The Complex Web of Vendors and Contracts

Building a Procurement Brain and Data Foundation

The global supply chain is a complex web of interactions and transactions involving countless suppliers, buyers, and their respective contracts.

This web spans the local, regional, national, and international levels, and it is constantly evolving due to various factors, such as globalisation, military advancements, cost reduction efforts, and technological innovations.

However, in recent times, the wheels of this complex web have come off, leading to an ever-increasing state of chaos.

The world of the past few decades has been the best it will ever be in our lifetime. Instead of cheap and better and faster, we’re rapidly transitioning into a world that’s pricier and worse and slower. Because the world—our world—is breaking apart - The End of the World Is Just the Beginning,Peter Zeihan

In this blog post, we will explore the complexity of our supply chains and why moving to digital solutions is critical to managing this complex web of vendors and contracts.

The Complexity of Our Supply Chains

The complexity of our supply chains is beyond anything that we can imagine.

The ability to diversify supply systems over any distance means it is economically advantageous to break up manufacturing into dozens, even thousands of individual steps. Workers building this or that tiny piece of widget become very good at it, but they are clueless as to the rest of the process. The workforce that purifies silicon dioxide does not and cannot create silicon wafers, does not and cannot build motherboards, and does not and cannot code. - The End of the World Is Just the Beginning,Peter Zeihan

The current supply chain system is the result of American-led globalisation, which is now shrinking and causing breakages, military advancements pushing for innovation, the creation of efficiencies and cost reduction at the expense of resiliency, and the reliance on Just In Time as the predominant way of efficiently operating manufacturing lines.

Moreover, the rise of Skimplation in every product and service that is offered, back-up ports, complexities with the sheer number of suppliers that make up different components and services for one product offering, tariffs and trade wars, and the Bullwhip Effect, which makes every out-of-stock item that bit harder to get in stock given order sizes, are all contributing factors.

The Complex Web of Vendors and Contracts

Visualising the complexity of our supply chains is not easy.

It is composed of two layers - buyers & sellers and contracts. A third layer could be added here - the customer.

Each relationship creates more outputs, with every seller and buyer having more buyers and sellers that they work with, which inevitably cross over with other buyers or sellers elsewhere.

And my point here is that nothing is linear.