Modern B2B Supply Chain Complexity Leads to the Need for Efficient Solutions
Today’s modern supply chains are not linear, but dynamic and multi-directional – and the digital solutions currently available to supply chain professionals only enhance that fact. The ability to do business overseas via virtual, instantaneous communications has allowed companies over the past few decades to increasingly outsource their production and distribution, leading to lower production costs and higher revenues, all while creating a globalized economy that is more vast and incredibly intricate than the lay person could imagine.
B2B supply chain complexity has dramatically increased as organizations rely on outsourcing non-core activities to allow greater focus on core business activities. And as the B2B supply chain has become more complex, efficient B2B solutions will become more necessary.
Post-recession, competition in the global marketplace has risen. Businesses must operate as efficiently as possible to remain relevant and to experience longevity. In order compete while the global market grows more complex, businesses must focus on improving operational efficiencies and cost efficiencies. This can easily become an overwhelming task for a burgeoning boutique firm looking for global acknowledgement and relevancy.
While dynamic connections exist between B2B supply chain players, the flow of information between the entities has remained static. The problem that grows out of this clunky information exchange is exacerbated by a lack of synchronization across these systems and information exchanges. Essentially, organizations are limited by a lack of “common language” and a manual information sourcing and exchange system. This allows for greater interruptions to productivity, increasing times to market and eating into profits for all involved.
Here’s an example: Company X makes a purchase order for a piece of custom equipment. Between the time the order is made and the time it gets delivered, Company X makes several design-related adjustments. This required all of the members within the supply chain – from the raw materials provider to the designer to the fabricator to be in communication with each other so that the final product is what Company X wants. Unfortunately, the links of many supply chains are fragmented, and communication is often dropped, resulting in unsatisfactory products being produced and, as a result, wasted labor and materials.
Given the prior example, it may seem obvious to focus on integrating and synchronizing existing supply chain operations and communications as opposed to creating awareness of the larger possibilities within the greater network – efficient B2B supply chain solutions that focus on creating a more efficient B2B network rather than a string of fragmented pieces. This requires not only a shift in the way that networks and systems are set up but also an overarching paradigm shift for individual organizations.
The goal of a successful B2B supply chain network is to improve not social connections but the ability to connect with the purpose of effectively communicating to drive more efficient transactions and facilitate global commerce.
Specific to the supply chain, this network must provide increased efficiency and collaboration in the following areas:
- Sourcing and vetting vendors
- Automated procurement
- More coordinated movement of products, deliveries, etc.
- Keeping inventory low and turnover high
- Bringing products to market as soon as possible
While the benefits are clearly listed and the outcomes are commonly known, there is still a hesitancy and a lack of motivation to adopt technological changes in the existing business model. Many prefer to “band-aid” their existing operations rather than make structural changes to it, even though the positive outcomes are known. Additionally, many SMEs are unable to see the benefits of joining a B2B supply chain network-stye solution, as opposed to “manually” competing for relevancy in a highly competitive supply chain environment.
This speaks of a dated business culture where assumptions about the effectiveness of the current business model and competitiveness in a global marketplace that may ultimately inhibit the business. Breaking the mold of traditional B2B communications and negotiations, the Internet has become a distinct medium through which rapid, multi-directional conversations and transactions can be facilitated, resulting in increased operational efficiencies and optimized costs for buyers and sellers at a global level. Face-to-face sessions have become less and less necessary with digital communications and networks making conversations more accessible and cost-effective.
The ones to derive the most benefit from a network-style solution are the world’s SMEs – the small organizations that are typically unable to engage in global commerce without an external agent’s assistance. Therein lies the huge opportunity for engagement and increased competitiveness within an international marketplace.
Featured image by Trevor Patt