If supply chain pros have learned anything recently, it’s that the system we have in place for the global flow of goods and materials is vulnerable to disruption.
The causes are many: devastating storms and floods, trade wars, political upheavals, cybersecurity attacks, and much more. But the grandfather of them all has been the disruption caused by the COVID-19 pandemic.
I speak with a lot of companies about their supply chain challenges. Because of these disruptions, the word on the lips of everyone today is “resilience.”
But How Do You Build Supply Chain Resilience?
To answer this question, I like to tell the story of one company that managed the shutdowns early in the pandemic much better than most – and they did it thanks to business networks.
This company is a large American power generator – one that orders a steady supply of engines that go into its generators. It just so happens that the supplier for these engines was in Wuhan, China, ground zero for the pandemic. After the shutdowns began in Wuhan, the company tried for days to call the factory to find out the fate of its latest order.
But no one at the plant would answer the phone. The reason was obvious: almost everyone in Wuhan was on lockdown. Operating without information, the company scrambled to find a new source of supply.
But before it did, an advance shipping notification came in over its business network: “Expect your order to arrive within six to seven days by air freight.” Crisis averted – thanks to the business network.
What Is a Business Network?
A business network is a system, ideally cloud-based, that brings together buyers and suppliers for real-time collaboration and visibility. But here’s the critical point about business networks: for them to work, you need to be up and running before the disruption happens.
Fortunately, the company in this story was up and running. So, despite a severe communication breakdown resulting from an unprecedented global health crisis, it was at least able to receive a signal that the order was on the way.
This signal helped the company avoid a cascade of quite dire business outcomes. Even if the company was able to find another supplier, the delays would have thrown schedules off, and the company would have had to retrofit the new engines to meet regulatory standards. That would have taken a lot of time, money, and energy.
The Nervous System of the Global Economy
Networks are resilient. If part of a network goes down, other parts step in to fill the void. Compare this to the old world of supplier interaction, which called for one-to-one data feeds typically managed through the tedious machinations of electronic data interchange (EDI). The vulnerabilities associated with this approach (particularly isolation) are obvious.
The network approach dramatically opens up the possibilities for connection. Instead of you against the world, it’s you in the world – connecting to and collaborating with an ever-wider range of suppliers throughout the world.
This is why companies are moving aggressively to join business networks to manage their supply chains. In the face of disruptions, the resilience of business networks can help organizations get through the rough patches.
It’s About Using Data to Your Advantage
The lifeblood of any business network is the sharing of data. Based on this data, you can analyze almost anything in your supply chain to find new ways to solve problems and run your business more efficiently.
Take, for instance, the container ship that found itself grounded for six days in the Suez Canal back in March 2021. One company I speak with regularly had perishable goods on board with a short shelf life. Because of track and trace capabilities – enabled, in part, due to data feeds through its business network – it was able to monitor the status of its goods and then run simulations about the most feasible courses of action. That’s putting data to work.
The Importance of Moving Now
Business networks are demonstrating their value. But again, it’s worth repeating: the advantages can only be realized if you’re already on the network to begin with. It’s important to get set up now. Because if you wait for the disruption to happen – and it will – you can expect to be disrupted.
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Greg Mekjian is global VP and general manager for SAP Business Network.