility past their first tier."
Now more than ever, organizations need to address the issue of poor visibility and work to build clearer, more communicative connections across their supply chains.
Low visibility is just one of the trending topics discussed in Source One's latest whitepaper: Procurement in 2019. Let's take a closer look.
Why is Visibility So Important?
Without visibility into its own operations, an organization cannot hope to engage honestly with its customers. This is an increasingly pressing issue. In just about every industry, customers are more discerning and more socially active than in previous generations. They expect their preferred brands to behave ethically and provide proof of their responsible practices. It's not enough for an organization to simply suggest its products are ethically sourced.
The engaged consumer expects a full report of where components came from, how products were assembled, and what sort of third parties might have played a role. Recent research from Accenture Strategy has found this is particularly true for Generation Z and Millennial consumers. 6 out of 10, they say, will seriously consider a company's ethical values and authenticity before making a purchase.
Even the suspicion that a company has acted irresponsibly or aligned itself with an unethical partner can leave Procurement scrambling to perform damage control. Thanks to the advent of social media, scandals tied to poor visibility can quickly move beyond visibility and into cultural ubiquity. Just ask any of the dozens of companies that weathered critical headlines in 2018.
Increasing visibility to improve business ethics isn't just about avoiding a scandal. In 2017, Unilever found that ethics and sustainability represent a $1.2 trillion dollar opportunity for those businesses that communicate their efforts to consumers.
Why is Visibility Lacking?
Attaining accurate and timely insights becomes more and more difficult as supply chains expand across the globe. Joann de Zegher, an assistant professor at MIT's Sloane School of Management, writes, "Global supply chains often consist of three or more layers. This makes makes the problem exponentially more difficult, as different tiers of the supply chain are farther removed from each other and their commercial ties become more and more diluted." This is all the more true when an organization experiences shifts related to supply chain disruptions or M&A activity.
The issue is further compounded when organizations neglect to communicate freely and exchange information with one another. Keeping valuable data in closed-off silos, they often leave their peers guessing and inadvertently promote irresponsible and inefficient practices. Problems arise, too, when growing organizations don't allow their processes to grow alongside them. When they remain loyal to outdated, low-tech processes they not limit their visibility, but tend to find themselves slipping behind their more tech-savvy competitors.
What Can Procurement Do?
Now for the good news. Emerging Procurement technologies promise to make enforcing compliance and tracking sourcing activities easier than ever. This year alone saw retailer, grocers, and other international organizations turn to blockchain-powered solutions to gain real-time insights into the happenings across their supply chain.
Even organizations without the funds to invest in cutting-edge tools begin to eliminate blind spots by mapping out their supply chain and conducting thorough audits at each link. By establishing an ethical code of conduct and regularly assessing partners to ensure compliance, organizations can ensure their network remain responsible in the long-term.
As in all things Supply Chain Management, adaptability is key. In all likelihood, Procurement finds itself suffering with low visibility because it has resisted change in the past. Moving forward, organizations cannot afford to accept 'good enough' or rely on legacy practices 'just because.' Serving today's consumers and standing apart from today's competitors means working tirelessly and adapting constantly to maintain visibility.
As in all things Supply Chain Management, adaptability is key. In all likelihood, Procurement finds itself suffering with low visibility because it has resisted change in the past. Moving forward, organizations cannot afford to accept 'good enough' or rely on legacy practices 'just because.' Serving today's consumers and standing apart from today's competitors means working tirelessly and adapting constantly to maintain visibility.
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