Why you need to identify hidden suppliers in your supply chain

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Why you need to identify hidden suppliers in your supply chain

Everyone thinks they have their supply chain mastered. For example, say you make packaged cookies. You get your flour from a farmer in Kansas, your sugar from Hawaii, your chocolate chips from Hershey, your tray inserts from a plastics company in Minnesota, and your foil from Phoenix. You get the picture. All of your shipments come in on Mondays, and you bake cookies all week to sell in Michigan.

For the most part, everything runs pretty smoothly. One month there is a flood in Hawaii, so your yeast is a little late; but there are no major disturbances to your production. However, what happens when Hershey’s milk comes from California cows and California has a drought? You don’t really care about the milk, nor do you know too much about where it comes from. You just know that all of a sudden you don’t have chocolate chips for your cookies. THAT is a hidden supplier.

Obviously this cookie example is fictional. (Forgive us; we’re hungry.) But instances such as this happen all the time around the world. A commonly cited example is an explosion at a German factory that supplied 70% of the world’s nylon. This wrecked havoc on the automotive industry.

CAPS Research is attempting to better understand how supply chain relationships function so that companies can apply their findings to better optimize their suppliers. This type of analysis will give manufacturers the chance to identify potential weak points in their supply chain before disaster strikes. By using a node centrality measure, we can determine how critical a supplier is to the network by analyzing how many buyers it supplies, what alternatives there are if it fails, and how quickly the effects will reach multiple industries. This is critical to being able to withstand external challenges such as natural disasters and political disputes in foreign countries.

Identifying hidden suppliers used to be a terrifyingly daunting task, but luckily, with the progression of big data, we now are able to more efficiently compute mathematically complicated models. This provides insight to large companies with complex and global supply chains as the marketplace continues to evolve. The risks of an unknown supplier could potentially bring down a large company, but with access to these new analytics from Bloomberg Supply Chain Database, Capital IQ, FactSet Revere and LexisNexis, we can make optimal decisions about supply chain management.

As you can see, hidden suppliers can be a sneaky detriment to a complex manufacturing process, but with new research we can withstand these external challenges with ease.

If you’re interested in the field of operations management, Kettering University Online offers a Master’s degree in Operations Management that can be completed 100% online in as few as nine months.