As featured on BusinessMirror: Supply chain visibility improves overall resiliency
Remove the blind spots
The COVID-19 pandemic and the Russia-Ukraine war snarled global supply chains, causing shortages of goods and materials around the world. These disruptions highlight a longstanding problem that most manufacturers and retailers haven't been able to resolve: They can't see deep into their supply chains to understand where the risks are. And without that visibility, they are, in effect, "flying blind".
Even in normal times, companies don't have advance warning about issues like growing component shortages or labor disruptions. Without such visibility, companies risk being unable to fulfil their own customers’ orders, forcing them to find more reliable or cheaper suppliers, or worse, find themselves at the mercy of a suppliers interruption.
Perhaps, no better example of the risks at hand is the recent experience of automakers, which have struggled due to the raging semiconductor shortage: their pain has occurred, in part, because they lacked direct knowledge of supply issues upstream.
On the other hand, when companies do have visibility into their supply chains—from one end to the other—they gain the resiliency to better react and manage those disruptions and reduce risk. Wide ranging visibility across the supply chain allows companies to better align demand and supply and improves their ability to make rapid, fact-based decisions with extended business partners. It clarifies the trade-offs needed to address supply chain constraints and enhances how the financial impacts of their decisions are made.
Companies have tried to develop the visibility they need. But a general resistance between companies and their suppliers to share information and the difficulty of getting all parties to understand the benefits of finding a solution have hampered these efforts.
The Philippines, like other countries, experienced disruptions in supply chains during the COVID-19 pandemic, leading to shortages of goods and materials. Given that businesses in the country rely on global and regional supply chains for sourcing raw materials, components, and finished products, and without visibility into these supply chains, there have been challenges in fulfilling customer orders, managing disruptions, and making informed decisions.
By investing in visibility, leveraging technology and analytics, and fostering collaboration with suppliers and customers, companies can make better-informed decisions, enhance customer satisfaction, and optimize their operations for profitability and success.
Jerome Andrew H. Garcia
Advisory Principal and Consumer and Retail Head
KPMG in the Philippines
Supply chain complexity prevents visibility
Gaining supply chain visibility isn't an end in itself. Visibility benefits the company by supporting the resiliency needed to better reset to unexpected events. But to achieve visibility, companies must address the challenges of today’s increasingly complex supply chains.
In a recent survey of supply chain executives conducted by KPMG LLP, a large swath of respondents stressed that greater supply chain viability would support crucial date and information to minimize disruptions, enable risk mitigation, improve supply chain decision-making, and increase speed to market. In addition, the businesses surveyed emphasized the need to increase visibility into their supply chains in order to maintain operational stability going forward. What's more, 59 percent of supply chain leaders who responded to an industry study indicated that improving supply chain visibility was their most important business priority in 2022.
So, if visibility is so important, why has it been so difficult for companies to achieve?
One reason is the sheer complexity of the modern multitiered supply chain. Even the biggest companies have trouble seeing past their top-tier suppliers to understand what is happening with tier 2 and tier 3 component suppliers down the chain. A recent KPMG global survey revealed that 70 percent of companies perceive their supply chain as "very" or "extremely complex.
Other challenges exist as well. According to our recent survey, respondents cited lack of adequate technology and the inability to access relevant data sets as the top barriers to gaining real-time visibility with tier 1 and tier 2 suppliers.
Finally, these challenges are compounded by the simple fact that some tier 1 suppliers simply don't want to share information concerning their suppliers down that line. Nevertheless, half of businesses in our survey recognize the need to engage tier 1 suppliers to build supply chain ecosystems that cooperatively grant businesses access to critical date across supply chain activities, and nearly 60 percent plan to invest in digital technology to bolster their data synthesis and analysis.
Visibility: don't forget your customers
It's crucial that companies develop visibility with their suppliers. But visibility in the opposite direction customers is critical, too. Companies are actually in the middle of the supply chain. They heed transparency so their customers can tell them what they want and need, and the companies, in turn, can tell their suppliers what the company needs.
Getting to this level of visibility and transparency will likely require technology date and analytics, and significant cultural change on the part of supplier and companies.
Share your vision, and collaborate with suppers to deliver real values
While companies across industries recognize the potential benefits of supply chain visibility and the risks of "flying blind," only a handful actually benefit from it – only 13 percent of supply chain and risk management industry executives indicate having complete visibility into the end-to-end supply chain.
The creation of a supply chain visibility program that enables better, faster decision-making is easier said than done. To deliver real-time access to data and insights across the supply chain, you need a sophisticated, integrated digital platform that is built to achieve the specific goals of the business. That means a transformation is recured to gain multitier visibility into your supply chain, but it must be one that is suitable to your specific needs, industry and circumstances.
As the events of the past few years have demonstrated, limited supply chain visibility has left many organizations flatfooted. Without first understanding all the constraints in the entire supply chain, companies cannot fully keep their commitment to fulfill their customers’ orders.
Multitier visibility, combined with sophisticated scenario planning and supply chain planning, can empower companies to make better business and more profitable decisions and keep their own customers satisfied.
With more detail on the constraints in the extended supply chain, finance and operations together can run scenarios and models to determine what can be produced with the available supply, which can help to prioritize customers and markets and, ultimately, optimize revenues and margin contribution.
The excerpt was taken from the KPMG Thought Leadership publication: https://advisory.kpmg.us/articles/2023/stop-flying-blind.html
© 2023 R.G. Manabat & Co., a Philippine partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.
This article is for general information purposes only and should not be considered as professional advice to a specific issue or entity. The views and opinions expressed herein are those of the author and do not necessarily represent KPMG International or KPMG in the Philippines.