Managing supply chain effectively is very crucial because of the magnitude of risks along the chain. After you sought opportunities with adjacent internal operations and direct customers and suppliers, you have to shift your attention to your suppliers’ suppliers and your customers’ customers – the extended supply chain.
It is a critical step to go beyond more-ambitious structural changes that could generate even greater pay offs but also to better manages risks. We must realize that the origin of a company’s products used to be pretty murky. Hitherto, virtually no one cared. Of course, all that is changed as consumers, governments and companies are demanding details about the systems and sources that deliver the goods.
Farsighted organizations are directly addressing new threats and opportunities presented by the question about where the product comes from. Thorough examination of extended supply chain becomes necessary as a result of emergence of toxic items along the chain that can damage the brand of the major manufacturer. For many products, origin is an essential feature of what the customers buys, even if it is an intangible or a difficult-to-verify quality.
For you to avoid the danger inherent in the extended supply chain, you must map out the members of your broader supply chain network and zero in on sustainability-related risks and opportunities. Figure out which performance indicators must be monitored to ensure that all members meet agreed-upon standards and targets.
For instance, you must see the detailed specification of an item, the level of quality control efforts and the results of inspections throughout its extended supply chain and then augment it with your own audits by consulting government agencies that keep tabs on companies’ social and environmental performance.
By doing this, you can be able to identify the vulnerabilities in your extended supply chain and then collaborate with members to make improvements.
Working with the first tier down to the lower ladder of suppliers will help to detect the anomaly early and track the next tier suppliers to keep the likely problem in-check. However, engaging members of the broader supply chain may be herculean task especially if they are several tiers below you.
Many companies may not want to share information about their operating and environmental performance with other members of the extended supply chain for fear of being used against them in contract negotiations so you typically will have to educate members about why transparency is needed and how the information will be used.
Finally, start coordinating efforts by identifying all the overlapping activities. Then, working with the other parties, explore improvements you could make together that would transcend what any of you could achieve on your own. Since your priorities may differ, the metrics to track progress will have to be comprehensive enough to cover the interests of all operations.