WHILE most companies have a general sense of who their tier 1 suppliers are, many companies currently suffer from a lack of transparency when it comes to knowing who their tier 2 or even tier 3 suppliers are within the overall supply chain.

The need for visibility is even more critical nowadays with the ongoing Covid-19 pandemic creating volatility and drawing questions around the resilience of supply chains.

Rather than being reactive, companies should take the opportunity amid the ongoing global crisis to delve deeper into their overall supply chain and examine where weaknesses or inefficiencies exist. 

For example, if companies notice that most of their raw materials are being sourced in a particular jurisdiction, they could aim to diversify away from a certain location to mitigate concentration risk.

Companies could also avoid reputation risk by knowing first-hand whether suppliers are upholding ESG standards, which are increasingly becoming critical for all companies to adhere to nowadays.

Other than mitigating risk, companies could also use multi-tier supply chain analysis to understand the cashflow constraints of suppliers and sub-suppliers, and, if applicable, allow for better financing terms based on the credit strength of their company as the anchor buyer.

Already several banks have looked to improve the process of multi-tier or deep-tier financing using blockchain technology to better validate financing requests from upstream suppliers.

Last year for instance, Standard Chartered along with its technology partner Linklogis were able to help Digital Guangdong craft and enhance its deep-tier supply chain financing by making it easier for suppliers along their whole supply chain to get financing from Standard Chartered. There has also been increased visibility of the entire supply chain ecosystem and underlying source of goods.  

Similarly, DBS last year introduced a multi-tier financing facility on Rong-E Lian, a logistics platform to help SMEs (small and medium enterprises) in China have better access to trade financing. By also using blockchain technology, the bank has been able to speed up the process around supplier onboarding to 1-2 days and also improve supply chain traceability across all parties.

In these times of uncertainty, it is advised for businesses to use this opportunity to reflect and see what changes need to be implemented along the supply chain to be better prepared for the future.