The Importance of supply chain: reducing risk and costs through collaboration

Within this article PIF take a look at the importance of understanding your supply chain.

The global nature of modern day manufacturing has dictated that a buyer's portfolio of suppliers can make for an incredibly cosmopolitan reading list. But just how well does the British manufacturing know the lower rungs of the supply chain and what can be done to glean better insights? PIF investigates...

Reliance on overseas suppliers

The British car industry employs nearly 130,000 people and generates more than £10bn a year for the economy. That in in large part is thanks to foreign investment that turned around an ailing national industry to the point of anticipated record high outputs by 2017.

But although those figures point towards a sector in rude health, the BBC reported recently that domestically produced components only account for 40% of the parts used in modern British-made cars. That's compared to an estimated 60% in France and Germany.

The BBC said,

“In some cases, the supply chains of the big UK operating firms are plugged into global logistics chains based in their 'home' nations. So whilst car output and exports may be rising, this sucks in more imported components.”

In general terms, this reliance on overseas suppliers might not simply pose a risk to the UK economy and manufacturing industry as a whole but could also acutely damage the profit margins and reputations of individual businesses. It is a question of faith. Exactly how clued up are we about the lower tiers of our supply chains? If the answer is 'not very' then that should sound some alarm bells.

“Blind faith in suppliers that have the potential to negatively influence brand and shareholder value through their actions – such as by breaching ethical working practices, using child labour, poor adherence to health & safety requirements, or having premises that are non-compliant with fire regulations – is courting immense danger,” warns Adrian Chamberlain, CEO of Achilles in The Manufacturer.

Cloud-based providers of collaborative industry data, Achilles, conducted a research exercise in 2013 that returned some telling statistics. “The Achilles report shows that nearly 40% of companies rank risk to reputation in the top three most important risks to manage and yet, 61% of organisations that procure outside the UK do not feel their supply chain helps them to identify and mitigate risk,” Chamberlain says.

Worse still, they found that “one in five (18%) companies in the UK holds absolutely no information about their tier two suppliers across the world.” Worrying figures indeed. So what's the solution?

Collaborative procurement data to put the buyer's mind at ease

How do you go about benchmarking a highly dispersed global community of manufacturing suppliers? It is a mammoth task. One that, up until the advent of emerging technologies, was a metaphorical minefield. But with the growing field of cloud-based systems comes a very real source of collaborative procurement data to put the buyer's mind at ease.

Chamberlain says, “Outsourcing the management of supplier information to a specialist, independent organisation that uses a global cloud based platform to manage collaborative communities, opens up a world of opportunities for improving data accuracy, streamlining processes, mapping supplier relationships at all tiers and reducing exposure to supply chain risk.”

Leading information technology research and advisory company, Gartner, rated Achilles as the the world's number one supply-base management organisation in 2010. The supply chain experts now manage collaborative communities that match buyers with more than 77,000 qualified suppliers. The end result? Less risk and cost for both.

You’ve heard out thoughts – do you agree? Is there pressure from buyers to know where the parts are sourced from? PIF would like to hear your comments…..