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Five reasons it’s time to rethink supply chain management

Updated: Mar 24, 2022

Thanks to the rise of globalization and outsourcing, supply chains have grown so large that they’ve become practically ungovernable through traditional means alone. Small companies often deal with hundreds of suppliers from one-time vendors to regular service providers, while large enterprises routinely handle supplier portfolios numbering in the tens of thousands. A lot don’t even know exactly how many suppliers they have.

Even supply chains for single product lines can become dizzyingly complex. To make matters worse, the level of complexity is often only revealed following a crisis. Remember, for example, the horse meat scandal, in which the scale and complexity of Europe’s food supply chains were revealed when the authorities spent weeks trying to track down the origins of the horse meat being passed off as beef in various UK supermarkets.

#1. Background checks are taking up too much time

When a product or service doesn’t live up to a customer’s expectations, the organisation that sold it to them is always the first to get the blame, no matter how far back along the supply chain the problem occurred. Being held accountable for the brunt of any reputational, financial, or legal damage, it’s imperative that organisations carry out extensive background checks before signing any new supplier contracts. With highly regulated industries, such as healthcare and finance, these are even more important. Background checks include Know Your Customer/Supplier (KYC/KYS), Anti-Money Laundering (AML), Corporate Social Responsibility (CSR), and credit checks to name a few.

Background checks must be carried out for all suppliers, no matter how small they are. Even a minor long-tail supplier can end up being responsible for a disaster. For example, US retailer Target found out the hard way when hackers stole millions of records by breaking in via an HVAC company that had access to their point-of-sale systems. At the time, it was the biggest ever data breach to ever hit the headlines. To reduce risk without spending a disproportionate amount of time on evaluating long-tail suppliers, buyers need to automate background checks and, in doing so, reduce instances of human error and conflicting information.

#2. There’s a lack of interconnectivity between departments

Information silos are among the most common barriers to business growth. When departments are unable to communicate efficiently with one another, the ability to track inventory across multiple warehouses and stores becomes exponentially more difficult. This occurs when staff need to update multiple internal systems to onboard and keep track of suppliers. Manual data entry and the exchange of information through arcane business processes ends up leading to a lack of consistency and a greatly increased chance of error.

In an ideal world, onboarding and maintaining suppliers should be a single cohesive process whereby the collection and management of supply chain information is automated. With one platform to manage all long-tail suppliers, companies can retain complete visibility into supply chains of any complexity while freeing up time to focus on improving relationships with major strategic suppliers. If information silos are hindering your ability to manage your supply chain efficiency, then it’s time to reduce dependence on manual processes and rethink business culture to put an emphasis on interdepartmental cooperation.

#3. It’s taking as long to onboard smaller suppliers as major ones

If we apply the 80/20 rule, also known as the Pareto principle, to supply chain management, then 80% of your suppliers are long-tail ones which individually have minor impacts on growth. Therefore, it’s counterproductive to spend as much time onboarding and maintaining smaller suppliers as strategic ones. Yet every supplier still needs correctly managing for the sake of compliance and sustainability. At the same time, unnecessarily lengthy onboarding processes are sure to put off smaller suppliers, thus making your company less attractive to do business with.

Naturally, strategic suppliers deserve more attention from a relationship-building standpoint. Afte