A Changing Competitive Environment
As digital innovation takes the forefront when it comes to customer experience and engagement, new connections between brand managers, manufacturing, and sources of supply are rapidly emerging. There’s still plenty of uncertainty surrounding this, but one thing is sure – as markets grow more volatile, companies will have to innovate to stay ahead of the game. There will be a push to find new ways to assess risk and anticipate opportunities faster and more accurately. Organizations will begin to move away from calendar-based sourcing events to an as-needed process that allows for more agile management of their supply chain.
This shift won’t be painless. First of all, the search for socially responsible, regulatory compliant sources of supply is already daunting. On top of that, there’s the challenge of finding high-quality, reliable capacity, which is especially difficult on the direct materials front. In short, dealing with the impacts of globalization on direct spend management requires more than just an informed approach. Making use of the new technologies becoming available will be essential.
Geopolitical Uncertainty and New Sources of Volatility
In the late 1980s, vertical integration of the supply chain was a common strategy for larger companies seeking a competitive advantage. While that approach still makes sense in certain traditional, domestic supply chains, for companies that rely directly or indirectly on low-cost global supply networks, it’s no longer a practical consideration.
The past few years have seen an increase in geopolitical uncertainty. The US has recently withdrawn from the TPP, which has moved on without it, and the future of NAFTA (now the USMCA) is uncertain. Tariffs have roiled trade relationships, most notably between the US and China, and the final effects remain to be seen. The WTO is facing pressure on several fronts. All of these bring with them potential supply disruptors that need managing.
Weakening international agreements and institutions are hardly the only potential sources of potential trouble. Cyber security is growing in importance as threats multiply. It is no longer a matter of “if” you will be hacked, but “when.” World weather patterns are changing, increasing the frequency off extreme events. Corporate Social Responsibility (CSR) and matters of sustainability are no longer back-burner issues, particularly in a social media world where damage to a brand can occur in an instant. Distressingly, we’ve learned that unexpected events don’t necessarily appear as obvious threats. It’s far more likely that the culprit will be a sequence of smaller events whose pattern goes undetected.
All this makes it necessary for supply chain leaders to have the ability to sense real threats, comprehend them, and quickly take appropriate action. The key is to figure out how to derive a competitive advantage in spite of the volatility, especially on the direct materials sourcing front. With more than a third of all manufacturing being outsourced to interdependent third parties spread out across the globe, managing a supply chain requires collaboration and transparency that can only come from a more technologically sophisticated approach.
To read more on this topic, check out our whitepaper.