The interconnected nature of global supply chains makes companies vulnerable to thousands of weak links—also known as suppliers. A new report released by World Economic Forum in collaboration with Accenture, called “New Models for Addressing Supply Chain and Transport Risk,” notes that businesses “both affect and are affected by risks at various stages, from the sourcing of raw materials to the destinations of goods and services.”
Weak links don't just affect your financial performance, but they can damage your company's reputation as well. You might not have much direct control over those weak links outside your organization, but a major influencer works inside it and is often left out of supply chain decisions. It's your procurement department.
One of the recommendations this report has for businesses is to explicitly assess supply chain and transport risks as part of procurement.
This caught my attention because I just interviewed Ralph Rupert, manager of unit load technology for Millwood, specialists in palletization and product unitization. We discussed how packaging and unitization can be a hidden cause of product quality problems. Rupert is also chair of the MH1 Pallet Standard Committee and was director of the Center for Unit Load Design at Virginia Tech. He says procurement needs to be part of a system when it comes to shipping and fulfillment. Problems arise when procurement is not only splintered from supply chain management, but splintered within its own structure.
Take bottled water for example. The plastic in these bottles is now so thin it no longer contributes to the packaging's structural integrity. Some recent store-level unit load failures dramatized the problem.
“One purchasing agent may be in charge of buying the bottles or buying the corrugated,” Rupert told me. “Another is buying pallets and another is purchasing the multi-million dollar handling systems and those purchasing agents and the teams they represent don't talk to each other.”
The contribution these disconnects make to supply chain failure is often overlooked, and this not only damages product, but company reputations, as well. It's also damaging to a company's sustainability strategy. But the reason this problem is perpetual is the procurement pros at work in their silos get rewarded for the low costs they pull down.
The resulting product damage is seldom traced to purchasing.
“You open the back of the trailer and find things damaged and the first instinct is to redesign the package,” Rupert says. “But maybe if they would have spent a little more money and gotten a better pallet it wouldn't have transmitted the vibration into the package and caused the damage in the first place.”
There are plenty of scary supply chain risks out in the world today. The good thing is you can see them. Sometimes your supply chain's worst enemy is invisible—and lives in your own little world.