What is the Biggest Blind Spot in Your Supply Chain?

In countless surveys over the past decade, manufacturers and retailers rank “improving supply chain visibility” as one of their top priorities. Yet, despite their focus on this effort and advancements in technology, achieving timely, accurate, and complete supply chain visibility remains an elusive goal for many companies.

There are many reasons why, as I’ve discussed in previous posts and Talking Logistics episodes, including:

  • Supply chain data is stored in too many systems, in too many formats, across many companies and geographies.
  • A lot of data/information is communicated in batch and serial mode, sometimes hours or days after a transaction or event occurs.
  • Low-tech / no-tech processes still exist, especially in developing countries.
  • Supply chain networks are reconfiguring at a rapid pace, so the challenge of connecting to new trading partners is ongoing.
  • Nobody really owns or is accountable for supply chain visibility and data quality management.

What is the biggest blind spot in your supply chain?

For many companies, it’s not having good visibility to what’s happening at their supplier’s supplier (or even knowing the identity, location, or other information about their supplier’s supplier).

Take BMW as the latest example. The company has had to shut down or slow down production at various factories around the world due to a shortage of steering gears manufactured by its supplier Bosch, which in turn blamed the problem on one of its suppliers in Italy that is having problems delivering the casing for the steering gears. As reported in the Wall Street Journal last week:

“Automotive value chains are international. An interruption in delivery of parts from a partner in Europe can therefore also have implications in China,” said [Markus Duesmann, BMW board member in charge of purchasing and supplier network].

“The vehicle is not complete until all parts, most of which are supplied “just-in-time”, are installed. It is, therefore, understandable how a missing part—even if only a small one, as in this case—can have a major impact.”

BMW said it doesn’t know the extent of the financial damage or impact on production and sales caused by the break in production [emphasis mine]. A spokesman said the company hoped to restart assembly at the plants next week, but wasn’t certain that would be possible [emphasis mine] .

What is happening to BMW today is another case study in supply chain risk management.

“With the size and complexity of supply chains soaring, a daunting challenge is confronting companies: identifying the critical nodes hidden within the vast expanse of their supply networks,” state the authors of a 2015 Harvard Business Review blog post titled Hidden Suppliers Can Make or Break Your Operations. “These are suppliers, or supplier sites, that might be in the second-tier or lower, which means the big buying companies would ordinarily have no contact and might not even know exist…These ‘nexus suppliers’ could be important [because, among other things,] a disruption of its operation would have a surprisingly huge impact on the original-equipment manufacturer’s production.”

[For related commentary, see my June 2015 post, Time to Survive and Nexus Supplier Index: New Measures of Supply Chain Risk Management.]

The fact that BMW doesn’t know “the extent of the financial damage or impact on production and sales caused by the break in production,” or when it will resume production with any certainty, is not surprising because, sadly, that’s true for virtually every company today. Knowing this critical information is a key attribute of a best-in-class supply chain organization, as I wrote about in my June 2014 post, Do You Have a Top 25 Supply Chain? Here’s an excerpt:

Is your supply chain best-in-class? There are many ways to approach this question, but here is my quick 1-Question Assessment Test, which I borrowed from a presentation Bindiya Vakil, founder of Resilinc and a supply chain risk management expert, gave a few years ago at a CSCMP New England Roundtable event:

Can you complete the following email within four hours of a supply chain disruption?

At 9:05am today, an earthquake of magnitude 7.0 struck Vietnam. N suppliers have manufacturing sites in a X mile radius of the epicenter. Within X hours of the event, we contacted all of these suppliers and determined that X supplier has shop floor damage. This will take N weeks to repair and clean up, and an additional N weeks to ramp and clear backlog. N single sourced parts with revenue impact $X-$YM each are manufactured at this facility. They are used in critical product lines Alpha and Gamma.

We have N weeks of component supply on hand and have secured additional N weeks of inventory from the broker market. The supplier has an alternate facility in X which can build this part. A 4 person team will deploy tomorrow to the alternate facility to support the supplier with an initial build. The alternate site should be up within N weeks. Communications with the supplier are streamlined and updates are posted every N hours.

At this time, we have no reason to believe that our manufacturing lines will be shut down due to this event.

The ability to compose that email implies that you have mapped your supply chain, that you have timely, accurate, and complete visibility of what’s happening in your supply chain, and that you communicate and collaborate effectively with your suppliers and trading partners  — which, in my book, are all fundamental attributes of supply chain excellence. From this, everything else follows: financial performance, market share, and customer satisfaction and loyalty.

The hypothetical email above was in response to an immediate and non-preventable disruption, which natural disasters like earthquakes and tsunamis typically are. But the ultimate goal is to predict disruptions and take corrective actions to prevent them or significantly minimize the scale, scope, and duration of a disruption. Nearly impossible to do if you have many blind spots in your supply chain.

What is the biggest blind spot in your supply chain? Post a comment and share your perspective!

And for some advice on how to improve supply chain visibility and collaboration, see The World’s Oldest Supply Chain Analyst Report and my presentation below.