Who will foot the supply chain visibility costs?
Everyone has been talking about supply chain visibility non-stop since the outbreak of the pandemic. So the question is: how serious are the practitioners? Given the deep outsourcing module they are adopting, it is not easy because of several layers. Tracing supply chains tier-wise is expensive and time-consuming. Neither of these twin aspects will be acceptable to the CEOs. Is it possible to achieve supply chain visibility with a lower cost and tight schedule? Unlikely, it appears.
Businesses indulge in unfair practices subtly to survive. Talking ethics is one thing, and practicing is another. When confronted with such behavior at any one layer of vendors, rectifying them may be desirable but impracticable given the tight timeline, leading to practitioners overlooking unfair practices and consoling oneself “let me be more vigilant in future.” Visibility comes with a cost!
A decade ago, when I submitted a report to a global freight forwarding company about a long road trip in their truck mentioning wayside amenities and the diet pattern of its drivers, I included a photo. In that photo, a kid was serving food at the highway eatery. The head of the Indian branch requested me to drop that picture and rewrite the para. He feared that his seniors would disapprove of child labor as part of the company’s global ethical standards.
In India, child labor is illegal like anywhere else globally, but there is weak enforcement. So dropping the photo from the report is the easy way out. But, will it end the heinous practice? I doubt. Supply chain visibility at times is likely to throw up inconvenient facts is an undeniable reality. “Focus on the goods movement from end to end, not on the movers,” advised the honcho of the company under the lens. Height of hypocrisy?
Even large corporates’ well-organized and strong supply chain teams concede that overseeing supply chain visibility or traceability does not go beyond tier one. Tier-one vendor’s pockets are not as deep as the giant business enterprise’s beneficiary to hand-hold his suppliers is a fact. Therefore, supply chain visibility is not deep-rooted.
A group of professors at Purdue School of Engineering and Technology in Indianapolis University, the US, in association with Dow Chemical experts, touch upon the importance of affordability as one of the two critical elements for supply chain visibility in a research paper published in 2017 under the title, On the Integration of Event-Based and Transaction-Based Architectures for Supply Chains.
“Affordable and reliable supply chain visibility is becoming increasingly important as the complexity of the network underlying supply chains is becoming orders of magnitudes higher compared to a decade ago. Moreover, this increase in complexity is starting to reflect on the cost of goods and their availability to the consumers,” they wrote.
Researchers admit the utility of the value chain through visibility through technological solutions. Still, technology has a cost, and they candidly underline this has to be a “low-cost option” for supply chain viability to be favorably considered by the top management.
There is no scarcity of mathematical models incorporating three crucial elements: SCV maximization, SCR minimization, and cost minimization under budget constraints, customer demand, production capacity, and supply availability.
Nothing is free, and therefore, who will bear the cost of enhanced supply chain visibility? Can the manufacturer absorb? It would be unchallenging provided the competition follows the same rulebook. But where is the guarantee that they would don’t give the same weightage for supply chain visibility? Indeed, a precarious affair. Consumers, any day, would opt for the best product at the cheapest price point. Thus, any padding up to the retail price tag on supply chain visibility will not pass muster. Is it a catch-22 situation? Worth pondering.