Connecting your ecosystem, winning in the turn

20 May 2021 | BLOGS

In June of last year, during the height of the pandemic, the IBM Institute of Business Value (IBV) surveyed over 3000 CEOs on their organizational priorities and investment focus.  One of the most critical areas that executives called out, was a need for greater focus on their business networks and partner ecosystems.  CEOs expect participation across these areas to grow more than 300 percent over the next two years compared to two years ago.  Driving this dramatic focus is the realization that business resilience and continuity is so dependent on these extended channels.  In addition, CEOs in KPMG’s survey taken at the same time, identified that the risks across their supply chain ecosystem was now the second most important to threat to growth.

In looking out into 2021, as efforts evolve from just surviving to thriving, the degree and speed of an organization’s recovery will be more directly tied to their ability to build these relationships.  In an update to the IBM IBV CEO study just released this year, operations-focused companies that are outperformers (greater revenue growth versus peers, see definition [In Margin]) are those that prioritize on building and taking advantage of these ecosystems.  Essentially, those companies unable to connect and leverage their networks will fall further behind as the economies around the world pick-up.

What three capabilities should you as a commodity intensive business focus on to ensure you are an outperformer and connecting your ecosystem?

1. Build greater transparency through supplier and buyer collaboration.

Organizations have been promoting the importance and need for greater involvement and collaboration with partners for many years, even to the point where efforts started to wane heading into 2020.   One of the main reasons this objective has been so elusive is that the focus has been almost exclusively on driving cost efficiencies, limiting the value of suppliers to want to participate.  Reinforcing this point, Gartner just published a survey from over 1300 supply chain professionals, where 60% admitted that their supply chains have not been designed for resilience, but cost-efficiency.  Strategic collaboration across your ecosystem is difficult when they only see it as a cost cutting effort or no clear benefit to them.

Additionally, most collaboration efforts only focused on a small set of Tier-1 partners, limiting visibility to the risks across the entirety of the supplier network.  Deloitte found that “50% of procurement leaders had high or very high visibility into their tier 1 suppliers, while 90% of organizations rated their visibility into their extended supply networks as moderate to very low.”

Greater digitalization and externalization of processes is critical to mitigate these risks and improve transparency across your ecosystem.  Collaboration through self-service tools should be in place to support suppliers of any size, but they are particularly critical for Tier 2 and 3 suppliers who traditionally have been more susceptible to market disruptions and often lack digital technologies.

2. Increase automation in your supply chain execution.

To be successful, commodities-intensive businesses must have confidence that every process across the supply chain will be executed flawlessly.  The constant trade uncertainty, sourcing risks and supply disruptions are driving chief supply chain officers (CSCOs) to redesign their supply chains and make them more agile and resilient to change.  They are doing this through the expansion of automation capabilities including warehouse, stockyard and global logistic management systems, specifically designed for commodity businesses.

The data across these control towers will be tightly integrated and shared across the ecosystem.  These efforts will build stronger supplier relationships that drive delivery improvements, while offering earlier warnings about emerging risks.

3. Improve sustainability and traceability, with transparency and trust.

The pandemic has accelerated the shift in global consumer attitudes toward environmental issues. According to a recent BCG survey, “Ninety percent of consumer respondents said they were equally or more concerned about these issues after the COVID-19 outbreak.”  The ability to capture and share this essential data while ensuring it’s lineage and trustworthiness, can only be accomplished through a more connected ecosystem.

Organizations can accelerate their efforts by improving their digitization and automation within their processes specific to sustainability.  In addition, through streamlined reporting and pre-defined visualizations of this data, you can more easily monitor and report on key initiatives, increasing the strategic value across the value chain.

Other resources

direct materials, finance close, supply chain risks, e-sourcing, finance management

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