Tag Archives: supplier

Covid liquidity pressures place supply chain finance in the driving seat

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Covid liquidity pressures place supply chain finance in the driving seat

The case for supply chain finance is as strong as ever

Not only did shipping and air freight supply chains come to a halt during the early days of the pandemic, but consumer demand also went through a slump. As a long-term consequence, supply chains have experienced strain, centered on working capital and ensuring business continuity across industry segments.

Today, the challenge is about demand, which exceeds timely supply, placing additional operational pressures on these businesses. This means supply chains are forced to stretch their working capital and make changes to how they finance and sustain their businesses.

According to the World Bank, there is a finance gap of about $5.2-trillion globally — wider in emerging markets where the availability of working capital has been limited or the understanding largely undervalued. As a result, we have experienced many product shortages, a prime example of how buyers and suppliers are facing the challenge to ensure the smooth exchange of products along the value chain.

Finance plays a big role in this continuity and in SA. While we lagged global markets in the adoption of supply chain finance models initially, the pandemic has strengthened the need for it. There has been a rising demand in supply chain finance locally — or reverse factoring as it’s commonly known — with some of the world’s largest businesses turning to this financing to help suppliers optimise their working capital.

However, supply chain finance is not a new concept. Globally, it has been used as a source of capital by many corporates as an alternative funding model to free up cash flow without affecting existing lending facilities.

Supply chain finance plays a pivotal role in markets in a state of flux, ensuring there is speed and efficiency in the payment cycle. Typically, a third-party finance provider will pay a buyer’s debt to the supplier at a discounted rate and much sooner than the buyer is able to do so if done directly.

This facilitates a positive cash flow for the business through the working capital cycle and ensures both buyer and supplier are better able to meet demand vs supply without the red tape of cash flow challenges typically experienced in a recovering market. It gives the buyer time to streamline cash flow, based on creditor cycles, where they pay the finance provider at a later date, allowing them room to ensure solid cash flow and build positive relationships with their suppliers.

It also offers a competitive advantage for the buyer and a financially savvy opportunity for the supplier to take advantage of mechanisms for early settlements and the related discounts that may apply.

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Seven Supply Chain Processes To Stop Doing In The Pandemic

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Seven Supply Chain Processes To Stop Doing In The Pandemic

Seven Supply Chain Processes To Stop Doing In The Pandemic

I remember standing in the temperature screening queue in Doha. As the line wound around multiple stations, my backpack cut into my shoulders. I was tired and cranky as I read the overview of MERS. As an United States resident, I was blissfully unaware of this virus and worried about catching my flight to Singapore. My ignorance of a potential pandemic was low.

Changing My Mental Model

The Middle East Respiratory Syndrome (MERS), first reported in Saudi Arabia in 2012, didn’t make headline news. Likewise, I watched the coverage of SARS, H1N1, and Ebola from my TV screen. As the COVID-19 saga unfolded, this was my mental model. My first articles dealt with the virus as a Chinese localized phenomenon. My jaw dropped when a friend became ill in Dallas in January from a visit to Dubai. I never conceived that it would become my reality.

Start Doing

In my prior articles, I have written extensively on the need for outside-in demand sensing processes based on market consumption data. I have also written about the need for supplier development programs and building robust supply chain capabilities in value networks. (I list these articles at the bottom of this post for reference.)

Stop Doing

What can we stop doing? The first step is to stop traditional demand planning processes based on conventional order pattern modeling. (This is the ouput of the conventional Advanced Planning models.) The modeling of historic order patterns is worthless through the pandemic. Why? The sales order pattern is no longer a predictor of future demand. Instead, invest in market sensing and the use of market consumption data. Attempt to read market shifts as they happen and drive a response.

Wrap-up

In closing, let me leave you with some thoughts. The pandemic is the result of a novel virus. Today, we have more that is unknown than known. What we stop doing will give us resources to focus on managing the supply chain in these uncertain times. Let me know your thoughts, and good luck.

Read more at Seven Supply Chain Processes To Stop Doing In The Pandemic

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What Are the Benefits of Supplier Quality Audits?

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What Are the Benefits of Supplier Quality Audits?

What Are the Benefits of Supplier Quality Audits?

While you want to trust and count on your suppliers, do you really know for sure that they have the proper procedures in place, that the procedures are being actively applied, and that their employees follow their established procedures?

Supplier quality audits are the process of verifying that each of your suppliers is adhering to both industry standards as set by the law and independent organizations, as well as your own company and brand standards.

