During the significant disruptions caused by the Covid pandemic, many companies learned that they really didn’t have good visibility across their end-to-end supply chains — especially not beyond their Tier 1 suppliers and partners. Fast forward to today, having multi-tier transparency and traceability is even more important. What trends are driving this requirement? How far have companies advanced toward achieving this level of visibility? What challenges are companies facing in trying to gain visibility beyond their Tier 1 suppliers and trading partners, and how can technology help? Those are some of the key questions I discussed with Brian Carelli, VP Product Management Sustainability at Infor, on a recent episode of Talking Logistics.
The Multi-Tier Visibility Requirement
I began by asking Brian why multi-tier visibility has become a requirement today. He mentions that what the pandemic exposed was companies’ inability to understand if Tier 2 and beyond suppliers could continue to produce the quantities necessary to keep supply chains moving.
But Brian notes that the requirements for multi-tier visibility and traceability have escalated today due to recent legislation. In the U.S. there is the Uyghur Forced Labor Prevention Act (UFLPA) which requires companies to prove they did not source goods from forced labor sources in the Uyghur region of China. And in Europe, the new Digital Product Passport will require a deeper level of visibility than most companies have today.
Also, geopolitical changes are forcing increased scrutiny. For example, aluminum, nickel and copper cannot be sourced from Russia into the U.S. today. And then there are the Scope 3 emissions tracking requirements. These are just a few of the many factors which are forcing companies to expand their definition of supply chain visibility beyond the tracking orders to complete traceability to the point of origin of their products.
The Visibility Maturity Curve
With the expanded requirements for visibility and traceability, I asked Brian how far along this maturity curve companies are in general. “It really varies from company to company, but even more so from industry to industry,” he says.
“Pharma went through this transition a decade ago. The food industry did also in order to track contaminants for recalls. Other industries are having a tougher time. I recently saw the auto industry just found out some of their components have come from the Uyghur region and now they have to do recalls. The fashion industry has been notoriously difficult to trace. Cotton is grown all over the world and is often aggregated and sold at auction. It’s very difficult to trace where it is sourced from.
“Even within industries some companies have taken this much more seriously for years. It can be part of their brand messaging, especially for those selling organics. For other companies, this has not been on their radar. They will have to start working directly with their suppliers, have them build a little bit of muscle memory doing tracing so that it doesn’t feel like a burden all at once to them. If you’re not practicing now for the regulations that are coming, you are going to get caught flat-footed once they roll out.”
The Challenges
Brian notes that the biggest challenges occur once you go beyond your Tier 1 suppliers. “You can incentivize your Tier 1 suppliers pretty easily, but it is much harder to do this with Tier 2 and beyond.” In the short clip below, Brian shares what come companies and suppliers are doing to address this challenge.
Another approach is to provide n-tier suppliers with better financing terms, as Brian explains in the clip below:
“It’s an industry with a lot of sticks and few carrots, so companies are trying to find more carrots,” says Brian.
How Can Technology Help?
The real challenge is when you have thousands of suppliers. There is no practical way to do traceability manually or with spreadsheets. Technology provides the scale to accomplish this. Brian says they are using artificial intelligence (AI) for pattern-matching to better understand paths through supply chains. There are also companies using publicly available data to map supply chains. They use AI and machine learning to find the thousands of suppliers you may not be aware of in your supply chain. And the use of network platforms and their vast amount of data facilitates this as well. “All of this can help lessen the burden on smaller suppliers and the workers on the factory floor,” Brian says.
Moving Up the Maturity Curve
How can companies move up the maturity curve on their visibility capabilities? Brian had some great, practical advice on steps companies can take, so I encourage you to watch the full episode for all of his insights and that question and more. Then post a comment and share your perspective on this topic!
