By Lisa Magnuson
There are many different factors that can affect a supply chain, ranging from “hard” attributes such as the temperature of plasma samples, to “soft” attributes such as whether a contract has been signed or not. The rapid advancement of digital transformation technologies such as supply chain visibility software, combined with disruptions such as COVID-19 and an unclear shift supply chain strategy, are key reasons that increased collaboration among organizations is vital to the health of any business.
Here are some key factors that are driving the need for supply chain visibility and collaboration across industries.
Visibility is the foundation of good supply chain management; without visibility into your supply chain, you will not be able to have agility and take immediate action based on your data. I like to use the metaphor of a boxer: you might have strong, fast arms and great footwork, but if you can’t see, there’s no way you can coordinate the rest of your body.
Visibility, however, is not easy. The first step in the process is understanding what kind of information you are talking about. The second step is understanding how new/old the information is that you’re getting. Is it in real time, or is it from two days ago? The third step is understanding how detailed your information is. Are you getting information at an aggregate lever, or are you getting detailed information so that you know exactly what’s going on in your supply chain? The fourth step—the most important one—is having the ability to derive insights from the information that you are receiving. I like to refer to the ability to interpret data as “visibility with smartness,” meaning you can create intelligence out of the information that you have.
To gain a better understanding of the factors driving the need for supply chain visibility, I spoke with Professor Hau Lee, a professor at the Stanford University Graduate School of Business, Co-Director of the Value Chain Initiative, and a member of our Cloudleaf Advisory Board. He recently completed a white paper on hard attribute and soft attribute visibility, and it turns out to be extremely relevant in today’s pandemic situation. Professor Lee pointed out that with the COVID-19 infection, a person can show symptoms such as a dry cough, high fever, etc. Those are physical attributes in the sense that you can see them, or you could simply use a thermometer to do a temperature check. But we also know that a person with the coronavirus can look perfectly fine on the outside, but inside, the virus is doing its damage; those are the soft attributes that you may not be able to measure.
In terms of supply chain visibility, hard attributes are also crucial, because you want to know where your ship is, where your cargo is, or what kind of condition your cargo is in. Soft attributes are things such as, “Has the contract been signed? Will I be able to get paid?” Those are the kind of visibility attributes that can help you to determine what the next step is. According to Professor Lee, you need to master both hard and soft attributes in order to gain full visibility.
The evolution of the digital supply chain has been a challenge in past years, because a lot of companies simply aren’t ready for it; many companies are still using legacy systems. Additionally, some organizations may be resistant to digital transformation because there aren’t a lot of demonstrated use cases in their industry sector. However, this situation is changing rapidly due to disruptions such as the worldwide spread of the COVID-19 virus. Because of this, you’ll start to see a faster adoption of digital transformation technologies such as supply chain visibility software. Some companies are in the reactive phase, thinking about how to survive the pandemic, but forward-thinking companies are already developing plans for what they will do during the restoration period. Once economic growth returns, organizations that are not prepared for the next disruption will be left behind.
Due to the COVID-19 pandemic, companies are taking a closer look at the location of their suppliers. They may think that they need to move out of China and move manufacturing to Vietnam or back to the U.S., for example. Tariffs are another major driver of that debate. Given what’s happened with the lack of surgical mask manufacturers in the U.S., some companies may look at that situation and think that they should move manufacturing to the U.S. in order to be more self-sufficient.
This debate is what Professor Lee referred to as the “unclear shift.” Lee added, “I predict that you cannot have an extreme position of bringing all production back to the U.S. However, if you spread yourself all over the globe with very minimum domestic capability, you are also vulnerable. The perfect supply chain network needs to be something in between these two extremes.” Lee stressed that in the ideal case, your network would be more geographically dispersed, which would require the use of digital technologies that would provide you with near-complete visibility, so that you can better coordinate and orchestrate your global supply chain.
As someone who has been involved with supply chains for decades, Professor Lee observed that every decade, there has been a major revolution with supply chains. He’s learned that successful supply chain practices in one industry can influence a completely different industry. For example, a “fast fashion” company such as Zara has been studied by supply chain professionals in many different industries. Zara’s agile supply chain enabled it to become one of the most profitable fashion brands. This kind of cross-industry learning can be quite powerful.
Changes in supply chain technology are dynamic and exciting, and it’s critical to stay on top of these new technologies. Technology advancements can transform how you operate your supply chain, as well as open up potential for creating new business models. For example, some companies have leveraged supply chain technology to become a service company. So instead of selling equipment, they sell you a service.
Globalization is another area that taught Professor Lee a lot of lessons. 20 years ago, everyone wanted to know what companies like Cisco and Hewlett Packard were doing in terms of supply chains. In the past few years, he’s discovered other great companies with innovative supply chain practices such as Zara, based in Spain, and 7-Eleven Japan. Lee commented that globalization gives us a lot of great innovations—everyone is experimenting. Although it can be complex to interact with other countries in terms of tariffs, natural disasters, and infections such as COVID-19, it is possible to use your supply chain to mutually support each other.
In these challenging times, increased collaboration across industries is needed. We have seen clothing manufacturers that were able to pivot themselves into making masks and protective gear. In China, one of the highest volume producers of masks is a company called BYD, which is a company that makes electric cars. Lee cited this example of crossing industry boundaries as “the wave of the future.“
In the past, visibility was a challenge, as every department held their information in silos – from marketing to manufacturing. This led to a lack of visibility across functions. When crossing company boundaries to work with suppliers, retailers, manufacturers, and distributors around the world, Lee emphasized the fact that we need to have supply chain visibility across all these companies. Clearly, having supply chain visibility is crucial to a company’s success.
Lisa Magnuson is the Chief Marketing Officer for Cloudleaf.
Prof. Hau Lee is a Professor at Stanford University Graduate School of Business and Co-Director of the Value Chain Initiative.
This eBook contains a collection of stories and advice from business and supply-chain leaders who have successfully managed or advised global supply chains through past disruptions. It will help you develop your own methods, approaches, and best practices for improving supply chain visibility in your organization.