Audits are widely recognized as a pertinent part of doing business.

While there are many reasons for this practice, here are the six biggest benefits of performing supplier quality audits.

1. A Reduction of Risk

A significant amount of risk accompanies extended supply chains, outsourcing, and globalization. The risks include:

  1. Quality
  2. Safety
  3. Business Continuity
  4. Reputation
  5. Cost Volatility
  6. Supply Disruption
  7. Non-Compliance Fines
  8. Safety Incidents
  9. And More

2. Better Contractor Management and Business Relationships with Suppliers

Your business can gain ground when costs are reduced, contractor management is streamlined, brand reputation is protected, and long-term profitability is achieved. This is easier done when the following tasks are taken care of efficiently:

  1. Supplier Prequalification
  2. Supplier Audits
  3. Worker Management
  4. Insurance Monitoring
  5. Analytics

3. Expert Guidance on Safety and Sustainability Performance

While you already have strategies in place to manage the health, safety, and behaviors within your own organization, how do you know your suppliers, contractors, and vendors are similarly motivated?

Supplier quality audits actively foster an aligned culture of health and safety through:

  1. Contractor Prequalification
  2. Document Management
  3. Auditing
  4. Employee-Level Qualification and Training
  5. Insurance Verification
  6. Business Intelligence

4. Closer Alignment with Your Compliance Standards

Your business is under pressure to maintain compliance with:

  1. Country-specific regulations
  2. Industry standards and regulations
  3. Corporate policies and standards

5. Better Procurement Decisions

Procurement teams are under a lot of pressure to find, qualify, monitor, and manage suppliers, all while lowering the cost of doing so. With supplier quality auditing, procurement managers can make better and more cost-effective procurement decisions by:

  1. Mitigating risk through communication, evaluation, selection, and monitoring services.
  2. Gaining unprecedented visibility into safety statistics, risk profiles, and historical data.
  3. Reducing lead time and improving efficiency with ongoing guidance and support throughout the procurement process.
  4. Maximizing data quality on the entire supply chain.

6. Sustainable Business Practices

Today, an organization committed to improving the environment through sustainable growth is required to meet both regulatory requirements and societal expectations. Managing the long-term value of your company and its brand is party dependent on properly managing the environmental, social, financial, and economic impacts throughout its supply chain. All of this can be done more easily with thorough supplier quality audits.

Read more at What Are the Benefits of Supplier Quality Audits?

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The Right Solution for Contractor and Supplier Management

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The benefits of outsourcing to suppliers and contractors is clear, but the associated risks are largely unseen, and the breakneck pace of change and the pressures of financial reality can cause important, risk-mitigating considerations such as contractor safety to be overlooked – which could be not only an ethical disaster but a business disaster as well.

Choosing the right solution

Contractors and suppliers can provide many essential benefits to businesses such as expertise, efficiency, and cost savings.

In addition, companies working with contractors and suppliers can scale their business up and down depending on market demand.

The benefits of outsourcing to suppliers and contractors is clear, but the associated risks are largely unseen.

To add fuel to the fire, the breakneck pace of change and the pressures of financial reality can cause important, risk-mitigating considerations such as contractor safety to be overlooked – which could be not only an ethical disaster but a business disaster as well.

Contractors working on your site and suppliers providing materials should be considered internal employees.

If contractors are injured on the job, it can seriously damage your organization’s reputation and impede your growth.

To maximize the benefit and minimize the risk of these relationships, companies and their suppliers must commit to a common culture of safety.

This means companies need to stay engaged with their contractors beyond simply hiring them. Companies should:

  1. Regularly collect information from their suppliers that demonstrate a commitment to safety such as incident rates (lagging indicators) and safety programs (leading indicators).
  2. Continuously monitor suppliers’ insurance coverage to protect the company in case something does happen.
  3. Audit worksites on a consistent basis to ensure that safety policies are enforced.
  4. Monitor the condition of equipment that contractors use to carry out their jobs.
  5. Ensure each contracted worker has the proper licenses and certifications to perform the job safely.
  6. Provide site-specific training required for each position.

Read more at The Right Solution for Contractor and Supplier Management

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The Right Solution for Contractor and Supplier Management

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The benefits of outsourcing to suppliers and contractors is clear, but the associated risks are largely unseen, and the breakneck pace of change and the pressures of financial reality can cause important, risk-mitigating considerations such as contractor safety to be overlooked – which could be not only an ethical disaster but a business disaster as well.

