The only constant in supply chains is change, according to Tom Kieley, CEO and co-founder of SourceDay.
“Supply chain volatility is ever present, and unfortunate occurrences like COVID-19 and natural disasters and other events just exacerbate change into higher volatility,” Kieley told FreightWaves Chief Strategy Officer JT Engstrom during FreightWaves’ North American Supply Chain Summit on Tuesday. The topic was “Managing Buyer and Supplier Relationships.”
Austin, Texas-based SourceDay was founded in 2015. The company offers a software-as-a-service platform connecting manufacturers with suppliers, providing clients with real-time data about supplier pricing, quantity, lead times and delivery dates.
“What we’ve seen through our customers’ data is 40% of all purchase order (PO) lines are subject to change,” Kieley said. “Whether it’s a demand signal from an enterprise resource planning (ERP) system, from a customer change or an inventory change, or a supplier miss, where the supplier is going to short ship and be late on a delivery, and you find out after it’s too late.”
Kieley said when a supplier misses on a shipment, it can have a ripple effect on the entire supply chain.
“Ultimately, that miss and that kind of negative experience causes customers to have a poor experience,” Kieley said. “Customers could compensate for that by overbuying materials and safety stock and inventory, which is costly to cash flows and margins.”
SourceDay had a customer in the health and beauty space that was able to double their presence and growth year-over-year through COVID-19, despite some of the supply chain risk and disturbances and volatility, Kieley said.
“That customer grew just by simply having processes and systems in place that enabled them and their suppliers to be more proactive to that volatility,” Kieley added.
Kieley’s bold advice for 2021: “Stop enabling poor-performing suppliers.”
“Start putting investment and effort and automation behind supply chain management, especially predictive automation,” Kieley said. “Where you can, use true collaborative data between your internal organization and your trading partners and your suppliers globally, to really enable your ERP investment to be more prescriptive and predictable — around accurate lead times, accurate forecasting — making sure you’re able to reduce your safety stock levels, increase your inventory turns, and really enabling organization to operate at the highest level possible.”
Kieley also believes the supply chain industry will see a significant investment in automation.
“It’s going to be interesting to see organizations start to put more investment in technology and automation in their supply chain performance, driving their suppliers to be a bigger piece of their business as partners, and having better accountability and visibility to what that demand truly is and how it’s fluctuating out there,” Kieley said.
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