A Data-Driven Approach to Raw Material Supply Chain Management
Raw materials are not only the building blocks of any product we consume but also the starting point. From consumer electronics to food products, manufacturers are involved in procuring, shipping, and storing massive volumes of raw material every day. This makes ensuring adequate supply and efficient management of raw materials critical for all companies involved in the production of goods. Moreover, raw materials are often an investment that affects cash flow as raw material costs have soared in recent months. Listed as an asset on a company’s balance sheet, soaring costs often mean increased value even during a decline in sales.
Over the last few decades, product companies have been expanding their sourcing networks for cost optimization, looking to strike the best deals in terms of material and logistics costs. This, in turn, has led to increasingly complex supply chains for raw materials filled with single producers of raw goods and strategic partnerships. However, following the disruptions brought about by COVID-19, manufacturers face increasing “cost pressures”, primarily due to shortages in the global workforce. At the same time, they are facing a scarcity of raw materials and, in particular, ingredients. This has led to increased complexities in the supply chains.
Such complexities can easily disturb the delicate balance between supply and demand if not effectively managed. Overstocks, understocks, and product quality and compliance issues can add even more complexities to transportation and warehousing and disrupt the production process. Many smaller producers lack adequate cash flows and reserve capacity to recover from these challenges despite higher company value.
Issues to Address
Working with our clients, many of them are product companies, we have identified the following key issues impacting the supply chain of their raw materials:
A raw material supply chain incurs several layers of cost related to energy, transportation and communication, logistics, labor, and even the adoption of newer technologies. While controlling operating costs is often a continuous challenge, a company cost management model can often be short-term and functionally focused. Therefore, optimizing supply chain costs demands greater insight. Through insight, companies can develop analysis models that align with their business values, functional outcomes, and long-term business valuation.
Traceability and transparency are essential in minimizing raw material safety and compliance issues, and visibility is the first step in that process. Companies need the ability to trace materials from the point of manufacture through their entire journey to the point of delivery. Whether inbound or outbound transactions and product flow, it is no longer ‘safe’ to use an age-old “one up / one down” methodology for tracking trade goods. Additionally, consumers are becoming increasingly curious about where their ingredients come from. So, accurate and real-time information from every node across the network can help enhance your brand value and increase customer loyalty. On the other hand, a lack of visibility exposes a company to undue risk and expenses.
Fragmented information and a lack of communication leave parties in the supply network without visibility into each other’s actions, leading to inefficiency. A trade relationship lacking collaboration will surely escalate supply chain problems, particularly as markets and raw material networks expand.
Many challenges in supply chain management and raw material partner networks are traceable to outdated systems and processes that depend on traditional paper tracking, manual inspection, and black box integrations lacking adequate reporting systems. Although short linear supply chains can be optimized using spreadsheets or siloed software, modern material partner networks are more complex, involving complicated business relations. Such network complexities include packaging and process materials, which are better served by integrated supply chain solutions that avoid mass customization.
Digital Solutions to Manage Risk
As the ‘Great Disruption’ continues, markets remain volatile. Fluctuating material prices and logistical disruptions due to lockdowns continue to affect the global supply of raw materials. Also, quarantine requirements continue to affect the manufacture of raw materials and finished goods. This raises the urgency for industry leaders to take a more innovative approach to raw material supply chain management. It comprises improvements in forecasting, flexibility, transparency, and increased visibility to capitalize on the new normal.
Industry leaders need to use such forecasts effectively to plan and minimize the impact of volatilities in day-to-day operations. Additionally, leverage a solution that drives down costs and provides a competitive edge via end-to-end supply chain visibility, gaining more stability.
Modern supply chain solutions can go a long way in formalizing and optimizing raw materials inventory and management.
Key Data Management Capabilities for Inventory Control
A supply chain solution that seamlessly integrates with data management technologies makes a business more efficient and less vulnerable to uncertainty. Advanced data management helps you to optimize inventory control through the following key capabilities:
– Functional Collaboration:
Maintains a consistent flow of information and insights across raw material partner networks, concerned departments, and business functions within the organization.
– Centralized Data Management:
Removes the need to maintain multiple integrations, bringing historical data, open orders, and shipping and invoice data into one unified digital connectivity, integration platform, and transaction processing model.
– Advanced Analytics:
Generate reporting based on real-time transaction processing to enable real-time and data-driven decision-making.
Combines data contained by the unified digital connectivity and integration platform and transaction processing model with improvements in visibility to reduce inventory spikes and shortages.
– Financial Planning:
Delivers visibility to your team so they may allocate funds to functions like procurement, processing, and production in time to ensure the quality and timely delivery of your products.
Although supply chain leaders understand the need for streamlined processes related to raw material management, they have had to rely on historical data or educated guesses to forecast future raw material demand for too long. However, data-driven forecasting resulting from functional collaboration and a unified digital platform eliminates waste, improves efficiency, and ensures the on-time delivery of quality products while reducing overall inventory costs.
That’s not all. Organizations with such a data-driven, analytical approach to collaboration can stay more informed while keeping an eye on raw material inventory and gaining significant competitive and cost advantages.
PartnerLinQ by Visionet: Digital Agility at the Speed of Business
PartnerLinQ is a hosted integration platform for EDI, B2B, and API integration; and is the flagship product of Visionet’s industry expertise and technology leadership. The PartnerLinQ team at Visionet has 25 years of experience providing industry-focused technology, consulting, and innovative solutions that drive global supply chain transformation from the factory to the end consumer.
PartnerLinQ is an innovative, process-centric, easy-to-use EDI solution that enables API-led, cloud-native integrations. It includes a simplified B2B communication engine that combines EDI, AS2, SFTP, and real-time APIs and easily handles proprietary file-based formats and custom integrations. With its overarching capabilities, PartnerLinQ is well suited for retail, e-commerce, wholesale, transportation, 3PL, distribution, and digital and analog partner ecosystems, helping your team achieve operational efficiency and gain real-time visibility.
Visionet, a Microsoft Gold Partner, leverages Microsoft Azure for the PartnerLinQ platform. The PartnerLinQ platform can process thousands of transactions simultaneously across a variety of transfer protocols. Moreover, it transforms X12, XML, Flat Files, CSV, IDocs, and custom formats and can integrate them into more than 74 ERP, WMS, and TMS systems.
Along with its job scheduling and batch job capabilities, PartnerLinQ’s ability to manage increased transaction volume means the entirety of the business workflow is much easier to manage than the black box integrations of yesteryear. Additionally, by optimizing its business rules engine, an extensive library, and ERP integration, PartnerLinQ enables easy partner onboarding, simplified configuration, and access to visual data mappings.