By David Parker
One of the fundamental challenges in supply chain management has been a lack of visibility that leads to inaccurate forecasts, poor planning, delayed shipments, poor decision making, inadequate customer service, higher risks and loss of revenue. How do you know if you need to improve visibility within your supply chain?
Start by identifying the visibility gaps that have the most significant business impact in terms of business resilience, cost control and competitive advantage.
- Work backward from business goals, whether they be reducing inventory costs, trimming cycle times, digital transformation initiatives or improving customer satisfaction.
- Understand business value early in the process to justify the investment. It’s important to choose appropriate metrics and quantify the business result. Even “soft” benefits like customer satisfaction can be quantified by such factors as increased average order size or Net Promoter Score ratings.
- Start with customer needs. Understand what the expectations are for the performance of your operation, which is going to improve your company’s value proposition. Your supply chain must be very responsive and able to manage assets dynamically to respond to those customer needs. For example, in many markets, customers want to know the exact status of the products they order at any point in time. It’s no longer good enough to say it’ll get there when it’ll get there; you need to state the day and window of time when the product will arrive as well as provide details on the product condition for quality assurance. If your customers are asking for this kind of precision and you cannot provide it, you probably need more visibility.
- Time is a critical factor. When customers ask for the status of their orders, you need to be able to answer their questions on the spot. You may think you have the answer until you realize you don’t. If you can’t pinpoint where things are and what happens next, you really don’t have the visibility you need.
- Use risk management techniques to determine how much visibility is right for your organization. That means knowing where the risks to your business lie, how severe their impact can be and what it will cost to minimize them. For example, you may have two suppliers that are drawing parts from the same subcomponent supplier—that’s a potential risk that can be avoided by having a secondary or tertiary supply capability built into your most strategic product sets.
- Don’t forget that small items can hold up big projects. In the wireless industry, for example, it’s important to have all the components on hand. You could have all the carriers, electronics and cell towers in place, but if you don’t have the electrical cable to connect everything, nothing will work. This level of visibility and insight is critical to managing customer expectations and improving the efficiency of your supply chain.
Companies are finding that gaps in visibility inside manufacturing facilities, distribution centers, and between locations are constraining their digital transformation.
These visibility gaps are caused by:
- Incomplete vision: You may lack an end-to-end, holistic view of the supply chain ecosystem – starting with information from trading partners of suppliers to work in process to delivery to customers.
- Data collection challenges: You may be relying on large, legacy IT investments such as ERP systems, which limits your ability to collect new types of data, not just structured data from older technologies like EDI and barcode scans.
- Limited ability to capture edge information: You’re using dated RFID technology for capturing data at the edge that’s typically placed at choke points and is often not 100% reliable.
- Integration challenges: Heterogenous enterprise architectures of IT systems, processes and data architectures are difficult to integrate and create silos of data in the enterprise.
- Projects are narrowly focused: Project improvement efforts are singular in scope within manufacturing, distribution, procurement sourcing, and customer management teams rather than integrated into a holistic supply chain improvement effort.
Supply chain disruptions are not limited just to external forces. Many organizations do not have the means to continuously monitor the flow of parts through a manufacturing process or to track product flows in a distribution center. Consider how that visibility might yield operational savings.
Visibility also does not end when the finished product leaves the shipping dock. Consider the value of being able to monitor the location and condition of finished products for scenarios like recalls or to determine if certain parts are experiencing high failure rates. Being unable to track down products shipped to customers can have liability consequences in the case of a recall.
It is also advisable to factor in the level of detail that you need. For example, tracking product condition at the pallet level is cheaper than at the SKU level, but there may be a payoff for having such fine-grained information for high-value components.
Supply Chain Visibility as Competitive Weapon
Supply chain visibility is about more than just protection and cost control. It can also be a powerful competitive tool. According to an IDC study of 1,839 respondents across three regions and six sub-industries within manufacturing, 65% of firms view the supply chain as a source of competitive differentiation in today’s marketplace. With technology offering ever-more options to streamline processes, this should be an important consideration for any company.
Consider that Amazon revolutionized e-commerce and solidified its market leadership by innovating with overnight or same-day shipping accompanied by comprehensive tracking and delivery notifications. Those features gave the company a significant edge over its competition, enabling Amazon to continue to innovate while others play catch-up.
Supply chain visibility enables rapid response to market conditions that makes that balance possible. Visibility should extend to the point of sale and even beyond to enable manufacturers and distributors to see inequities before they develop into “out of stock” lost sales. If you have a store that’s selling ten iPhones a day and another that’s selling two, you need to be able to ship more phones to the stores that sell ten. It is becoming essential to have this assessment conducted in real time to allow your business to be agile and able to dynamically adjust to the changing needs of the markets and customers you serve.
The same opportunities are available in business-to-business markets as well.
- A manufacturer that streamlines its supply chains can pass along that visibility to its customers, enabling them to manage their own inventories more precisely.
- When manufacturers or food producers issue recalls, the distributors who can trace shipments of affected products through to their customers are better positioned to win the loyalty of those customers in the future.
- Predictive maintenance, or the use of data analytics to anticipate problems in commercial equipment before they occur, is an increasingly compelling value-added service that sellers can offer customers. Having a complete picture of the parts and equipment the customer is using enables sellers to more accurately forecast maintenance schedules.
The entire supply chain can be thought of as a complex workflow of many interlinked processes. Visibility helps supply chain professionals understand the tradeoffs in various alternative decisions, leading to the optimal choice for mitigating business risks.
The massive disruption caused by COVID-19 has clearly pushed real-time supply chain visibility to the C-suite. Given this environment, most companies now understand the need to increase visibility by rapidly accelerating digital transformation in their supply chains and adopting modern, cloud-based technologies like IoT, digital twins and AI/ML to help drive insights across their enterprise to ultimately deliver automated execution of business processes. At this point, you are truly on the path to a data-driven enterprise where exception-based management of the business becomes the normal mode of operation.