How Disconnected Supplier Data Increases Supply Chain Risk

Article Highlights:

• Disconnected supplier data creates a fractured information landscape that can pose real danger to OEMs, leaving them uniquely vulnerable to a myriad of supply chain risks. 
• When your supplier data is scattered across employees, devices, and files, it makes it significantly harder to evaluate direct and sub-tier manufacturers. And without the ability to promptly and effectively evaluate your suppliers, your supply chain risk management (SCRM) suffers. 
• The Z2Data platform features a powerful risk hub that includes meticulous risk assessments for more than 700,000 global suppliers. These supplier profiles incorporate continuously updated data points across a battery of critical pillars, including operations, financial fundamentals, ESG, and data transparency. 

Today, sourcing and procurement professionals are able to access an extraordinary amount of data on their supply chains. These experts and their organizations can obtain information on everything from transportation logistics and developing disruptions to real-time market dynamics and in-depth supplier profiles. Under the right circumstances, such an abundance of intelligence can be valuable, providing businesses illuminating context and actionable insights. But when that information isn’t organized in a coherent, cohesive way, though, those large volumes of data can amount to little more than bewildering noise. Instead of drawing on the data to inform sourcing strategies and shape risk management measures, teams may feel overwhelmed by the scope and density of the intelligence at their disposal. 

This predicament—an excess of data without the cohesion or structure to render it useful—can be especially prominent when it comes to suppliers. Original equipment manufacturers (OEMs) and other businesses often have a depth of information on the manufacturers they source from, including:

• Pricing and market history
• Financial health
• ESG fundamentals
• Manufacturing sites
• Cybersecurity profiles 
• Sourcing dependencies

The central problem with this information, however, is that it’s often fragmented across the company, nestled away in files, folders, cabinets, and individual employee devices. The result is a fractured landscape of data silos on a business’s suppliers—a model that does not necessarily benefit or meaningfully contribute to supply chain risk management (SCRM). In fact, this kind of disconnected supplier data actually poses real dangers to OEMs, leaving them uniquely vulnerable to a myriad of supply chain risks. 

Why Is Supplier Data So Fragmented?

To examine the risks associated with disconnected, decentralized supplier data, it helps to understand why this information is so fragmented in the first place. 

• Relationships Dating Back Decades

In many cases, OEMs may have sourced from specific direct suppliers for years or even decades. Relationships dating back to the early 2010s—or even the aughts—could have originally relied on data storage methods that are now generally seen as dated or even obsolete, including individual files, spreadsheets, and even physical documentation. While businesses often carry out efforts to update their data storage methods—including through digitization and other forms of consolidation—these internal initiatives can sometimes be haphazard and inconsistent. As a result, data from business partnerships dating back years or decades are often held in a wide range of formats. 

• Evolving Teams and Points of Contact

Companies often work with their tier 1 suppliers via a specific point of contact at their organization, someone responsible for working directly with the manufacturer and storing all the information associated with them. But these points of contact can change over time, resulting in data distributed across multiple sourcing professionals (some of whom may no longer even be at the business). Relying on individuals—rather than a larger internal system—for data storage leads to fragmentation that can take significant time to clean up and unify. 

• Lack of a Centralized Data Platform

Both longstanding supplier relationships with evolving data storage methods and revolving points of contact are a symptom of a larger systemic issue: the lack of  centralized data through a single unified platform. Tools that can carry out this functionality are crucial differentiators for data storage, giving firms the solid foundation to develop supply chain mapping, risk assessments, and accurate impact assessments. 

Both longstanding supplier relationships with evolving data storage methods and revolving points of contact are a symptom of a larger systemic issue: the lack of  centralized data through a single unified platform.

Z2Data’s centralized data repository, for example, is a highly configurable platform that supports a wide range of intelligence. Z2Data provides a unified hub for individuals and teams across a company to collaborate in an effective, highly streamlined fashion, allowing data to be consolidated and analyzed in a single location. This centralization ultimately informs rapid impact analysis, risk reporting, and end-to-end supply chain risk management—all without the data gaps or duplication that often compromise these functionalities. 

The Consequences of Disconnected Supplier Data

When your supplier data is scattered across employees, devices, and files, it makes it significantly harder to evaluate direct and sub-tier manufacturers. And without the ability to promptly and effectively evaluate your suppliers, your supply chain risk management (SCRM) suffers. 

Disconnected Supplier Data Consequence One: Slower Responses to Disruptions

Supply chain disruptions happen all the time, and those disruptions often impact suppliers. But OEMs that don’t have a single unified repository for their supplier data are going to be slower and less decisive than counterparts who possess organized, accessible information on their supply chains. 

