Supply chain managers oversee the activities of thousands of suppliers; the shear volume of suppliers can obscure the real nature of supplier business practices. They pose threats to businesses, people, and the environment, therefore business leaders and supply chain managers must be vigilant, proactive, and neutralize invisible supply chains with concrete and sustainable solutions.
Impact of Invisible Supply Chain
Invisible suppliers are business threats
Recently Nestlé publicly admitted to the presence of human trafficking, child labor, and hazardous working conditions within its supply chain. The information about Nestlé’s supply chain issues came to light following reports published by several media outlets and non-governmental organizations, which revealed the harsh working conditions of workers at the company’s Thailand seafood suppliers supporting some its food products. Although the company is currently taking proactive steps to curtail inhumane practices within its supply chain, it took the revelations of several external organizations for the company to address the unethical issues within its seafood supply chain.
The Nestlé case sheds light on the gaps in active monitoring of suppliers. Monitoring must go above and beyond dashboards and analytics, to real-time knowledge of the physical state of supplier operations. The increase of global sourcing and consumer demands have created an environment for invisible supply chains to thrive, which has led to a breeding ground of business risks and unethical practices. Invisible supply chains are real threats to financial results, business image, people, and the environment.
Companies must actively guard against invisible supply chains because unethical behavior, dangerous factory conditions, illegal activities can plague the supply chains of all industrial sectors as highlighted by recent examples in mobile technology, garment, and food industries.
To Improve Supply Chain Visibility
Companies must nurture sustainable supplier relationships that extend beyond products, services, and financial results. If companies can integrate these three approaches; engagement, optimization, and supplier partnership building blocks, into their supply chain strategy, then companies will successfully improve supply chain visibility and reduce risks.
1) Engagement
Top-down engagement from senior leadership, supply chain managers, down to suppliers sends a message that supply chain visibility is an important business objective that contributes to results. First, clear engagement from leadership drives down to supply chain managers that supply chain visibility is a company priority. Second, managers will build and tailor supply chain strategies that establishes supply chain visibility within the supply base. Finally, suppliers will have make a commitment to take steps to improve operations transparency, and align with their customers’ requirements. However, to promote supplier engagement, companies must establish supplier partnerships that nurture commitment of supplier to supply chain visibility.
2) Optimization
Supply chain optimization is crucial aspect for supply chain visibility. Over time companies accumulate thousands of suppliers, and their shear volumes can make it challenge for companies to actively manage each supplier. Optimization can help eliminate all the clutter within supply chains, and create supplier development opportunities that are aligned with company vision, objectives, and ethics.
3) Building Blocks
Several building blocks that help companies develop sustainable supplier partnerships, improve supply chain visibility, and reduce risks are;
- Objectives - Supply chain visibility should be measurable in supplier report card.
- Qualifications - Supplier competence should be aligned with business objectives and values.
- Performance - Supplier performances should be a key performance metric for supply chain.
- Evaluations - Regular and surprise supplier audits should be scheduled to gauge supplier compliance.
- Risk Management - Supplier checkups should be actively used to evaluate supplier health.
- Training - Supplier training should be integrated in company training programs.
- Accountability - Suppliers should be encouraged to report ethical violations.
- Reward - Supplier awards can promote supplier engagement.
- Promote - Broadcasting supplier successes can provide standards for current and future suppliers.
Supply chain visibility is a winning business strategy, which when properly integrated into company objectives will yield benefits, and stave off potential risks. It equips companies with tools and information necessary to weather the storms of the dynamic global economic market.