Transparency and effective management of an organization’s supply chain are essential now more than ever in view of all the supply chain challenges.
Supply chain management in sourcing custom-manufactured parts in metals, plastics, rubber, and other engineering materials has begun to pose many challenges. Especially, the questions being asked on the source of certain raw materials is being questioned and ELV (End of Life vehicle) requirements as to how some materials will cause long-term harm to human health if disposed of in more than harmful proportions, is gaining more and more traction. Regulations such as RoHS, U.S. EPA, etc. are becoming more stringent.
It only needs to see how a balance between these regulatory requirements and the cost of materials and manufacturing processes impact long-term sustainability and cost Vs benefits in the long term need to be weighed in.
Due to stories concerning shortages of infant formula, new cars and even the majority of laypeople are aware with the term “supply chain.” Most businesses and customers used to take it for granted that suppliers would fulfil orders for the parts and goods they produce and that goods would always be in stock. However, the COVID-19 pandemic led to supply chain issues in the global economy, which were made worse by geopolitical conflicts like the Russian invasion of Ukraine, Chinese factory lockdowns, and the current global energy crisis, which includes a decline in crude oil production among OPEC countries and may further increase transportation costs. Given all of these circumstances, transparency and efficiency are more important than ever.
Supply chain transparency
Supply chain has gained popularity as a result of COVID-19’s tendency to impede the flow of commodities in numerous situations. The location of where parts or finished goods are sent from affects supply chain problems due to global crises and societal concerns (such as the usage of child labour in foreign nations). Increased sourcing transparency may be more significant to end users due to reliability worries. Finding a company’s “North Star” might help you understand what openness means to the organisation, according to a research scientist from the Center of Transportation and Logistics at MIT. These two aspects of supply chain transparency should be present:
- “Visibility. Accurately recognising and gathering information from each supply chain link.
- Disclosure is the act of sharing information both internally and externally at the desired or necessary level of detail.
There are good reasons to increase supply chain transparency, especially given the accountability concerns with governments demanding more information about where products are sourced. These issues include evolving regulatory concerns, including those from the country of origin, about sourcing and customer trust. Investors impressed by a company’s reputation for on-time deliveries or upholding ethical standards may be drawn in by elevated supply chain difficulties. This could provide the business a competitive edge over rivals in the same industry.
A new era has begun
Supply chain difficulties are improving when regulatory compliance and benchmark requirements are met, data collection plans are in place that provide accurate real-time snapshots of the supply chain, and all employees, all the way up to the boardroom, focus more emphasis on the supply chain. By allocating funds in the Creating Helpful Incentives to Produce Semiconductors and Science Act of 2022 (CHIPS Act) to develop technologies that give more visibility into problems affecting the flow of components and finished goods, lawmakers in Washington, D.C., recognised the need to modernise how supply chains can be monitored.
However, the level of supply chain transparency might differ based on the goals and reputation of a specific organisation. Whether a petroleum producer or a fashion designer discloses information about where its products are created largely relies on what the end consumer wants to know. Stakeholders and stockholders may be worried about confidentiality difficulties in the context of these boardroom issues. On the other hand, some businesses inform customers of the origin of their orders as well as the estimated time of delivery. It is not possible to optimise a supply chain without access to all of the important participants.
Create a communication plan
In order to ensure that they are connected to a company they can trust, suppliers and end users must be aware of a clearly defined supply chain transparency plan. When suppliers are informed of a projection for the next six months or more, they can change and respond appropriately, potentially improving their own efficiency. If they are unable to reach that deadline, they may need to look into alternate sources, which is preferable to putting out fires or scrambling to come up with solutions at the last minute. Several American automakers cut back on their orders for semiconductor chips during the height of the pandemic, while producers of cell phones and other digital gadgets increased their purchases to cover the hole. When the automobile manufacturers resumed production, the semiconductor chip producers were unprepared for an increase in orders, which caused a sharp increase in sticker prices because of high demand and low supplies. It occasionally also necessitated the temporary closure of auto production facilities, which resulted in job losses.
Proactively increasing supply chain transparency
Government organisations and lawmakers have been getting more involved in supply chain management over the past few years. For example, lawmakers passed a bill to increase domestic semiconductor chip production because it was needed for automobiles. They also organised airlifts of baby formula from Europe when one of the country’s major suppliers was shut down for a while. Supply chains used to be taken for granted, but after the past two or more years, it’s unlikely that will happen again. To ensure that the company’s supply chain management is in step with contemporary business realities, it is important to be as proactive as feasible. Consider this a business problem and begin by identifying the areas that want improvement. The source of components and final goods shouldn’t be taken for granted anymore.
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