By Dr. Sanjoy Paul, Prof. Hau Lee and Mahesh Veerina
In this series, we put different tracking approaches on a common foundation and categorize them into that we refer to as hard and soft attribute-based tracking. Then we argue why both hard and soft attribute-based tracking are important and how one complements the other, leading to near-optimal visibility. In this blog post, we introduce the framework for supply chain visibility and explore these two dimensions of supply chain visibility.
One of the key challenges in supply chain has been the lack of visibility that leads to inaccurate predictions, poor planning, delayed decision making, higher risks and loss of business. In fact, visibility has several value dimensions. At the foundational level, it allows accurate and timely reporting or performance measures, which are necessary for incentive alignment. Then, visibility enables prompt actions and responses, if necessary, to events that may have deviated from the plan, helping in course correction. Third, visibility allows us to have the best responses, knowing the full conditions of the supply chain beyond the event we are addressing. This is especially relevant for risk mitigation when multiple factors interact in a complex manner, resulting in the creation of a practically infinite state space for decision making. Visibility helps in understanding the tradeoffs in various alternative decisions, leading to the optimal choice mitigating business risks. Finally, visibility enables us to improve our predictive power, which is useful for pre-emptive actions and improved planning capabilities.
There are several parameters that need to be tracked for improving supply chain visibility. Some argue that the key to higher productivity is tracking progress in business processes, leading to the identification of exceptions in a timely manner and orchestrating operations based on that visibility. On the other hand, some argue that tracking the location and condition of goods and supplies in real time as they move through the supply chain, involving different stakeholders across organizational boundaries, is the basis for smarter decision making. Both viewpoints have their own merit, as they both point out bottlenecks in the supply chain in their own way and identify the points of intervention for overcoming them. We embrace both schools of thought and put them on a common framework, as shown in the chart below. The former school of thought banks on what we refer to as soft attributes and the latter school banks on what we call hard attributes.
Let us delve a little deeper into supply chain visibility. Visibility in the supply chain is aimed at providing the status and location of the raw materials/components, from the suppliers to the factory to logistics to the shop floor to the finished goods in the warehouse and distribution centers, and finally, to consumption.
There are two dimensions to visibility – one that involves hard attributes and the other that involves soft attributes. Hard attributes are location, condition (vibration/shock, ambient temperature, humidity, pressure), timestamp and count (see the chart above) that can be captured using sensors, while the soft attributes are classified mostly as context. There are two types of context: (1) business process context and (2) environmental context. Business process context refers to the steps in business processes, such as requisition, approval, purchase order, invoice, payment, picking, packing, shipping, storing, etc. that can be captured in the system during the execution of various business processes. Environmental context, on the other hand, refers to factors adjacent to the core functions of the supply chain, but have an impact on the efficiency of the supply chain. These contexts are captured by systems for purposes other than the supply chain. For example, weather conditions are captured for weather forecasts and traffic conditions are captured for helping drivers with navigation. But both of these parameters – weather and traffic – are directly relevant for logistics operations – impacting the supply chain.
These attributes, whether hard or soft, signify potential changes in values or impacts to different members in the supply chain.
In summary, tracking hard and soft attributes are two dimensions of supply chain visibility that should be tracked in order to achieve near-optimal visibility. We elaborate further on the impact of hard and soft attributes on different members in the supply chain in our whitepaper A Holistic Approach to Supply Chain Visibility.
Dr. Sanjoy Paul is an innovator, disruptive entrepreneur, and an industry-recognized expert in AI & IoT.
Prof. Hau Lee is a Professor at Stanford University Graduate School of Business and Co-Director of the Value Chain Initiative.
Mahesh Veerina is a seasoned Silicon Valley entrepreneur, technology executive and investor and is the President and CEO of Cloudleaf.
Read post 2 of this series, Hard and Soft Attributes: A Framework for Supply Chain Visibility.