In today’s world, companies are constantly facing brand-new challenges and opportunities. To stay competitive and profitable, businesses need to streamline their supply chain processes while still meeting consumers’ demand for unique products at an affordable price point. This visibility across the entire supply chain is essential to drive efficiency, cost savings, and risk mitigation.
A purpose-driven supply chain can be the answer to this. It is an optimized supply chain finance system that ensures all partners align to eliminate unnecessary practices and activities from the entire process to make it more efficient and beneficial to the larger supply chain ecosystem. Every change brought about by these supply chains helps organizations cut back on costs and deliver potential benefits to stakeholders..
With continuous improvements in the process on the back of good analytics and reporting. Each improvement that increases speed, reduces redundancies, and improves quality increments sustainability. In this article, you will learn about purpose-driven supply chains and how adopting purpose-driven supply chains can help achieve efficiency and sustainability.
What is a Purpose-Driven Supply Chain and How Does it Ensure Collaboration?
Purpose-driven supply chains are driven by the strategic needs of its stakeholders. It’s about giving customers what they want, when they want it, where they want it, at the best price possible. It’s about giving suppliers the incentives to help their customers succeed, and helping them sell what they have in stock by moving it through the supply chain quickly. This allows stakeholders to plan, execute, track, manage, and improve their supply chain activities.
These supply chains are mostly governed by a collaborative approach that integrates strategy, technology, people, and process. For a supply chain to be purpose-driven, it must be designed with its stakeholders’ needs at the center of the process. This means that supply chain teams must work together across functions, departments, and even companies through partnerships and collaboration to design end-to-end supply chain processes that meet each stakeholder’s needs.
How Digitization of Supply Chains Through SCF Helps
The digitization of supply chains has been changing the way companies view their supply chains for the past few years. Traditionally, supply chain management has been largely paper-based, which often results in a lack of transparency and visibility. But the introduction of digital tools has helped companies improve the way they view their business and their supply chains.
Suppliers and customers are now provided with a digital view of the end-to-end supply chain, which is helping them make better decisions. This has helped companies gain real-time visibility, which helps them make informed decisions during the procurement process. It has also helped companies reduce costs and also improve their profitability.
The impact of digitization through finance is huge as it helps the supply chain party members collaborate seamlessly across the supply chain. The direct benefits of this are
- Manufacturers can predict demand and forecast inventory.
- Suppliers can forecast demand and manage their inventory.
- Distributors and retailers can manage inventories and stock levels easily.
Why Efficiency and Sustainability in a Supply Chain is Important?
As businesses become more supply chain-focused, they are realizing the importance of balancing efficiency and sustainability. The supply chain is where organizations’ efforts to reduce waste, increase customer satisfaction, and maintain cost competitiveness are focused. By improving the efficiency and sustainability of their supply chain, brand owners can increase their customer satisfaction and reduce redundancies.
Suppliers are responsible for providing their customers with the raw materials or even the end products needed to produce their goods. They are responsible for shipping those products to their customers and making sure that they are delivered on time and in the right quantity. If suppliers have a large excess of inventory, this could put them in a situation where they have to pay for the storage of the extra goods. If the goods are perishable, they could end up being disposed of.
Why Suppliers and Customers Need Liquidity Access for Financing?
Suppliers and customers need liquidity access for financing to reduce cost and increase revenue. For instance, in a traditional supply chain, suppliers are paid after ninety days. However, customers pay manufacturers after sixty days. The difference between the two payment terms can be a source of capital for suppliers and customers. In the traditional supply chain model, the buyer pays the supplier ninety days after receiving the product. The supplier then pays the manufacturer thirty days after, who then pays the distributor thirty days after, and finally the retailer receives the payment thirty days after that.
Suppliers often face the problem of not having enough cash to fulfill their production orders which is why they turn to manufacturers to borrow money and purchase the materials needed to make their products. While the suppliers might not be able to get financing from a bank, they can turn to their customers to help them fund their inventory.
When customers provide suppliers with financing, they can lock in a specific price for their product by eliminating some of the uncertainty that comes with the procurement process. Customers can also use this as an opportunity to gain valuable insight into their suppliers’ production processes and timelines.
3 Ways Purpose-Driven Supply Chains Improve Efficiency and Sustainability
Finding the Source of Inefficiencies and Eliminating Them
Since efficiency and sustainability are achieved through a collaborative approach, supply chain teams can identify specific areas of inefficiency and determine how to reduce waste throughout the entire supply chain. This helps cut down redundant costs and investments.
Focusing on Supplier Relationships and Identifying Areas of Improvement
When companies have real-time visibility into their supply chain, they can better identify the strengths and weaknesses of their suppliers. This helps them work more collaboratively with their suppliers to identify areas of improvement. When this is figured out, a major part of the finance is sorted.
Reducing the Carbon Footprint of the Supply Chain
Carbon emissions are a significant problem that businesses need to address. Supply chain teams can reduce the carbon footprint of their supply chains by reducing the amount of time materials spend in transit and optimizing how products are manufactured. This accelerates the speed of proceedings in the cycle.
Conclusion
A purpose-driven supply chain is essential to ensure collaboration between supply chain members and drive efficiency, cost savings, and risk mitigation. To achieve this, communication between all supply chain members needs to be frequent and transparent.
This can be facilitated through a SCOR model. Supply chains need to be digitized through SCF to ensure visibility, transparency, and traceability across the entire supply chain. This will help the supply chain members collaborate seamlessly across the chain to drive efficiency and sustainability.
