Eighty-four per cent of businesses have suffered from some form of supplier failure in the past two to three years, commissioned research conducted by Forrester Consulting on behalf of Tungsten Network reveals.
Despite today’s data-saturated world, the March 2017 study, Supplier Networks Enable Innovative And Streamlined Supply Chains, highlights how supply chains are not yet optimised to meet the demands of today’s customers, resulting in stunted business growth and increased risk levels.
The most common impact of supplier failure identified in the research was financial, with 30 per cent of firms reporting a loss in revenue or business partners. Other impact areas reported by more than 22 per cent of buyers were higher insurance premiums, damaged reputation/loss of customer trust and significant legal/regulatory fines.
The most worrisome risk factors for suppliers were found to be security (ensuring data security and privacy standards) and information risk (accuracy, timeliness, and security of information exchanged with suppliers).
Despite this, only 23 per cent of buyers have achieved ‘mature’ supplier-related processes, which involve them monitoring and analysing their suppliers with clear data. When asked about their approach to conduct due diligence on suppliers and ensuring compliance with regulations and corporate social responsibility (CSR) policies, just 12 per cent of businesses scored the highest level of ‘optimised’ maturity, which sees processes being constantly monitored and improved to maximise performance.
Low process maturity, revealed in more than a third of businesses (35 per cent) operate on an ad hoc or non-existent basis, with no consistent set of processes for dealing with suppliers or way of measuring expenditure with them. It was found to lead to poor sourcing decisions, due to the lack of high-quality up-to-date information.
Rick Hurwitz, Tungsten Network’s CEO comments, ‘Today’s digital world affords buyers and sellers the opportunity to more effectively use their data and manage their interactions. It is vital that businesses are able to effectively use their data and manage their suppliers. Both buyer and suppliers in our study shared a host of challenges in meeting their company’s objectives, including increased cyber fraud, siloed customer data, insufficient cash for investment, and legacy technology systems. Clearly, many businesses are struggling with inadequate processes and supplier failure is hitting the bottom line.’
According to the study, for businesses to thrive, ‘they need to be properly managed using modern tools and processes that establish accountability, reduce uncertainty, and foster trust.’ It’s possible to find value beyond the transaction itself, by tapping into networks that can allow ‘high-value buyers and suppliers to find each other more easily and can build capabilities that benefit them both. They can also experiment with managing cash in new ways, such as by negotiating more flexible payment options like dynamic discounting and invoice financing.’
The study did highlight aspirations to improve supplier management, however. A third (33 per cent) of firms say that improving technology for collaborating with suppliers was a top priority over the next 12 months, with 25 per cent intending to aggregate and analyse data sources to improve context and decision making.
More than 600 businesses from the UK, US, France and Germany took part in the study, including 400 buyers at large companies with more than 1,000 employees, and 200 suppliers who earn more than half their revenue by supplying large companies.
The study finds that buyers that are satisfied with their supplier approach are more likely than other buyers to have conducted a complete inventory of supplier activities; have clear supplier on-boarding guidance; a robust supplier management process that aligns to business priorities; and business lines that take responsibility for the suppliers they work with.
Further reading on supplier failure