Let’s say there’s a major earthquake in a country that serves as a key manufacturing hub for the automotive industry. Automakers with unified data will be able to quickly determine their degree of supply chain exposure by identifying the manufacturing sites they source from that are based in the disaster-afflicted country. Companies with disconnected supplier data, on the other hand, will respond far slower, increasing their vulnerability to slowdowns, shortages, and revenue loss. 

Whether it’s a natural disaster, a labor strike, or a raw materials bottleneck, having immediate, comprehensive access to supplier data gives firms the agility so critical to today’s erratic supply chains. 

Disconnected Supplier Data Consequence Two: Poorer Risk Assessments

Having the ability to assess the risks posed by existing and prospective suppliers is a crucial component to robust SCRM. The most resilient organizations have a meticulous understanding of their risk landscapes, including the various weaknesses embedded in their direct suppliers. 

But businesses with fragmented supplier data have a much harder time conducting accurate, comprehensive risk assessments. Risk evaluations are largely dependent on the information being fed into them, and firms that can only access fragments of information on their manufacturers will produce spotty, incomplete risk profiles. What’s worse, the blindspots in those profiles—the areas for which no data is available—could actually be the supplier’s most significant vulnerabilities. Risk assessments that aren’t informed by complete datasets on everything from financial fundamentals and compliance history to manufacturing operations are misleading OEMs and destabilizing supply chain resilience. 

But businesses with fragmented supplier data have a much harder time conducting accurate, comprehensive risk assessments.

Disconnected Supplier Data Consequence Three: No Side-by-Side Comparisons 

Businesses that practice effective due diligence are constantly comparing suppliers, examining differences in prices, availability, reliability, and manufacturing locations. These juxtapositions ensure that organizations are regularly identifying avenues to minimize costs while maximizing production stability. Fragmented supplier data compromises these side-by-side comparisons, making them incomplete or even misleading. Without the ability to thoroughly compare prospective manufacturers, companies are forfeiting a strategic edge, resigning themselves to higher prices, and surrendering market data that can serve as powerful leverage under the right circumstances. 

Disconnected Supplier Data Consequence Four: Inability to Track ESG Performance

As ESG regulations like the Corporate Sustainability Reporting Directive (CSRD), the Corporate Due Diligence Directive (CSDDD), and the California Climate Corporate Data Accountability Act continue moving toward greater levels of implementation, there’s growing pressure on businesses to track ESG throughout their supply chain. That’s because some of the emerging regulations require organizations to carry out supply chain due diligence, including identifying and mitigating ESG issues among direct and sub-tier suppliers. 

Businesses with disconnected supplier data are going to have a much harder time evaluating the ESG performance of their suppliers. OEMs may need to assess key ESG metrics like Scope 3 carbon emissions, environmental compliance, and human rights in their manufacturing network. Unfortunately, scattered, fragmented supplier data makes this task much more difficult—in some cases, even, impossible. And over the second half of the 2020s, assessing ESG performance among suppliers is going to shift from a helpful, nice-to-have capability to a strategic requirement. 

Tools that are able to function as centralized repositories for supplier data are going to play a vital role in efforts to track ESG performance across supply chains. These platforms maintain in-depth profiles on thousands of suppliers in various industries, profiles that often encompass critical ESG information. 

The Z2Data Risk Hub Unifies Supplier Data

The Z2Data platform features a powerful risk hub that includes meticulous risk assessments for more than 700,000 global suppliers. These supplier profiles incorporate continuously updated data points across a battery of critical pillars, including operations, financial fundamentals, ESG, and data transparency. The SCRM software uses quantitative scoring models, historical trend analysis, and other internal methodologies to evaluate risk with precision and objectivity. 

Z2Data’s out-of-the-box assessments look at 12 distinct risk factors among suppliers: 

• Sourcing Dependency
• Tariff Impact
• Trade Compliance 
• Geopolitical Risk
• Manufacturing Operations
• Financial Health
• Bankruptcy Risk
• ESG Performance/Risk
• Cybersecurity
• Data Transparency
• Materials
• Electronic Supply Chain Risk 

By leveraging Z2Data’s risk hub, organizations can utilize all-encompassing risk assessments, carry out side-by-side comparisons, and carefully glean ESG performance for their direct and sub-tier suppliers. To learn more about how the Z2Data platform and its supplier database can help companies centralize their supply chain data and fortify their resilience amid global trade turmoil, schedule a free trial with one of our product experts.