Demystifying Business Networks: Building a Resilient Supply Chain

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They’ve been around for longer than you think. And today, they’re better than ever, driving business collaboration, supply chain transparency and resilience, and business value. Tony Harris, senior vice president and head of marketing and solutions for SAP Business, examines the evolution of business networks and how they are the key to supply chain resilience and success.

Business networks. How can two simple words be so misunderstood?

But they are. Some consider business networks to be just another clever invention of marketers rather than a powerful tool to drive real business value. That is until the “Aha!” moment when they ask themselves, “How on earth did we get by without one of these?”

The Evolution of B2B Business Networks

Most organizations have always used business networks – even if they didn’t know it. In its simplest form, a business network is a series of point-to-point lines of communication between business partners. One could even argue that this type of communication started thousands of years ago with the carrier pigeon.

As technology has evolved, business networking has moved on from the venerable carrier pigeon. The telephone made it possible to speak directly with business partners. Fax machines, e-mails, and later electronic data interchange (EDI) and supplier portals made it increasingly easy to share the documents required to place and process orders.

However, these “old school” channels are no match for today’s complex supply chains:

  • You have to work with each partner individually: That’s a lot of phone calls, e-mails, or carrier pigeons.
  • You only know the suppliers you know: What if the supplier for a specific fastener is out of stock? How do you find a new, qualified supplier quickly? And how do you avoid surprises like this in the first place?
  • Suppliers need to work harder to be discovered by new buyers: While buyers have challenges finding suppliers, those same suppliers need a centralized place to hang their sign and tell their story. Advertising, web searches, word of mouth, and so on can only take them so far.

As shown in the picture below, modern business networks enable buyers to “connect once with many.” By joining a modern business network, an organization’s buyers are connected with hundreds, even thousands of suppliers instantly. This goes a long way toward solving the challenges of one-off, point-to-point vendor communications. Buyers will find more suppliers, and they’ll be able to work with them more efficiently. Likewise, suppliers have an instant channel to advertise and sell their products and solutions to a vast pool of buyers worldwide.

The modern business network
Image Source: SAP

The Challenges of Sharing Data

When we talk about resilient supply chains, we often refer to increased visibility among buyers and suppliers. This requires sharing of data – sometimes a lot of it.

That’s not easy to do with traditional business networks. Let’s look at a common example: A company e-mails it’s six-month forecast to a component supplier and then changes it the next day. Most businesses manage forecasts in spreadsheets, some with upwards of 500 rows of data. If they change a row, will the supplier make the same update on their copy of the spreadsheet? How will the supplier communicate that they can address the new requirements? And how do these updates make it into the planning system? Does someone re-key the data, potentially introducing errors?

There has to be a better way. There is – think “digital transformation.” Today, organizations are digitizing their businesses with enterprise resource planning (ERP) solutions, which enable them to integrate business processes and share data within their enterprise.

But you can’t achieve the full potential of digital transformation without business networks. They extend key processes beyond the four walls of the company, orchestrating transaction flows across end-to-end business processes, exchanging data securely, and connecting trading partners to enable full visibility and transparency.

No more one-off spreadsheets or lengthy e-mail exchanges.

See More: Overcoming High Tech Supply Chain Challenges

 The Power of Business Networks

As technology advances, business networks are evolving to address more complex scenarios and delve deeper into the supply chain, going beyond the first tier of suppliers into tier 2 and tier 3.

For example, to manage contract manufacturing outsourcing (CMO), you need to coordinate component suppliers, the CMO, packaging suppliers, and logistics providers. This helps ensure the finished product is assembled and delivered in time to fill customer orders. Business networks make it possible to manage the transactional collaboration between all of these parties, ensuring each has visibility into the relevant activities of the others.

As I speak with business leaders, they share concerns about their biggest challenges. Business networks empower organizations to address the most significant challenges of our times, including:

  • Supply chain resilience: Business networks enable organizations to find new sources of supply quickly in times of disruption or in support of risk mitigation strategies like on-shoring or near-shoring. Look for robust networks with a large number of suppliers who are onboarded and ready to transact with new customers.
  • Environmental, social, and governance (ESG) compliance: Governments, consumers, and even their own employees are pushing organizations to incorporate sustainability and human rights actions into their operations. Business networks can help them cast a wider net to find suppliers that fit their ESG profile. Standardized self-assessment questionnaires (SAQs) make it easy for suppliers to share information about their company profile quickly and efficiently.
  • Skilled labor shortages: The past few years proved that in many industries, it is possible for businesses to tap into the supply of highly skilled workers beyond their borders. Virtual teams have become the norm. And as they tap into new sources of talent via business networks, businesses are realizing new levels of staffing and financial flexibility.
  • Shipping and logistics: Ports in chaos, shortages of qualified truck drivers, threatened rail strikes, and weather events are constantly threatening to paralyze supply chains. Logistics business networks help businesses find the carriers they need. They also offer visibility into shipments through global track and trace capabilities, making it possible to anticipate problems and take proactive remediation steps.
  • Inflation and the high cost of borrowing: For most suppliers, steady cash flow is essential to their survival. Business networks can connect buyers and suppliers to financial payment providers offering working capital management solutions to keep payments flowing.

What Makes a Good Business Network?

I ask myself and my team this question all the time. After all, it’s our job to help guide the evolution of our company’s business network to meet the changing needs of our customers.

For me, a “good” business network must:

  • Connect people, processes, and systems across multiple organizations –not just one organization at a time. An effective business network makes it possible to digitize transactions and create transparent, resilient, and sustainable supply chains.
  • Orchestrate collaboration across a range of different trading partners, going beyond the first tier of the supply chain into tier 2 and tier 3.
  • Deliver value to trading partners. For example, it should enable suppliers to find new customers, then support the integration of their systems to do business more efficiently.
  • Enable digital transformation across a wide range of processes. Effective business networks can support a variety of collaboration scenarios, including indirect procurement, supply chain, logistics, asset management, finance, and talent.

The key is to drive business value through collaboration, transparency, and resilience. From humble beginnings, business networks have become essential for business collaboration and supply chain transparency and resilience. Can your business survive without them?

Tell us about your experience with evolving business networks on FacebookOpens a new window , TwitterOpens a new window , and LinkedInOpens a new window . We’d love to hear from you!

Image Source: Shutterstock

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