Improving Visibility to Increase Resilience

Last week, President Donald Trump levied another 10 percent tariff on goods imported from China, bringing the total duty to 20 percent. He also implemented 25 percent tariffs on goods imported from Canada and Mexico, although those levies were largely suspended within 48 hours.

Continuing trade policy whiplash and uncertainty begs the question: Does your organization have a clear view into its end-to-end supply chain and where inputs come from?

Companies that lack visibility into lower-tier suppliers risk even more repercussions. That lack of visibility and transparency can lead to unexpected price spikes, compliance violations and production delays, says Alex Bowles, director of global client services at supplier management software provider Transparency-One, an ISN company.

A lack of visibility “remains one of the top challenges for businesses, particularly for those with complex supply chains consisting of global networks of suppliers and manufacturers,” he says. “Another aspect that poses problems is often the lack of quality data and the general lack of data all together.”

Following the example of best-in-class organizations that have taken a risk-based approach to transparency and have increased their supply chain visibility can help organizations reduce unexpected expenses or challenges due to tariffs and other disruption.

The Changing Supply Chain Environment

In addition to providing insight into which inputs might incur tariffs, visibility offers other supply chain advantages, Bowles says. One area is compliance.

“Regulations and legislations are increasingly requiring companies to ensure their product components cannot be traced back to environmental issues such as deforestation, but also human rights and forced labor issues,” he says. “Non-compliance can lead to these products being taken off the market or fines, which, in return, can have significant impacts on a company’s bottom line.”

Many best-in-class organizations have well-established traceability targets and outcomes on some, but not all, commodities, Bowles says. “Even well-established high-risk categories like cocoa and palm may require a higher level of compliance and data capture based on new global regulations like the European Union’s Regulation on Deforestation-free Products (EUDR),” he says.

Another area is sustainability. “Such issues as water stress, extreme weather and natural disasters, and conflict within the region are all examples of events that can halt production and significantly impact a company’s bottom line,” Bowles says. Understanding these issues can help a company implement necessary mitigation efforts to reduce the impacts of such events or help reassess sourcing strategies to ensure its resilience long-term, he says.

Having visibility and transparency is also important when working with stakeholders: “Lack of supply chain knowledge and inability to be transparent about the supply chain can lead to loss of credibility, reputational damage and decline in sales, Bowles says. He adds that customers and investors are increasingly looking at a company’s operational practices when making their investment and purchasing decisions.

How Solutions Can Help

To improve visibility, Bowles recommends prioritizing supplier engagement as well as technology. “Both are equally important,” he says.

Finding a technology and service partner for supply chain mapping can help organizations take a deeper dive into their supplier tiers, he says. Supply chain mapping allows companies to centralize supplier information, like POs, certifications and compliance documentation. Companies can then track and monitor their supply chain data in real time and engage their supply chain when needed, he says.

Bowles notes that solutions also can help with:

Risk identification and mitigation. Mapping supply chains allows the company to identify its vulnerabilities and risks, enabling it to implement necessary mitigation efforts or reassess sourcing strategies.

Cost-savings and revenue protection. Identification of risks allows a company to implement the necessary actions or undertake the necessary steps to secure the company’s resilience long-term.

Supplier engagement. An organization should choose and develop suppliers that show they are embracing sustainable practices and transitioning to better materials.

(Photo credit: Getty Images/Shaunl)