The Resilient, Efficient and Sustainable supply chain journey - Redefining the Systems

cargo ship

November 10, 2021

Technology can make a real difference in enabling people and processes.

In the first blog, The Challenges, we highlighted 3 challenges in our effort to create a more resilient, more efficient and more sustainable supply chain. The existence of Conflicting objectives means we should look at aligning the processes and systems to enable us the make the appropriate decision and tradeoffs. But Siloed thinking and the Legacy systems deficit are making this more difficult to achieve.

There is no question that the solution is to first and foremost focus on people and process as we did in the second blog, Redefining the Processes, but technology can make a real difference to enable these processes and make the people able to focus on the important issues rather than the mundane task of data gathering and analysis.

The last 30 years have seen a huge expansion of global trade. Many of the goods we consume today are made in a different continents. The chase for the cheapest production location has resulted in complex, long lead time supply chains which have significantly increased the risk of disruptions, reduced supply chain efficiencies and increased our environment impact.

To put this in some perspective, according to McKinsey: > 80% of greenhouse-gas (GHR) emissions in consumer-goods industries are now in the supply chain. Scope 3 emissions are 5.6x higher then Scope 1+2 combined in manufacturing and 5.1x and 4.2x for Food and Apparel industries respectively.

The global trade trend has given rise to a new type of software solutions that focus on the processes between organization rather than within the 4 walls of a single organization. These multi enterprise business networks (MEBN) are the foundation of Supply Chain Control towers. The core architecture of a MEBN helps break down the departmental and intercompany silos by providing near real time insight and collaborative planning and execution capabilities across all parties of the supply chain.

This capability is fundamental in being able to resolve the tradeoffs between resilience, efficiency and sustainability. For example, by providing continues real time insight into the suppliers manufacturing and shipping process to the Transportation process allows for continues optimization of the tradeoff discussed in example in the first blog.

A MEBN architecture is also ideal for capturing the Scope 3 emission data, which are the result of activities from assets not owned or controlled by our own organization, but that indirectly impacts our value chain. In a true MEBN architecture any organization only exists once, which means that suppliers only have to provide scope 3 data one time and can make it available to all buying organizations. This reduces the burden of providing information significantly and enables more standardization.

We often focus on the physical part of supply chain but we should not forget about the financial side, as we all know there won’t be a physical flow of goods if there isn’t a financial counter flow. I.e. you won’t get your stuff if you don’t pay. Combining these two worlds in a single platform has significant benefits in providing accurate cash flow visibility to both the buyer and supplier and certainty of payment for the, often cash strapped, supplier. Additionally this process enables supply chain financing programs, and not just of approved invoices, but also on PO’s, which financial institutions can only provide if they have access to and trust in the historical performance data of the supplier. The more advanced organizations have even gone as far as to link the cost of financing to the sustainability performance of the suppliers, providing that ever so important carrot to improve the overall value chains ESG score and improve society as a whole.

We also see more and more organizations looking to build relationships directly with their suppliers rather than relying purely on middleman. Historically this was done to improve the relationship with the goods supplier and in the process build a more resilient and efficient supply chain by, for example, taking out the fees the middleman charges. Now the need to improve traceability as well as the need to measure and improve the Scope 3 emissions and other ESG related initiatives is accelerating this trend.

As mentioned before, technology is not the answer by itself but with the right processes in place a MEBN based supply chain Control Tower that is true single instance and combines both the physical and financial supply chain processes can provide the capabilities to help people reach their organizational Sustainability goals, whiles operating an efficient and resilient supply chain.

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