All posts by Ed Edwards

Looking Back: 3 Top Supply Chain Tech Trends In 2016

To look forward, we first need to look back and learn. What are the key supply chain trends from 2016 procurement needs to take account of in 2017?

As we look ahead to the New Year, this is also an opportune time to take a look back at the trends and innovations that began reshaping the supply chain in 2016. These trends will continue to impact procurement professionals throughout 2017 and beyond.

A Stronger Focus On Digital Supply Chain Networks

Many supply chains still utilise a mix of paper-based and technology-driven processes. However, more and more companies are moving towards fully-digital supply chain models.

In fact, in a recent survey, more than 75 per cent of respondents said that it was important or very important for their organisation’s supply chains to undergo a digital transformation.

An all-digital supply chain provides procurement teams with more visibility into their supply chain. This enables them to better understand their data, their processes, and their overall operations. Armed with this insight, it is much easier to address issues and implement improvements.

These are advantages that all supply chain professionals seek. As a result, the adoption of digital supply chain is expected to increase in 2017.

The Rise Of Blockchain Technology In the Supply Chain

All businesses are at risk of a cyberattack. Recent large-scale DDOS attacks that crippled sites like Netflix, Paypal, Reddit, Twitter and thousands of others proved a sobering reminder.

That is why many organisations and supply chain teams have started to adopt blockchain data structures to protect their valuable information.

A blockchain is a data structuring approach that groups data together into ‘blocks’. Every block cross-references the previous block and the following block to ensure the data is valid, creating a “chain.”

In addition, the full chain is not stored in a central location. Rather different blocks are stored on different computers and networks at the same time. Only those who have authorised access to the blocks within the chain can access other blocks and implement changes.

As a result, data stored in blockchains are very resistant to tampering, making it extremely secure in the face of cybersecurity risks.

Major companies are beginning to incorporate blockchain into their supply chains as part of their invoicing, auditing, and inventory-tracking processes. For example, IBM launched a platform to test blockchain technologies to track high-value goods. And Walmart used Blockchain to tackle food safety.

Blockchain gives supply chain professionals a means of combating cybersecurity threats while ensuring that items can be tracked in a transparent and secure way.

“Uberization” Takes Hold

If you’ve ever taken an Uber from the airport or rented a vacation home through a service like AirBNB, you are already familiar with the benefits of an on-demand, pay-per-use service. Now, the supply chain is getting familiar with them as well, as procurement professionals seek to leverage the approach to manage inventory and reduce costs.

For example, companies are now offering on-demand warehousing services, which could reduce (or eliminate) the need to maintain expensive distribution centres.

Just as procurement professionals are looking to benefit from the trend, companies are looking to capitalise on it. Boeing is betting big on the pay-per-use model and is leasing their planes to Amazon for its Air Cargo network. In the retail space, companies such as Nordstrom’s, Costco and Whole Foods are implementing new options for customers.

About a third of all supply chain professionals see Uberization as a disruptive and important element of the supply chain.

In the past year, these three technologies had a big impact on supply chains and the people who work in them. And they will continue to shape the supply chain in 2017. However, they aren’t the only ones. What other technologies do you think will play an essential role in supply chains in the New Year?

How To Solve The Extended Payment Term Problem

Extended payment terms can be a huge burden for buyers and suppliers. Not to mention the negative press. But there is a solution at hand.

extended payment

In response to the financial recession of 2008, many supply chain and procurement departments began pushing their suppliers for extended payment terms as a means to improve cash flow and limit the need to acquire credit, which was in short supply.

While the recession has long since past, the practice is still very much in use today. In fact, major companies such as AB InBev, Kellogg, Diageo, and Mars commonly establish payment terms that extend anywhere from 90 to 120 days. Additionally, a 2016 study revealed that buying teams are planning to extend their payment terms even further.

This push for extended payment terms makes sense for buyers. Extra cash in the coffers can be used to fund R&D, buy back stock, and invest in strategic initiatives. It also never hurts to have more free cash as working capital.

However, while buyers benefit greatly from extended payment arrangements, they can pose a tremendous burden to suppliers – especially small- to medium-sized businesses (SMBs).

How Extended Payment Terms Hurt Suppliers (And Buyers)

Extended payment terms can be detrimental to suppliers for a variety of reasons, including:

1. Curbed Productivity

Many SMB suppliers have limited resources in terms of manpower and production capability. As a result, they can only take on so many projects and contracts at a time before reaching capacity.

When funds are tied up waiting for cash to come in, these companies are precluded from investing in new equipment, replenishing stock or adding to their workforces. This brings the company to a standstill, and could put it out of business altogether.

