Lack of supply chain visibility raises business risk, finds global study

A study released by Harvard Business Review Analytic Services (HBRAS), commissioned by Basware, highlights that businesses worldwide lack transparency in their supply chains.

The majority of the business leaders surveyed (60%) warn that poor visibility of who they do business with is a significant source of risk. Nearly a quarter (24%) admit they fail to effectively evaluate supplier business practices, with 45 percent citing manual processes that lead to incomplete data entry as a key cause.

Klaus Andersen, Chief Executive, of Basware commented: “That so many organisations lack the ability to effectively monitor who they do business with is a significant cause for concern. Chief Executives are right to be worried about the reputational and commercial implications of blind-spots across their supply chain. This report finds that visibility of the flow of money, goods and services is a defining characteristic of successful businesses. This means taking responsibility for not only the quality of goods and services, but also the manner in which they are produced. We define this as Visible Commerce – having full transparency which allows you to make better, more responsible decisions.”

As well as placing importance on ethical considerations, the most common factors for evaluating suppliers remain economic. Sixty percent of respondents cite “value for money” and 54% call out “cost savings” as their top criteria. Firms identified as much more successful are nearly twice as likely to be effective at evaluating suppliers.

Nine in ten executives interviewed for the Using Transparency to Enhance Reputation and Manage Business Risk report believe a culture of transparency is essential to increase employee engagement and simplify processes. The majority (59%) expect their finance and accounting arms to drive that culture of transparency, with a third (36%) attributing operational savings in excess of 10 per cent to improved visible commerce. A further 40 percent of firms are keen to do more to ensure ethical best practice amongst suppliers.

Guillaume Roels, Timken Chaired Professor of Global Technology and Innovation at INSEAD who was interviewed for the report remarks: “We have to move beyond the mentality of siloes. Many organisations try to optimize just for their business, but they don’t see the whole value chain. Businesses really compete at the supply chain level. You need to find ways to capture the savings and to share the benefits with your supply chain partners. But transparency doesn’t come for free; you have to work hard to get it.”

While executives identify the finance and accounting arms of their enterprises as key to transparency, they cite technical, organisational, and cultural barriers to fully realising the benefits of that openness. 44 percent say they lack the tools and technology to evaluate and monitor their suppliers. Alarmingly, nearly a quarter (23%) of respondents said that none of their suppliers are electronically connected to their purchase-to pay-system.