Expanding your supplier base is critical to mitigating risks and making profit. However, this can also create a whole new set of problems. The more complex your supply chain, the more risks are likely to emerge, and the harder it becomes to see them.
Here we explain how supply chain visibility benefits your profit margins, and how companies can achieve it in an affordable way.
EXPANDING YOUR SOURCING HORIZONS
“Widening your supply base and not relying on one supplier is essential to mitigate against external threats,” Chirag Shah, executive director at business and technology provider Xchanging, explained to Just Style. While companies can form close working relationships with a single supplier, the heavy reliance on that source can be an expensive supply chain disaster waiting to happen.
It can also mean that companies don’t reap the benefits of healthy market competition. In the 2015 Global Procurement Survey, Xchanging asked over 800 procurement professionals about challenges facing their business operations, and found that 65% struggled with a lack of supplier innovation. By using a wide range of suppliers, companies have more choice and more bargaining power, which could help them to secure better prices.
SUPPLY CHAIN RISKS CAN POSE EXTREME CHALLENGE
However, extending your supply chain brings new risks along with rewards. As companies expand their sourcing activities, they can become more exposed if supply chain visibility decreases.
When it comes to global sourcing, supply chain risks could take the form of shipping delays, currency fluctuations or even natural disasters, all of which can complicate supply chain processes and cost companies a lot of money. Without supply chain visibility, companies are at risk of sourcing problems from every direction.
Unsurprisingly, Xchanging found that 77% of procurement professionals see supply chain risks as a challenge to business operations, and 17% consider them to be an extreme challenge.
“Even if you don’t trade internationally, chances are your suppliers do,” the study states. “No organisation is immune to threats from external procurement.”
KNOWLEDGE IS POWER IN THE SUPPLY CHAIN
“Dealing with more than one supplier, and knowing who supplies them, will give you control over the entire buying process,” noted Shah. Companies with a diverse supplier base must therefore manage and monitor every link in their supply chain.
Performed manually, this task would take up a lot of time and resources, and could still be prone to costly errors. However, Segura’s software allows companies to manage suppliers and subcontractors in a more efficient manner, making secondary supply chain visibility affordable.
Our cloud-based software makes it possible to trace an individual order back through a database of pre-approved suppliers. By auditing every supplier and subcontractor within this database, you ensure that orders placed through Segura’s platform will comply with set supply chain standards.
In the event that orders are fulfilled outside of your approved database, Segura can send alerts in real time. Our comprehensive audit trail enables you to see exactly where an order went off track, helping you to protect your profit margins now and in the future. Poorly performing suppliers can be easily identified and removed from the supply chain, effectively rewarding your best suppliers with more business and helping your company to secure great service.
STRONGER SUPPLY CHAINS MEAN HIGHER PROFITS
If your company can properly manage a diverse supplier base, the recompenses can be significant.
A survey by Deloitte last year proved that companies with strong supply chains typically generate more revenue and higher profits. The research found that 79% of supply chain leaders reported revenue growth significantly above the industry average, in contrast to just 8% of companies with weaker supply chain performance that reported high revenue growth.
Originally published 05/06/2016