The foundations of any Digital Supply Chain is the real time, end-to-end electronic connectivity of every node and aspect of your Supply Chain. Unless your company is entirely self-sufficient this connectivity requires extensive and exhaustive Supplier Onboarding.
And this onboarding is not restricted to the first tier suppliers with whom you have direct contact. You must connect with second, third, and fourth tier suppliers, many of which you will often never have even heard of before.
And that is an enormous challenge, to say the very least.
Which Suppliers Must be Onboarded?
Simply put, all suppliers must be onboarded through electronic connectivity in order for a Digital Supply Chain to operate accurately and holistically. This includes any suppliers of goods or services.
And by “all suppliers” we mean not just your direct, first tier suppliers. But it also means your supplier’s suppliers, and their suppliers, and then their suppliers. Chances are you don’t likely know, or have even heard of, many of the 2nd tier suppliers in your Supply Chain, let alone the ones below that tier.
That level of supplier connectivity is necessary because we all know that it only takes a problem with one supplier, with one component, with one type of raw material, or with one logistics service provider to stop an entire Supply Chain dead in its tracks. If you need proof of that, look no further than the Covid-19 experience.
Practically speaking however, getting all of those tiers of suppliers on board AND electronically connected AND transparently sharing all of their real time production and inventory information is not likely to happen in our life time.
That doesn’t mean you shouldn’t try. That doesn’t mean it isn’t possible. But it does mean that it is more reasonable to expect that you will need to accept that it may take a long time just to get even your tier one suppliers on board. And that will have to be ok because your Digital Supply Chain strategic implementation requires you to play the long game.
Why is getting all of these suppliers on board and up and running so difficult?
Challenges and Headwinds
There are many reasons that you will find that supplier onboarding is going to be difficult, to not only get their real time information electronic connected but to get them transparently transferred instantaneously.
1. Lack of Visibility
You know the names and contact information of your first tier suppliers because you deal with them directly. You are unlikely to know the names of any of your second tier suppliers and below unless their names have come up due to prior issues and you have a need to know.
This lack of visibility is because historically there was little reason for you to know as you were reliant on your first tier suppliers to run their Supply Chains independently. Further those first tier suppliers may protect those supplier connections due to competitive or other proprietary reasons.
2. Your Supplier is the 500 pound Gorilla
The reality is that most companies deal with suppliers that are bigger than they are. These suppliers may have global brand name recognition, global reach and enormous revenues.
For smaller customers they are usually unable to dictate any terms or requirements to these large suppliers. The suppliers tell their smaller customers what the operating terms will be and the small customers must either accept those terms or take their business elsewhere.
Even for such an enlightened cause as the creation of digital connectivity, these suppliers will decide how or if they want to participate.
3. Intellectual Property
Depending on the nature of the goods that your suppliers are providing, they may have intellectual property in both their own and their supplier’s manufacturing and fabrication processes.
Disclosure of their suppliers, let alone the detailed operating information within those operations, may compromise their control over that intellectual property.
Like you, your first tier suppliers have invested a tremendous amount of time and money in creating and cultivating their supplier networks. In doing so they have established a level of competitiveness (eg. cost, technology, capabilities, speed) that allow them to successfully go to market.
Disclosure of that level of information and connectivity may be viewed as compromising that work, and that form of intellectual property.
5. Cost and Resource
Certainly once you get into the 3rd and 4th tiers of your supply chain you can get down to some pretty small suppliers working in less regulated conditions in undeveloped geographies and environments.
These companies may not have the resources, the money or the aptitude to enable the level of technological connectivity that you are looking for. But the mere fact that you discover this level of vulnerability in your supply chain does enable you to take steps to take actions to reduce this risk.
6. Lack of Transparency
Despite your best intentions, and despite supplier wishes to support your needs, the reality is that many suppliers will not want to give you full, unmitigated access to all of their operating information.
Assuming they even have all of this data at hand, they will not want to give you the transparency that you want. They may not want to be micromanaged, which is a possibility. Or they may not want you to know precisely how things are run. Or they just may not trust that you will keep their information confidential and out of the hands of competitors, or that you will not use this information against them.
7. Lack of Standards
Finally, there is the very real issue of a lack of standards. Your suppliers serve many other customers, not just you. If each of their customers are approaching them and asking for them to connect electronically, but asking for different things, then that means they must customize a solution for each customer, which is not at all practical.
Without a worldwide set of universally accepted standards for connectivity this is a very real problem.
Overall, these and other challenges to onboarding suppliers to create the connectivity that fuels your Digital Supply Chain, are very real. They must be overcome in order to advance your digital agenda.
What steps can you take in the face of these headwinds?
Solutions and the Go Forward Plan
For those who are unsure or weak of conviction, the challenges to supplier onboarding to create a Digital Supply Chain may prove enough to cause them to abandon that strategy. The same is true for those without the resources or the time and energy.
But there is an inevitability about the creation of the Digital Supply Chain that is our true north, even if the path is difficult, even if it takes decades, and even if it is unclear.
What are the possible supplier onboarding solutions to getting past these seemingly insurmountable obstacles?
1. Manage Expectations
First and foremost, while the end goal is to get all tiers in your Supply Chain onboarded that expectation should be relaxed. You should track your progress in supplier onboarding with 1st tier, 2nd tier and 3rd tier suppliers certainly, but your implementation goals should decrease by tier, at least for the foreseeable future.
This also includes managing expectations within your company. The Digital Supply Chain strategy is a LONG TERM vision. Everybody wants quick results but a comprehensive implementation can take a long time. You need to constantly educate and communicate with your senior management and stakeholders so that they are informed and invested in your strategy.
2. Lower Requirements in the Short Term
Because of a lack of universal standards for connectivity, because of concerns about intellectual property, and because a concern about preservation of the confidentiality of the information, you may have to limit which data you are asking for.
You want information about inventory levels, deliveries, production times, quality, etc. Work to limit these requirements to the basics of what you need in the interim. This will enable you the time to work out any process kinks, and to establish the trust your suppliers need to know that your integrity can be counted on.
3. Engage Experts
There are many companies that provide a pre-established data management service. They have already done the hard work of connecting with suppliers and putting in standard processes and tools. They provide an out-of-the-box connectivity solution.
Leverage this type of resource wherever possible to save time, resources and money.
4. Digital Transformation and Change Leadership
Change is hard. Change meets resistance. And change can be temperamental. But in the long term change is good and necessary.
You need real Digital transformation leadership and change leadership skills to succeed. Anyone inside or outside your organization can put enough roadblocks in your way so that they dampen and imped, if not kill, your strategy.
This is as true for a Digital Supply Chain transformation as for any other initiative. Perhaps more so because of how comprehensive and all consuming this type of transformation is.
The vision of a Digital Supply Chain is the future. Period.
Realizing that vision will take a long time. For larger companies with the vision and drive it will come faster. For smaller companies it will take longer and they will likely ride on the coattails who have already done the heavy lifting to implement their Digital Supply Chains.
Making that vision a reality begins and ends with supplier onboarding. Once you have your suppliers electronically connected you can layer on top of that all of the other technologies (eg. Control towers, Predictive analytics, Machine Learning, AI, etc.).
But you must get your suppliers on board. They must be digitally linked to your business in every possible way.