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98% - The Supply Chain Problem No One is Talking About

There’s an uncomfortable feature of the global manufacturing supply chain that no one wants to talk about: The fact that over 98% of the supply chain is made up of SMEs otherwise known as: small and medium sized entities. (Source: US National Association of Manufacturers - companies with less than 500 employees). In fact, these SMEs are not only the engine room of global manufacturing supply chains, but are critical to societies and national economies. For example, over 3/5ths of people in the UK are employed by SMEs.


Understanding and recognizing that global supply chains are extremely asymmetrical is critical to begin to solve today’s complex supply chain problems.


In recent years, the rate of change of technology to improve supply chain businesses has steadily accelerated. In fact, not a day goes by when we don’t hear something about how blockchain, AI or some other emerging technology is going to solve all our supply chain woes.


You might argue that we don’t need AI to solve multi-tier supply chain risk. After all, actuarial methods for solving insurance risk problems are the very same methods we can use to project risk in manufacturing and service supply chains. So what’s the difference? Why can we (profitably) predict the life expectancy of a life insurance holder and yet we don’t know the probability that our critical inbound parts are sitting on a ship stranded in the Suez Canal?


One of the primary differences is data quality - or to be more specific: high-fidelity data quality across multi-tier supply chain networks.


Multi-tier visibility is critical because with it, we can model all potential outcomes.


The reason it is so hard to achieve is because of the 98% problem: the majority of the supply chain is not digitized and is in no position to efficiently share data. So how do we solve this?


Part of the problem is that small suppliers are extremely reluctant to share data for fear of it being used against them by their larger customers. Another part of it is that there is incredibly poor adoption of technology by SMEs - so the methods of sharing are non-existent - even if the intention is there. There’s also a very limited understanding of what technological solutions are available to SMEs. Stakeholders literally don’t know what they don’t know and don’t know where to start. Lastly, there’s not enough investment in technology for SMEs because there’s a feeling from tech investors that SMEs have low LTV (lifetime value) and that the sales cycles are too long for a disproportionately small return. There’s certainly truth in this. In future posts, I’ll detail out how we are approaching these issues.


At Enspan, we are out to solve this very problem because as supply chain professionals having worked with the largest manufacturing companies in the world, we’ve noticed that almost none have visibility to their suppliers past Tier 1. There’s a lot of chatter about Control Towers etc., but how do you run a Control Tower that cannot see past Tier 1?

Until someone solves the inhibitors of digitizing Tier 2 and beyond, larger manufacturers will have to deal with an opaque supply chain and all of the issues that that brings.


If you are truly interested in gaining visibility to your multi-tier supply chain partners, then stick around for further posts on the topic or visit us at enspan.io to learn more. Feel free to reach out to have a 1:1 discussion about how your supply chain can benefit from greater visibility and how we overcome the challenges of the asymmetrical SME problem.




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