August 1, 2020
By: Omar Nadi, Director Supplier Product Management
I love my job and think the intersection of technology and the supply chain, with all of its importance and global, limitless possibilities, is both interesting and intellectually engaging. But over the years I have learned that others outside of my professional circle do not always share my enthusiasm. At a cocktail party I can go on about the economic impact of supply chain automation and visibility, Industry 4.0, or machine learning. And, oftentimes, politely stifled yawns ensued. I can sense eyes glazing over. People just aren’t that concerned about where things come from or how they’re made. At least, they weren’t until 2020.
Starting about February, COVID-19 pressure tested supply chains worldwide—uncovering hidden risks, oversights and limitations within the supply chains of manufacturers across many industries. For a time, consumers struggled to buy household essentials. Businesses scrambled to acquire manufacturing inputs ranging from isopropyl alcohol to aluminum cans. Many healthcare supplies evaporated. Policies such as NAFTA, and dynamics such as the wage gap between American and Chinese manufacturers, were coming back to haunt us. And, just like that, all of my cocktail party supply chain talk was very, very interesting.
Within professional supply chain circles, a similar shift was taking place. Inbound supply chain matters were stepping out of the shadow of the longtime dominant outbound focus. Outbound has a huge impact on customer experience; always will. But COVID-19 forced us to both remember and respect the fact that without mastering inbound, we very well might not have anything to sell.
Though some people draw different lines around its edges, we’re all familiar with inbound supply chains. Broadly speaking, they entail finding, qualifying, acquiring, managing and optimizing the various products and services it takes to supply and run our business. This means anything from general sourcing to supplier scoring to setting up integrated in-plant services and even some aspects of facility design around things like inbound freight, cold storage, or warehouse management.
Businesses need strong inbound connectivity to bring strategic advantage to critical functions such as:
Inbound has thousands of facets and is often a thankless discipline. Rarely do automakers call up its supplier of electronic sensors and say, “Hey, I just wanted to let you know I appreciate all of the things you did behind the scenes to build these things and fulfill my order.” And relentless corporate pressure often means that no matter how shrewdly you negotiate supplier deals or how efficiently you plan and run your operation, you’re always under scrutiny.
Firstly, with the pandemic’s epicenter focused in China, inbound functions that depended on goods from Chinese factories experienced a comprehensive set of supply shocks. It’s tough to overestimate the effects of such a disruption, given that The People’s Republic of China is the largest supplier of goods to the United States with official import numbers of $539.3 billion as reported by the U.S. government in 2018. The U.S. Census reports August year-to-date imports reached just $262.7 billion so far in 2020 (down from $310.3 billion in 2019). Without the Chinese goods we’d taken for granted, U.S. firms struggled to source feedstock materials. The term “supply chain resilience” became mainstream news. Fingers were pointed. It wasn’t pretty.
Compounding the problem, enterprises modified their purchasing behavior to stock up on things buyers anticipated would become scarce. So inbound supply chain personnel were having to source goods from a strained number of suppliers and were asking for more than ever. Some suppliers cracked under the pressure. New, unproven suppliers sprang up overnight. Carriers were strained. Warehousing and other functions faced new questions, policies, and regulations at a rapid pace.
Perhaps worst of all, for many manufacturers, was the realization of just how much visibility and transparency was lacking across the supply chain. Sure, your ERP would tell you to the milligram how much malt barley your commercial brewery might have on hand. But how much confidence did you have that you were really going to get the next batch of bottles or hops or hardware or cleaning chemicals? This lack of visibility across the supply chain caused a lot of people to lose a lot of sleep.
In a post-COVID-19 world, maintaining an inbound supply chain function that has end-to-end supply chain visibility, more sourcing agility, greater depth, and more intelligence is paramount. How are enterprises making that happen? By increasing connectivity. You’ve heard the usual advice of identifying risks, diversifying suppliers, etc. But for inbound in particular, consider these five areas:
Enterprises are pretty good at cross-functional connectivity these days. But back-end connectivity that brings real-time visibility into supplier inventories, capacities, transactions, and shipments gave enterprises a real competitive advantage during the COVID crunch. This alone won’t solve for global sourcing crises, but it will exponentially improve decision quality when it counts.
Post-COVID we all know that we need more sourcing options. But properly analyzing supplier risk, performance, economics, and preference takes good information. The time to collect and analyze this information is before there is a crisis. This type of thing is easy to put off but can become very important very quickly. Take a step back and assess what information you’ll need to make the best choices and then put a plan in place to make it happen.
Sourcing optimization, tender management, order and shipment confirmations, Proof-of-Delivery (POD), and safety stock management. There are dozens of mission-critical inbound functions you can automate relatively quickly and easily. Start small and scale up when you see quantifiable traction.
Connecting digitally with carriers can bring about a whole host of inbound benefits, as well as customer experience enhancements. Taking the time to connect to your carriers is easier than it sounds and can help improve inventory management, lower freight costs, negotiate better deals, avoid unnecessary delays and costs, as well as more accurately and objectively assess service levels.
This all sounds great, but how do you start? You start with a plan. Try putting the biggest inbound risk events, their implications, and a specific, multi-layered plan to prevent them down on paper first—then pair this with a snapshot of your organization’s most critical inbound performance metrics. This will at least give you a place to start prioritizing objectives, projects, and next steps.
Will friends and family be glued to every word the next time I go on a rant about planning engines, artificial intelligence, or inventory visibility? That remains to be seen. But one thing is certain: If there’s a commercial upside to the COVID-19 crisis it’s that organizations will likely come out of it with more well-rounded and sustainable supply chain investments that give inbound its due.