Why supply needs digital ecosystems more than ever

The changing shape of supply chain means that networks are now more important than ever.  Supply is far less linear than it once was, now being more of a network of suppliers, plants, transportation companies and micro-fulfilment specialists. 

Such networks are greater than the sum of the participating businesses; they enable organisations to collaborate with trading partners to streamline processes, create value in real time, and solve problems quickly, as they arise.

And it is digital ecosystems that connect the dots in such networks. Ecosystems such as SAP Business Network, which is designed to power transparency, resilience, and sustainability, by connecting people, processes, and systems across multiple enterprises, to digitise transactions and create transparent, resilient, and sustainable supply chains.

At SAP Spend Connect Live, held in Vienna, Austria, in October, SAP Chief Marketing & Solutions Officer Tony Harris spoke to our sister publication, Procurement Magazine, about the massive growth of SAP Business Network (BN).

Harris revealed that SAP Business Network involves a total of US$4.9tn in spend annually, and that it has seen a 14% growth in transactional relationships over the past year. He also discussed the focus on innovation, particularly in the area of generative AI.  

“The figure on spend is not cumulative," he pointed out. "This is what we do every year, and that number is generally only going up.”

He added: “The other thing is the innovation around supplier onboarding. A network is only a network when you've got both buyers and suppliers, and we have millions and millions of suppliers, and this only continues to grow."

SAP's overall vision with BN is to help companies to leverage intelligence that allows them to be more resilient, by being part of a network. Such ecosystems also help organisations work together to achieve sustainability goals.

“SAP transformed the world of business applications 50 years ago with the introduction of enterprise resource planning,” Harris says, being interviewed for an in-house SAP video  entitled ‘Explore the Impact of SAP Business Network for Industries’. “And we’re now well placed to do that again by network-enabling business applications.”

Harris goes on to say that digital ecosystems are by their nature diverse and complex – that it’s not just suppliers but also service providers, logistics carriers, original equipment manufacturers, contract manufacturers, and many more. 

“This is why on SAP BN we use the term ‘trading partner’ to reflect the many types of businesses operating on the network,” Harris says.

Neither is SAP BN built solely around suppliers, because it has process areas also around procurement, logistics, assets, finance and talent. 

And as well as embracing multiple functions, the SAP BN ecosystem is multi-tiered. At the top level is the tier-one network, which are the immediate suppliers to a buyer, where the network helps customers achieve better working capital management, for example.

Next, is the ‘Tier N’ network. 

“This is where we are building value chains across an entire industry and often spanning industries,” Harris explains. “We're helping customers gain insights into their end-tier supply chain, via our material traceability solution that supports both batch and serial-number tracking at various stages of a product life cycle, from materials or components from one supplier up to the finished product sold by the final company.”

The third tier is the B2B marketplace. Many digital ecosystems claim such marketplaces but, says Harris, the truth is that many of them are in fact point-to-point networks, or private networks, whereby a supplier establishes unique connections over and over again with each buyer. That, says Harris, “is purely about a transactional exchange”.

He adds: “Now with SAP BN we have a trading partner directory enabling every company on to market themselves with a rich profile that includes details such as their ESG credentials, which. “They can also publish their entire catalogue, so buyers can more easily discover potential new suppliers.”

Another powerful benefit of supplier ecosystems is cost control, says Harris.

“Disruption has exposed the fragility of supply chains,” he says, “but because a business network can provide visibility across the supply chain, companies can anticipate issues that may arise.”

This, Harris explains, allows them to adapt and react quickly, and to avoid unnecessary costs due to shipment delays and other factors.

He adds: “Companies can reduce costs through their ability to identify and work with the most efficient and low-cost logistics supplier for order fulfilment, say. This enables a business to reroute shipments through a logistics business network, ensuring deliveries are handled quickly to meet customer expectations.”

Harris continues: “Digital networks make a company visible to new suppliers, and this larger supply base can lead to new relationships, which helps drive down purchase prices – further enhancing profitability and bringing new customer channels to light.”

In an earlier interview with Supply Chain Digital, Harris identified other areas in which supplier networks can help:

Boosting customer satisfaction – “When organisations collaborate in real time and work in parallel, the customer benefits,” he says. “Customer service is enhanced because the customer receives the value as the businesses in the network focus on their needs.” 

Choosing aligned suppliers – “A business network provides transparency, which allows companies to choose suppliers who best align to the company’s values, processes, and their customers’ expectations.” 

Increasing revenue – Harris says: “Relying on a business network can help a company move beyond its local market to become part of a global network that continues to grow as more companies join. This helps companies find new customers, uncover new opportunities, and secure the suppliers needed to support these new business models.”

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Make sure you check out the latest edition of Supply Chain Digital and also sign up to our global conference series - Procurement & Supply Chain 2024
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Supply Chain Digital is a BizClik brand