We all saw factory shutdowns in our regions during the peak of the COVID-19 pandemic, due mostly to a lack of supply of raw material, which made it impossible for manufacturers to continue production. What caused these problems and what lessons can manufacturers learn?
Global Supply Chains Alone are Not the Problem
In light of the pandemic, global supply chains were often considered part of the problem, because it takes, for example, four to six weeks to get raw material or components shipped from China to Europe. This then led to severe supply shortages in Europe as Chinese factories shut down.
However, avoiding global supply chains does not prevent a lack of supply. Many manufacturers rely on suppliers for very specialized components or raw materials that are not easy to source quickly from other suppliers. And even if suppliers are on the same continent, this can be a challenge if country borders are closed.
It might sound like a reasonable measure to avoid risks embedded in global supply chains by shifting supplier capacity closer, but we do not believe this consideration will affect supplier sourcing. In the end, we believe supplier sourcing decisions will be based on price.
What Lessons Should Manufacturers Learn?
To make supply chains more resilient to any unforeseen events in the future, the dependence on just a few suppliers must be tackled.
In addition, not knowing where goods are in-transit and when they will be arriving at the factory makes production planning in times of global supply and demand uncertainties challenging. The same applies to not knowing the real-time delivery capabilities of transportation providers, which doesn’t help when selecting appropriate logistics providers.
I had lots of conversations with manufacturers about their lessons learned during the peak of the coronavirus outbreak. One interesting observation was that the vast majority said there was no way of avoiding what happened; the problem was that they didn’t see it coming. If there had been a higher level of visibility, manufacturers would have been able to react much faster.
Are B2B Market Places Addressing These Challenges?
Cloud-based B2B marketplaces typically connect multiple suppliers with multiple buyers. And there are increasing numbers of B2B marketplaces out there, serving not only the need for basic supply, but also increasingly for industry-specific raw materials and components. Some examples are XOM Materials (steel), merQubiz (recovered paper), and Forstify (timber).
Reducing dependency on only a few suppliers and moving to a broader supplier base by utilizing the growing number of industry-specific B2B marketplaces will help to establish more flexible and resilient supply chain networks.
The same applies for the emerging segment of cloud-based B2B transportation management platforms, which bring together logistics providers with their customers depending on their current needs, case-by-case.
The more we see such industry-specific B2B marketplaces emerging, we also observe that the providers of those platforms start to add analytics and AI capabilities to them. This, for example, enhances manufacturers’ ability to predict potential risks in the supply chain better, well in advance and before any unforeseen events happen, thereby also helping to make supply chain operations more resilient.
Conclusion
From our perspective, utilizing cloud-based and analytics-powered B2B marketplaces will help manufacturers to make supply chain operations more resilient. This is also confirmed by some survey results from our recent supply chain survey, which show that for 38% of manufacturers in Europe, participating in B2B marketplaces delivers benefits related to easier access to suppliers and providers, and for 43% it provides greater supply chain visibility.
Are you already using B2B marketplaces and what benefits are you experiencing from them? I’d be very interested in receiving your feedback on this. And, please see our recently published IDC PeerScape with several examples of industry-specific B2B market places.
If you want to learn more about this topic or have any questions, please contact Stefanie Naujoks, or head over to https://www.idc.com/eu and drop your details in the form on the top right.