Current Fragmentation of the Supply Chain

The world as we know is becoming more globalized, or at-least we hope it is. We now live in a world where your purchasing power can span beyond the scope of your personal transportations but rather, around the world. And as we live in an age where we posses an exceptionally high expectation of quality information, the supply chain is one of those areas that still has lots of catching up to do.

To the average consumers, the knowledge of supply chain isn’t necessary, people don’t typically care or bother to find out about who brought their iPhone to live or who assembled their rice cooker. It is completely understandable, given that not every person is in a professional field that requires supply chain knowledge.

The supply chain is very much the untouched side of business that regular consumers don’t see. However such function actually can make or break a business and can transform many aspects of the company just by proper management.

What we are focusing on today however, is this distance relationship between the average consumer to the supply chain as well as vendors within the supply chain as well.

We begin by examining the lack of understanding of a consumer in their daily products. Be it clothing items, electronics, cookery, it is hard to distinguish the precise production process and the people involved to get these every day products to our hands.

To say that no one cares about where their things come from is purely an overstatement. Recent years, there has been numerous marketing and PR campaigns from small boutique fashion stores to grocery delivery services with an emphasis on “knowing your sources”. Such models have proven to work well especially towards the younger generations who care about sustainability and quality. However, it is still just to state the majority of the people are distanced from the people who designed, crafted and shipped the products that influences their daily lives.

Why is that?

One reason, it is because people don’t necessarily always have the resources to care. Being able to have the time and money to care about such things is a luxury many don’t have. Why would anyone care about where their clothes come from if they can barely put food on the table or are simply too exhausted from working numerous jobs?

Such attitude however, will change as the generations evolve. As younger generations who are susceptible to large amounts of quality information will begin to demonstrate care and shift away from non fair-trade, non sustainable developments little by little, beginning by merely being aware of the issue.

The real issue arises when there is a distant relationship with vendors throughout the supply chain. The lack of non real-time production monitoring ERP systems throughout the supply chain results in more bottlenecks and raw material shortages. Many businesses over-promise and under-deliver regarding their production process, leading on to numerous deficiencies within the supply chain. When such deficiencies happen, the consumer experience ends up being the one that takes the hit.

What has become a norm within the supply chain world is the hogging of information with each other. This “strategic” move has been a derivative of the competitive space in the manufacturing world. However, many vendors took this concept so far to mean hogging all information even from those within their own supply chain. The efforts on trying to mitigate the fear of getting bypassed down the value chain then becomes over dominant to a point where resources often times are misallocated to prevent such competitions. What these manufacturers lacked foresight on is instead of spending resources on preventative measures but rather on innovation in various functions in R&D, that is what will give the competitive edge to other competitors. If the value added is so much greater than others, that is what will keep the competitors out the door, not the hogging of supplier and vendor information.

This then results in the fragmentation that was discussed earlier. The lack of coordination amongst retailers all the way to raw material suppliers results in things like inventory shortages, production constraints, and logistic delays. Demand driven supply chain has aimed to mitigate this to a certain degree, but a even stronger level of integration needs to be in place for large scale production to be coordinated properly to lower risks.

What this fragmentation means is that there will always be a drop in consumer experience as long as the supply chain can’t cope with the demand in integration as necessary.

For the next evolution of consumer experience, it is crucial that the supply chain is not just monitored, but rather integrated from vendor to vendor all the way down to the consumer. The smaller the gap between communication and information from each gap, the more refined and thus the more “integrated” the production will be.

People’s biggest concerns are always going to be the instability of such integration and cost. With an integration as such, many will assume the only way to go about doing so is to increase in-house manufacturing. However, this is exactly the opposite that is being suggested, we believe outsourced manufactures can conduct such functions just as well if not better, but only if it is monitored carefully, shedding all deadweight in the value chain, and keeping those that truly bring value.

Brandon Lu is the founder of UBQ International, an enterprise solution for supply chain on the start-up scale.

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