By Sundar Kamakshisundaram, Vice President, Solutions Marketing, Ariba - an SAP company
There was a time not too long ago when it was sufficient for businesses to simply monitor their own suppliers. But as supply chains have become longer and more global, now businesses must keep tabs on their supplier’s suppliers as well. Need proof? Look no further than recent news headlines.
Chinese authorities recently accused the China subsidiary of U.S.-based meat supplier OSI Group of intentionally selling meat beyond its shelf life to restaurant companies. This caused key customers to flee and even more to review their partnerships and potentially follow suit.
In early August, an explosion at a metal products factory in China killed 75 workers and injured at least 185 others. The supplier was a supplier to another supplier who provided wheels to a major automotive manufacturer. Although the company was several steps removed, its brand was associated with, and therefore not immune to damage from the event.
The road is littered with the remnants of companies that have failed because they didn’t anticipate and take steps to mitigate the risks inherent in today’s multi-tier supply chains. But anticipating risk is only half the battle. To effectively manage complex supply networks requires three things:
The ability to predict the future with accuracy, leveraging input from real-time market dynamics and historical market trends from a network of partners and peers.
The competency to assess a myriad of potential actions and identify those with the highest propensity for success – based on analyzing the actions and results of other enterprises or individuals that were exposed to similar conditions in the past.
The flexibility to quickly act on these predictions by adapting business processes to execute the right action in advance of market changes.
Thankfully, businesses now have the ability to capitalize on these predictions by adapting businesses processes that are executed in advance of market changes or the competition. Traditional technologies can’t enable this. But a new breed of solutions can. Such solutions combine the strengths of three key trends:
The convenience and agility of the Cloud
To keep pace in today’s fast-changing world and achieve new levels of business productivity and performance, businesses must be able to innovate and adapt processes quickly to capitalize on market shifts. The Cloud empowers companies to this, by providing them with the flexibility to access apps, technology, and other capabilities on a more variable model – basically everything as a service. Leveraging this model, they can quickly reconfigure business processes or extend information to employees and partners in far reaching corners of the globe – without requiring massive IT resources or waiting on lengthy upgrade cycles.
The connectivity and insight of social and business networks
Just as consumers tap into personal networks to learn, share and shop better, companies are harnessing the ‘knowledge of crowds’ and insights from business networks to detect risks and market changes and chart recommended courses of action that have tested and proven by others in the community.
The power and speed of in-memory database and analytics
With business moving at light speed, companies need to capture, analyze and act on information faster than ever before. By combining both transaction processing and analytics on a single platform, in-memory technology eliminates the delays and inefficiencies inherent in parallel operational and business intelligence systems, and enables companies to aggregate, correlate, and assess countless bits of information and scenarios to determine the best course of action with unprecedented speed.
And they enable companies to execute a new approach to risk management through which they can pinpoint potential risks that may be hidden deep in their supply network and head off trouble before it happens. Procurement, for instance can be alerted to potential future risks in the sub-tier supply chain by triangulating a myriad of real-time supplier performance inputs (e.g., change in payment status, loss of a key customer, change in leadership, commodity price or supply fluctuations) crossed-referenced historical results when such patterns exist.
These alerts can be supplemented with recommended responses or alternative suppliers based on community-generated ratings and buying patterns of other like-buyers on a business network.
As the saying goes, "What you can't see can hurt you." Armed with the right technology, intelligence and insights and connected to the right networks, companies can see the future to help mitigate risk and create competitive advantage.
This story originally appeared in SAP Business Trends.
