The Business Risks of Poor Transparency in Supply Chains
By Lisa Michaels, Updated: 2023-03-20 (published on 2020-12-01)
In a recently conducted professional study, 60% of the respondents said that they were actively seeking out ways to improve their supply chain visibility. While another 26% said that improved transparency in their supply chain could generate cost savings of up to 20%.
Transparency in supply chains goes beyond reassuring your customers that you know where your products and components are coming from. It’s also the key to ensuring efficient and cost-effective business operations.
If you are unable to track every stage of your supply chain, then you have no way of measuring things like which of your suppliers provide the fastest shipments. Or whether there’s a problem along the way that’s slowing down your deliveries.
Today, we’re going to look at some of the biggest risks of limited transparency in a supply chain. Then you can fully understand its importance.
Risk 1: Limited View of Shipment Issues
When you order supplies from companies around the world, there are a lot of red lines to be crossed. As well as documentation to deal with before you actually receive your shipments.
Unfortunately, without proper transparency, it’s impossible to know when or why your shipments are being held up. You might have crucial supplies stuck in a port somewhere. And, you may not find out about the issue until days later.
Improved transparency in supply chains will help you to determine where these potential issues might be in advance. Then you can prepare the right documentation, payments, and other essential information. It even allows you to avoid certain ports if they slow down your deliveries, by switching to different suppliers closer to home.
Lack of visibility also forces you to rely on your suppliers and other companies in order to keep informed about what’s happening to your investments. Many suppliers are relatively good at keeping their customers informed. However, all you need is one weak link in the chain to bring your entire company grinding to a halt.
Risk 2: Lack of Supply Intelligence
Evaluating your supply chain is a great way to identify any stopping blocks that are slowing your business processes down. However, there’s plenty of additional information that you can access if you know where to look. Most notably concerning customer demand and inventory turnover.
Intelligent supply chain tools provide insight into these aspects of your business instantly. For instance, you might have software in place that tracks which of your products demand the most re-orders in a certain amount of time. Your software could also show you when peaks and drops in demand happen. This allows you to adjust the way you order supplies accordingly.
Having an overview of your supply chain ensures that you can always keep on top of your inventory. The more information you have, the more you’ll be prepared for increased demand and more shipments. When you are prepared for spikes in demand, you will be less likely to end up with an empty slot in your inventory. Inevitably, leading to unhappy customers.
Many of the most popular tools for supply chain management these days can even convert information into graphics. This way fluctuations in demand are easier to visualize.
Risk 3: Less Insight Into Problems
Better supply chain visibility is an excellent way to improve your awareness of trends and opportunities that can help your business to grow. However, it’s also a way for you to determine where problems in your supply chain originate.
Taking a controlled view of every step that your supplies take is important. From the point that you order them, to the moment your products reach your customers. This is the only way to track any potential problems that could be damaging your business reputation and outcomes.
Automation and robotics are becoming common components of the supply chain these days. Today, intelligent supply chain management tools gather data in real-time. This demonstrates where the biggest bottlenecks in your business operations are. For instance, you might notice that the biggest problems you have stem from shipping resources to your production floors from a certain country. If that’s the case, switching to a different provider may save you a lot of time and headaches.
On the other hand, you could find that fulfilling orders to customers who want “express shipping” is the biggest issue for your brand. Perhaps the shipping supply company you’re working with right now doesn’t have the capacity to handle your orders. Thanks to the insights gathered from the data, you will be able to find a better solution.
You might even discover that using robotic process automation to pack and pick orders speeds up the way that you handle peaks in demand. Although more advanced technology often requires a lot of initial investment, these tools also provide a quick return of investment. Essentially, they reduce the risk of lost opportunities and even improving your reputation with customers.
However, the only way to determine whether new investments will be suitable for your business is to ensure that you have a complete overview of the situation. Technology can provide it to you.
Don’t Underestimate the Importance of Supply Chain Visibility
You can’t fix a problem that you can’t see. And you can’t take advantage of opportunities when you don’t know they’re there. Visibility is one of the most important things that any company can have when it comes to the supply chain.
The more information you have about your supply and fulfillment processes, the easier it is to reduce the risk of any errors that could cost you a lot of time and money. Don’t underestimate the power of transparency in your supply chain.
Lisa Michaels is a freelance writer, editor, and a thriving content marketing consultant from Portland. Being self-employed, she does her best to stay on top of the current trends in business and tech. Feel free to connect with her on Twitter @LisaBMichaels.
This article does not constitute legal advice.
The opinions expressed in the column above represent the author’s own.