2021 began with a number of challenges for the business world. There wasn’t only the ongoing COVID-19 pandemic, which had already severely restricted business life for over a year. There was also the large freight ship Ever Given getting stuck in the Suez Canal and the continuing bottleneck in the supply of semiconductors, alongside further factors putting an immense strain on supply chains everywhere. Many companies are now reflecting how to react earlier to such situations and deal with them better in the future.
In this first instalment of our series on integrating suppliers along the supply chain, we shall be looking at the increasing complexity of today‘s supply chains, and describing how digitalising these can help deal with situations like those above. We will also be presenting the solutions SEEBURGER can offer you to support your business in this area.
Today’s supply chains are becoming increasingly complex
The supply chains of today are growing in complexity. While companies used to be able to manage challenges in procurement, production management and sales and distribution on their own, this is unthinkable in today’s world.
This is because globalisation has moved the goalposts. Moving into new markets has allowed companies access to completely new buyer groups. Increasing customisation has led to much broader product ranges. This has led to more product variations on the market, with ever shorter lifecycles but with long, individual supply chains behind them. And this is compounded by new societal and corporate needs (such as corporate compliance) as well as ever-changing legislation. Consider the new supply chain law just passed by the German government. And don’t forget that new markets also mean new competitors. These open up opportunities for companies, but also risks.
These dynamics have led to companies becoming involved in ever more complex supply chains, in which goods are manufactured and information exchanged. The number of companies handling the product while it is being made (known as tiers in a supply chain) is increasing, as each tier starts specialising in one particular step. A manufacturer is therefore one part of a complex supply chain, as illustrated in figure 1:
Creating and maintaining such a system requires active supply chain management, as illustrated in figure 2. You constantly need to have a clear view of what is going where, when, to ensure quality standards for the products and components, and to make sure the goods keep flowing. However, such active supply chain management is really only possible if the information flow in an organisation has been extensively digitalised. The key figures and information you need to control a complex supply chain can only be provided if information is processed promptly and to a high quality.
Supply chains are often insufficiently digitalised
Let’s start by asking a question: What does digitalisation actually mean in this context? In theory, e-mail and fax are both digital media. However, as these require documents to be processed manually, and they are usually not trackable either, there is still a lack of transparency in the process of sending documents through these media. Instead, when we talk about digitalisation, we mean a fully automatic document exchange between organisations, with no human intervention.
EDI (Electronic Data Interchange) with its typical batch processing became the established standard for this type of document exchange as early as the 1990s. In recent years, this has been joined by APIs (Application Programming Interfaces); lighter yet less standardised than the classic EDI, these provide communication in real time. SEEBURGER supports both these communication channels on its integration platform, the Business Integration Suite (BIS), which has been an established market player for several years.
Not least due to pressure from customers, many companies have now digitalised communication with their customers through these channels. Those responsible for distribution can clearly see which products are in demand, and plan and control production accordingly by defining batch sizes and scheduling transportation (see the category distribution in figure 2).
In contrast, digitalisation on the supplier side is significantly less advanced, and the further from the end product (2nd, 3rd, 4th tier…), the weaker it is. This insufficient digitalisation leads to problems forecasting incoming goods for companies downstream, which has a correspondingly negative effect on their procurement strategies. The consequences are larger inventories and poor ratings for those non-digitally ‛integrated’, or ‛connected’ suppliers, as EDI jargon has it.
The challenge of integrating suppliers along the supply chain
The challenge in integrating these suppliers is less a technical issue than an organisational one. As mentioned above, there is already proven, established technology available for EDI and API integration, such as SEEBURGER‘s BIS platform.
The real challenge lies in dealing with such a variety of needs and structures. Companies who trade B2B tend to have significantly more suppliers than customers. And these suppliers vary much more in their EDI and IT capabilities than customers. There is also a range of supplier relationships; is an organisation supplying direct goods such as components or raw materials, or fulfilling an indirect need, such as stationery? The first step toward integrating your own suppliers is therefore to analyse and classify them in terms of their ability to digitalise.
Supplier classification – the first step towards integrating your suppliers along the whole supply chain
The first task is to determine the EDI capabilities of your suppliers. You need to find out which
- are already EDI-enabled and which protocols and formats they already support.
- are not yet EDI-enabled, but would be willing to introduce EDI.
- are not EDI-enabled, and due to organisational or financial limitations, would not be able to introduce EDI.
In practice, this classification could be extended with further points. In particular, there are a number of technical details which need to be clarified with the EDI-enabled suppliers. This is a mammoth organisational task, as information needs to be collected and systematically structured and stored for hundreds of suppliers. At the same time, it is important to still keep track of everything. This would require hiring further staff, as this is a task of such magnitude, it can’t simply be done on the side.
Help is at hand with the cloud-based onboarding services offered by integration service providers. SEEBURGER, for example, offers Community Survey, a cloud-based service which lets an organisation carry out their own surveys with a large number of suppliers. All the suppliers‘ responses are collated centrally, reducing the admin for the surveying organisation to a minimum.
Creating a mass survey is simple. SEEBURGER provides a range of pre-prepared surveys which can be adapted to your organisation’s specific needs with just a few clicks. And your suppliers benefit too. Community Survey leads them intelligently through the survey, showing them only the questions relevant to their previous responses. This means that suppliers only need to answer questions genuinely relevant to their circumstances.
Sources: [StoRa] Stocker, S.; Radtke, P.: Supply Chain Quality, Carl Hanser Verlag, München/Wien, 2000 (German language)
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