Contractors and suppliers can provide many essential benefits to businesses such as expertise, efficiency, and cost savings.

In addition, companies working with contractors and suppliers can scale their business up and down depending on market demand.

The benefits of outsourcing to suppliers and contractors is clear, but the associated risks are largely unseen.

To add fuel to the fire, the breakneck pace of change and the pressures of financial reality can cause important, risk-mitigating considerations such as contractor safety to be overlooked – which could be not only an ethical disaster but a business disaster as well.

Contractors working on your site and suppliers providing materials should be considered internal employees.

If contractors are injured on the job, it can seriously damage your organization’s reputation and impede your growth.

To maximize the benefit and minimize the risk of these relationships, companies and their suppliers must commit to a common culture of safety.

This means companies need to stay engaged with their contractors beyond simply hiring them. Companies should:

  1. Regularly collect information from their suppliers that demonstrate a commitment to safety such as incident rates (lagging indicators) and safety programs (leading indicators).
  2. Continuously monitor suppliers’ insurance coverage to protect the company in case something does happen.
  3. Audit worksites on a consistent basis to ensure that safety policies are enforced.
  4. Monitor the condition of equipment that contractors use to carry out their jobs.
  5. Ensure each contracted worker has the proper licenses and certifications to perform the job safely.
  6. Provide site-specific training required for each position.

Read more at The Right Solution for Contractor and Supplier Management

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10 Ways Machine Learning Is Revolutionizing Supply Chain Management

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Machine learning makes it possible to discover patterns in supply chain data by relying on algorithms that quickly pinpoint the most influential factors to a supply networks’ success, while constantly learning in the process.

Discovering new patterns in supply chain data has the potential to revolutionize any business. Machine learning algorithms are finding these new patterns in supply chain data daily, without needing manual intervention or the definition of taxonomy to guide the analysis. The algorithms iteratively query data with many using constraint-based modeling to find the core set of factors with the greatest predictive accuracy. Key factors influencing inventory levels, supplier quality, demand forecasting, procure-to-pay, order-to-cash, production planning, transportation management and more are becoming known for the first time. New knowledge and insights from machine learning are revolutionizing supply chain management as a result.

The ten ways machine learning is revolutionizing supply chain management include:

  1. Machine learning algorithms and the apps running them are capable of analyzing large, diverse data sets fast, improving demand forecasting accuracy.
  2. Reducing freight costs, improving supplier delivery performance, and minimizing supplier risk are three of the many benefits machine learning is providing in collaborative supply chain networks.
  3. Machine Learning and its core constructs are ideally suited for providing insights into improving supply chain management performance not available from previous technologies.
  4. Machine learning excels at visual pattern recognition, opening up many potential applications in physical inspection and maintenance of physical assets across an entire supply chain network.
  5. Gaining greater contextual intelligence using machine learning combined with related technologies across supply chain operations translates into lower inventory and operations costs and quicker response times to customers.
  6. Forecasting demand for new products including the causal factors that most drive new sales is an area machine learning is being applied to today with strong results.
  7. Companies are extending the life of key supply chain assets including machinery, engines, transportation and warehouse equipment by finding new patterns in usage data collected via IoT sensors.
  8. Improving supplier quality management and compliance by finding patterns in suppliers’ quality levels and creating track-and-trace data hierarchies for each supplier, unassisted.
  9. Machine learning is improving production planning and factory scheduling accuracy by taking into account multiple constraints and optimizing for each.
  10. Combining machine learning with advanced analytics, IoT sensors, and real-time monitoring is providing end-to-end visibility across many supply chains for the first time.

Read more at 10 Ways Machine Learning Is Revolutionizing Supply Chain Management

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6 in 10 businesses experienced at least one supply chain disruption in Asia Pacific in 2016

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One in four businesses exceed ‎US$1 million in losses, but almost half of survey respondents in Asia Pacific did not insure their losses.

Zurich Insurance has revealed the key Asia Pacific findings of the Business Continuity Institute (BCI) “Supply Chain Resilience Report 2016”. Despite six out of ten organisations experiencing at least one supply chain disruption during the past year, with one in four exceeding ‎US$1 million in losses, the report found that almost half of survey respondents in Asia Pacific did not insure their losses.

