Originally shared on Forbes.com
Over the past six months, I’ve noticed a shift. Manufacturers are becoming increasingly unsatisfied with being reactive when it comes to sustainability efforts. They recognize, with growing regulatory and consumer pressure, the need to introduce a new, proactive foundation that can scale across all aspects of their supply chain. They also understand that truly proactive supplier management starts with gaining better control of their data.I often hear, “We’re still tracking all our data in spreadsheets and on yellow sticky notes.” Or, “We have a good handle on data coming off our equipment, but I don’t have enough visibility into our supplier network.” Before they can tackle sustainability goals, they have to close data supplier information gaps.
Going Beyond Your Own Scope To Collaborate With Suppliers
Gaining access to real-time data from suppliers is the next natural step for most operations. Early sustainability efforts looked at things within the operation’s full control. What cups will I offer employees? Can we replace fossil fuel electricity for our plants with renewable sources? Where is the nearest supplier to keep transportation-related emissions low?If you want to really understand your environmental impact, such as your carbon footprint, you have to go beyond domains within your direct control and truly understand the circular economy you operate within. That means a whole new level of supplier collaboration.
Having shared policies across your suppliers is a step in the right direction. But those policies are not easily actionable in their current form. For example, at the time that you formed a partnership, a supplier may indicate that 100% of materials in a packaging product are recyclable. What happens if nine months later, they change their process and now only 75% is recycled? Will you know? Sure, your contract likely has some supplier performance thresholds, but it’s very difficult to react to misalignment in real time under the static information-sharing paradigm that contract-based obligations afford.
The Value Of The Network
There is a better way. In a network model, specifications are aggregated across the entire supplier network and shared. In the example above, you’d have received an alert letting you know exactly what had changed, when and for how long. Innovation in your network allows you to view your own specifications but also those of your suppliers so you can make informed decisions and hold each other accountable. It’s an extremely effective way to streamline sourcing decisions.The idea of a network is possible with current technology advancements. Data silos are being replaced with data sharing, and specification management connects it all together. When this happens, transparency forces all of us to become action-oriented.One of the values of being on a network is the ability to quickly find an alternative supplier if the one you have chosen falls out of compliance. In addition, it can cement existing relationships by proving terms are in compliance at all times. Contract management and supplier relationships become a whole lot more efficient.Of course, to build a network with these benefits, it must be secure and trusted. First and foremost, this means the network must set up guardrails and restrict data sharing in a way that gives the data owner control over what and with whom that information is shared.Even with these promises, moving to a network can feel fraught with risk. Luckily, there is a model to learn from. As an industry, we have made this type of transformation with the wide adoption of open-source software. I spent 17 years of my career at Microsoft. At the beginning of those years, it felt critical that we protect how the internals of the software worked. The introduction of open-source software changed how we think about the value of our code. Value is not in the zeros and ones of the code but rather in how the code is applied to solve specific real-world problems. That is where true innovation comes into play. What you did with the information became the value we had to protect—and open source became a well-established norm.
Driving Efficiency Through Automation And Transparency
Supplier networks are on the cusp of a similar evolution. It will require creating an immutable record—showing not only the current state but changes over time. This type of business network has the potential to drive great efficiencies through automation and transparency.With this evolution, sustainability won’t be the only benefit. Recalls will be much easier to trace and manage because you’ll know the very finite detail about where recalled artifacts were utilized.This is all great news, but there is a harsh reality we must face. You can’t operate on this network if all of your data isn’t digitized. So, if you’re still sharing specs using shared drives, PDFs or emails, the first step you must take is to digitize your information.Supplier collaboration is the future. The question isn’t whether you will build a more transparent network. The question is when. Do you want to be one of the early success stories?