2. Lack of Financial Flexibility

While large corporations and buying teams have the purchasing power to demand extended payment terms, smaller suppliers do not.

As a result, these suppliers are forced to receive payments late while paying their own suppliers early. This creates a cash flow crunch in working capital that many can’t escape.

In fact, most firms operate on a month-to-month basis with cash reserves built to last only 27 days.  

3. Lower Employee Morale

In addition to the financial consequences of extending payment terms, the practice takes a human toll as well. Going three-to-four months without receiving payments from buyers makes it difficult for businesses to make their own payroll – usually the largest expense for a SMB.

As a result, small suppliers suffer from reduced morale and engagement. This can, in turn, lead to a decline in quality and production delays.

4. Limited Credit Options

With limited cash on hand, the only financial lifeline available to many SMBs is to apply for more credit. However, 50% of small businesses receive no money at all when they apply for credit loans.

SMB Credit
Source: Federal Reserve Banks of New York, Atlanta, Cleveland and Philadelphia

Extended Payment Terms Can Hurt Buyers, Too

In the end, buyers end up paying the price for extended payment terms as well. That’s because it introduces risk into their supply chains. If a trusted supplier is forced out of business or suffers a decline in productivity, it hurts the procuring organisation.

In addition, suppliers have long memories. Many will compensate for extended payment terms with higher costs, while others include steep late-payment penalties in their contracts.

Lastly, a high quality supplier whose products or services are in-demand supplier may simply choose to work with other companies that offer friendlier payment terms, and forego bidding new opportunities that come with onerous payment terms.

Reverse Factoring May Be The Solution

Reverse factoring allows a buying organisation to leverage its strong credit rating to acquire favourable financing, which is used to pay suppliers in a more timely manner.

Here’s how it works:

  • Supplier submits the invoice to the buyer.
  • Buyer approves the invoice and submits it to a 3rd party financial institution or factor, who bases interest terms on creditworthiness of the buyer.
  • Financial institution pays the supplier at their desired early term of net 30 days, discounting the invoice payment by the agreed-to discount rate.
  • Buyer pays the financial institution the face value of the invoice at their agreed-upon date, say net 90 or net 120 days.

The concept is fairly new, but it is already proving to be a great solution for buyers that want to reap the cash flow benefits of extended payment terms without putting their suppliers in jeopardy.

That’s because it is beneficial to every participant in the process. It allows both buyers and suppliers maintain cash flow while forging positive working relationships in the supply chain. The financial institution also benefits by generating a return on the funds lent to the supplier and reimbursed by the buyer’s payment.

Offering friendlier payment terms is just one way to build stronger relationships with suppliers. Discover more on how to improve your relationships with SMBs in our latest tip sheet.

Ed Edwards is Audience Outreach Manager at THOMASNET.com. He leverages his extensive experiences in engineering, manufacturing and procurement, to educate procurement and engineering professionals on how to streamline and improve their work.

Ed provides customised training to organisations’ engineering and sourcing teams and helps buyers with their challenges and finds them new opportunities.

Stop Ignoring Twitter As A Supply Chain Tool

Using social media as a supply chain tool? Don’t dismiss Twitter – it can add real value for your organisation.

twitter supply chain

Many procurement teams and companies have realised the crucial role that social media plays in their marketing efforts. However, while Facebook and LinkedIn are often used effectively, Twitter is frequently relegated to an afterthought – and it shouldn’t be.

From brand awareness to customer engagement and trend monitoring, Twitter provides many opportunities for supply chain organisations to stand out from the crowd.

In addition, the microblogging platform can be an asset that extends beyond your marketing efforts and shapes your overall business strategy.

Below are just a few ways Twitter can be a game changer for your company:

Use Hashtags To Showcase Thought Leadership And Discover New Supply Chain Trends

Twitter’s hashtags are a great way to get a pulse on the supply chain industry. In fact, there are 228 tweets per hour that include the hashtag #supplychain. Some of the other most popular supply chain hashtags include #Procurement, #SCM, and #Logistics.

Use these hashtags in your posts to showcase thought leadership and uncover potential business development opportunities. You can also follow these hashtags – and others – to uncover new trends, technologies and best practices that you can use to implement in your organisation.

Tools like Hashtagify make it easy to find hashtags relevant to your company and industry.

Recruit The Right Talent

Recruiting and retaining top supply chain talent is becoming more competitive, so companies need to find new ways to recruit the best in the industry.

Showcasing your company’s corporate culture through Twitter can entice the right supply chain talent to apply for job openings at your organisation.  

Not only can Twitter help find the right talent, it can also help your organisation research and vet candidates. Your organisation will understand the candidate’s perspective on the supply chain industry, as well as get a better sense of whether or not the candidate would be a good fit in your organisation.

