Supply Chain Visibility Needed for More Products Than Ever, Experts Say

Until recently, unless they were trying to comply with a stringent rule of origin, or they were a producer in an industry with high safety needs, most buyers did not have visibility deep into their supply chains. But new government requirements and coronavirus-related disruptions have placed newfound importance on supply chain awareness, said speakers during a webinar.

Tom Gould, vice president of global customs and trade at Flexport, said that apparel firms that needed to satisfy yarn-forward rules in free trade agreements or preference programs did have to go back several steps. "Companies needed to know where the yarn was made … but they didn’t necessarily need to know where the rayon was extruded or where the cotton was grown," he said during an Aug. 24 Flexport webinar on supply chain visibility.

Fellow panelist Amy Morgan, head of trade compliance at Altana AI, said the auto industry and aerospace industry have always had great visibility, whether or not rules of origin are in play, because all suppliers must be certified to get contracts with the original equipment manufacturer. If a piston in a car engine or a casing around a jet engine's fan fails, the results could be catastrophic, so manufacturers need to know who is making these parts, and under what standards, no matter how many layers down those companies are.

But Gould said many companies really specialize in distribution and sales, and simply procure goods. "They often don’t have any visibility deeper further back into their supply chain," he said. "They’ve simply never had a need to know in the past."

Now, with the forced labor import ban in the U.S. and Canada and forced labor supply chain mapping disclosures required in Europe, that is changing. Gould predicted that once carbon border adjustment taxes are in place, it won't be long before they reach into complex manufactured goods, not just primary inputs.

He said in consumer product safety and food safety, there's always been a lot of regulation, but now there's a "vast expansion in the number of [imported] products" that governments want more detail about.

However, government informational requirements are the least likely motivator for companies to get more supply chain visibility, according to the survey of attendees. About half said they need to know more about their supply chains because they need to work around pandemic-era interruptions in supply. Another 24% said they want to know more about their suppliers' suppliers to reduce costs.

The webinar producers asked attendees what is the biggest barrier they have to gaining more supply chain visibility, and 35% said it is that their suppliers don't want to tell them who they buy from.

"Few suppliers are going to want to share who they do business with, that’s their magic, that’s their secret sauce," Morgan said.

She also said that she believes supply chain maps are not enough, because maps are snapshots of a moment in time. "Supply chains are dynamic, they’re living organisms, they’re changing," she said. Her company uses artificial intelligence to make educated guesses about which companies are third-, fourth-, fifth- and sixth-tier suppliers. She said that it both provides data and risk assessment simultaneously.

Gould predicted that if companies are able to know their supply chains down to the raw material, they could either learn the decisions they made in the past were correct decisions, or they'll decide they might need redundancy for certain inputs, or geographical diversification.

When asked by International Trade Today if when companies find evidence of forced labor through supply chain investigations, that means they cannot meet obligations to customers and they have a sunk cost, Gordon said companies should try to map a supply chain with a vendor before an order is placed.

"Do it sooner, do it as early as you possibly can," she said,"before it has to be that sunk cost."