Partnering with BCI for the eighth year, the annual report is regarded as one of the most authoritative benchmark reports in this business area. The key findings for Asia Pacific (APAC) this year are:

  1. IT/Telecom outages was named as the number one cause of supply chain disruption
  2. One in four organisations experienced cumulative losses of over ‎US$1 million
  3. 46% of organisations do not insure their losses, meaning they bore the full brunt of the cost
  4. Only 30% of disruptions occur with an immediate supplier
  5. 48% responded that top management have made commitments to supply chain resilience

Read more 6 in 10 businesses experienced at least one supply chain disruption in Asia Pacific in 2016

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Why Supply Chain Risk Management is Key to Supplier Management

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While brand damage can be quite costly to the businesses whose sales rely strongly on the customer loyalty they generate from their brand strength, cost volatility and supply disruption is very costly to all manufacturers. In fact, in the latest 2015 study by the Business Continuity Institute, supply chain disruption is double in priority relative to other enterprise disruptions and over three-fourths of respondents cited that they had at least one recent (significant) disruption. The same percentage didn’t have full visibility of their supply chains.

While category management can address and even reduce supply chain risk by ensuring a chosen strategy has the right level of resiliency, prevention and agility, it cannot prevent risk or do much to eliminate the source of risk once something has happened. That can only be done by each party in the supply chain doing everything they can to eliminate the risk. In particular, a supplier needs to do all they can to minimize the risk on their end.

However, not all suppliers are as advanced in supply chain management, and in particular, risk management as the buying organization. That’s why good supplier management combined with SCRM is key. Good risk management is a combination of risk prevention and risk mitigation when a risk is detected. Risk prevention involves selecting suppliers, products and services that are low risk and risk mitigation involves taking action as soon as an indicator is detected.

A supplier is not always good at mitigating or even detecting risk in its supply chain, or may overlook an obvious sign that an observant buyer would not, which is why proper supplier management is key. This begins even when qualifying suppliers. Including risk criteria related to the supplier and supplier location gives a good indication of a supplier’s the risk level. Besides the supplier qualification criteria, supply location-related risks provide an overview on potential threats like natural disasters, political situation, sanctions or economic risk. This gives buyers the chance to take preventive actions.

Read more at Why Supply Chain Risk Management is Key to Supplier Management

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Globalization Creates New Avenues for Supply Chain Risk: riskmethods Shares its Predictions for 2016

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As part of our ongoing series on what procurement technology providers see as the biggest challenge for procurement in 2016, we recently spoke to riskmethods to hear its thoughts on the topic. Heiko Schwarz, riskmethods founder and managing director, pointed to increased external risks, globalization and regulation compliance as the main issues procurement and supply chain managers will have to tackle in the new year.

These three major trends will expose organizations to risks in 2016, Heiko said. External risk will continue to be an issue. For example, extreme weather such as rain or snow storms will expose and disrupt supply chains even more than in the past, he said. Political risks have been a growing trend for years, but will continue in 2016 as well, he added.

Globalization is also pushing enterprises to search for new suppliers in countries or regions they probably have not worked in before. Procurement’s scope in the last year has dramatically changed, going from a “domestic-centric” view to a more global one, Heiko said. Specifically, he believes we will see movement away from China as the cost of operating there continues to rise. China is no longer a low-cost sourcing country, and this is putting pressure on companies to move to new areas, places such as the northern regions of Africa, he said. This globalization push will put increase supply chain complexities in 2016.

Read more at Globalization Creates New Avenues for Supply Chain Risk: riskmethods Shares its Predictions for 2016

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Poor Visibility Puts a Majority of Organizations at Risk for Supply Chain Disruption

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The majority of companies that experienced a supply chain disruption in the last year cited either a tier 1 or tier 2 supplier as the predominant source of the disruption, according to 2015 Supply Chain Resilience Report from the Business Continuity Institute and Zurich Insurance. Half of all respondents in the report cited a tier 1 supplier, the immediate or direct supplier, as the major source of the supply chain disruption and an additional 21% cited their tier 2 supplier, the supplier of the OEM’s tier 1 supplier.

The report also showed the majority (72%) of organizations lack full visibility into their supply chains. What is troublesome, too, is that nearly 1 in 10 (9%) of the more than 500 companies surveyed for the report do not fully know who their key suppliers are. This can no doubt make supply chain risk management even more difficult for firms that lack proper oversight on who exactly their suppliers are.

According to Thomas Kase, vice president of research at Spend Matters and an expert on supply chain risk, sometimes companies lack quality visibility and have a fragmented picture of their suppliers and what they deliver.
“The end result is a foggy mess,” Thomas said.

Read more at Poor Visibility Puts a Majority of Organizations at Risk for Supply Chain Disruption

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