Discover Potential Demands And Risks in Real Time

Twitter acts like a real-time news ticker, which can help supply chain professionals prepare for unexpected demands and risk. Twitter is able to add rich, real-time insight to operational data that can help your organisation make timely and better-informed decisions.

According to IBM, Twitter is a valuable indicator of demand for certain sectors of manufacturing. For example, if a major influencer discusses one of your products on Twitter, the awareness of your brand may skyrocket, causing a large demand for your company’s product without any warning.

By monitoring your products and services on Twitter, you’ll be able to learn about the demand as soon as you can. Social listening on Twitter can also help your organisation prepare for low-probability, high-impact risks such as natural disasters that could disrupt your supply chain.

Showcasing your knowledge, connecting with top talent and keeping your finger on the pulse of the supply chain are powerful ways to gain a competitive advantage over the competition, and Twitter makes it simple. Be sure to integrate it into your social media strategy.

Ed Edwards is Audience Outreach Manager at THOMASNET.com. He leverages his extensive experiences in engineering, manufacturing and procurement, to educate procurement and engineering professionals on how to streamline and improve their work.

Ed provides customised training to organisations’ engineering and sourcing teams and helps buyers with their challenges and finds them new opportunities.

3 Reasons Why Supply Chain Professionals Are Excited About Industry 4.0

The Industry 4.0 revolution is firmly under way. And it’s something for supply chain professionals to be excited about.

industry 4.0

Over 200 years ago, the first industrial revolution was ushered in by the roar of the steam engine. Now, thanks to advances in automation and computerisation, a new revolution is underway – Industry 4.0.

Also known as the fourth manufacturing revolution, Industry 4.0 marks the convergence of physical and digital manufacturing capabilities to create “smart factories.”

These factories empower supply chain professionals and manufacturers to digitally plan and project the entire production lifecycle. This can help to increase efficiency, minimise risks and, ultimately, drive revenues.

In fact, 35 per cent of companies adopting Industry 4.0 technologies expect to generate revenue gains of more than 20 per cent over the next five years

Picking Up Steam

The revolution is already well underway in countries with large manufacturing footprints, such as the United States, Germany and Japan.

However, now it’s starting to pick up steam around the globe. That’s because more companies want to take advantage of the tremendous business opportunity presented by Industry 4.0 adoption.

So what specific Industry 4.0 technologies have the supply chain so excited? Here are the top three:

Predictive Maintenance

Big data is playing a big role in the revolution. Predictive maintenance is one example of how it is being used.

Within smart factories, sensors are installed on every machine. These sensors produce data that can be used to accurately monitor key performance parameters. This knowledge is used to assess the probability of machine failure while allowing stakeholders to prepare accordingly.

The manufacturing personnel in the factory, as well as the supply chain professionals who are relying on them, receive continuous, up-to-date status alerts.

Armed with this information, MRO employees can make more precise repair calculations in order to prevent non-scheduled outages. At the same time, procurement and supply chain professionals can identify potential risks well in advance, allowing them to be more responsive and agile.

Additive Manufacturing

Additive manufacturing is not a new phenomena. For decades, the process was used to prototype new products before they were put in production on factory floors.

Today, however, thanks to the improved capabilities and reduced costs associated with 3D printing, additive manufacturing is being conducted on the factory floor itself.

As a result, manufacturers in smart factories need little to no lead time to fulfil spare part requirements, and design improvements and upgrades can be made on the fly. Supplies that were previously too heavy or too cost prohibitive to ship can be created on-site, reducing costs and logistic headaches for supply chain professionals.

This expansion of additive manufacturing has reduced required inventory levels and provided procurement teams with greater flexibility than ever before.

RFID Tags

Intelligent radio frequency identification (RFID) tag technology helps supply chain professionals track the status and location of each piece of inventory throughout the entire supply chain.

This technology provides procurement teams with the peace of mind that no piece of inventory will go unaccounted for. It also improves efficiency by making it easier to find specific items, no matter where they are located within a warehouse.

Lastly, RFID can prevent products from being counterfeited by verifying the authenticity of goods and products as they move through the supply chain. This helps to combat a growing concern in the industry.

Just as it has in the United States, Germany and Japan, Industry 4.0 will revolutionise the supply chain around the globe. As it does, procurement professionals will be able to understand their operations better than ever before and be empowered to make more strategic, agile decisions.

Ed Edwards is Audience Outreach Manager at THOMASNET.com. He leverages his extensive experiences in engineering, manufacturing and procurement, to educate procurement and engineering professionals on how to streamline and improve their work.

Ed provides customised training to organisations’ engineering and sourcing teams and helps buyers with their challenges and finds them new opportunities.