Supplier blindness

Perhaps unsurprisingly, a recent Deloitte survey found that cost reduction is the main priority for 75% of buyers. What is surprising is that nearly as many confessed that they had no supply chain visibility past tier 1 suppliers.

Only 6% of respondents said they have “full transparency” of their entire supply chain, while 65% said they have limited to no visibility. Which is surprising given the move towards corporate social responsibility (CSR) and consumers desire to have more information about the origin of their goods.

As retailers increasingly want to meet goals in sustainability and ethical labour and know its supplier are paying fair wages to its workers, what do they know about the supplier’s supplier.

Poor visibility also makes it difficult for an importer to manage risk proactively, which means many are leaving themselves exposed to potential supply chain disruption and margin erosion by having limited visibility of their supply chains beyond the first tier.

Coverage in Supply Chain Dive on the Deloitte’s survey reported that numerous technology solutions have been developed to attempt to increase visibility throughout the supply chain.G.Tech_Technology_Factory_Zhuhai_China

Blockchain is one of the most notable, with companies such as Unilever, JD.com and Maersk seeking to use the technology for better transparency.

Software tools are also being tapped to help itemise risks in the supply chain beyond the first two tiers, but while technology develops quickly, adoption tends to be more sluggish.

“Despite recognising digital technologies, their impact and imminent uses, few organisations appear to be progressing at the rate that their C-suite executives consider necessary for achieving overall goals,” Deloitte’s survey stated.

“The level and speed of digitalisation across procurement functions is lower than expected and needed.”

Deloitte outlines numerous gaps when it comes to technology. While most (83%) CPOs have a digital procurement strategy, only one-third of them believe the strategy will help them deliver on procurement objectives.

There’s no overstating the importance of cost reduction; at the same time, however, a prioritisation of savings could result in other important factors, including visibility and technology, falling to the wayside.