By Phil Lavin, Sales Manager, AEB (International) Ltd.
Supply chain visibility describes the IT-supported management of all processes and information within the supply chain, from supplier to end customer. Deployed effectively, it improves quality of services, controls the impact of disruptions, and lowers operating costs. But although it ranks highly on management agendas, many businesses still struggle to approach the matter successfully and comprehensively. What are the challenges, and in which areas of the supply chain is visibility of particular importance?
E-commerce and the ability to easily compare products and services are key drivers for change in today's modern supply chains. Consumers can shop around the clock and expect delivery within hours, leading to a sharp increase of small parcel volumes with highly individualised "last mile" requirements and a growing number of corresponding returns. Shorter product cycles, more complex products, global procurement, volatile markets, and a growing number of natural disasters present additional challenges. In combination, these challenges are amplified and often require new supply chain management strategies and business processes. The only way to manage such complexity is through comprehensive IT support.
A key factor for success when implementing supply chain visibility projects is to establish real-time transparency over ongoing processes, e.g. the status of a customer order, the scheduling of a picking order, the customs clearance progress, or the location of a container, which facilitates the planning of capacities across departments and organisations. It also enables the selection of carriers or transport modes by cost or lead time, resulting in more reliable deliveries, fewer empty runs, shorter wait times, and faster inventory turn-over. This translates directly to increased customer service and more efficient operations.
Adding cost transparency to the equation facilitates further supply chain savings. Transport costs rank high on the supply chain balance sheet and reliable information on shipping volumes and costs form the basis for establishing successful carrier contracts and maintaining performance levels in line with service requirements. Saving potentials in this area can also be realised by monitoring ongoing costs with the help of an automated freight and transport cost verification process, which eliminates the risk of erroneous service charges while saving resources.
Another important aspect is bringing transparency to the relevant risks in the supply chain and obtaining consistent, complete, and validated data. End-to-end transparency creates a basic understanding of the existing risks and helps to qualify them. A Deloitte study[1] found that the most common risks within a company's own supply chain were interruptions to the procurement, production and distribution networks. In the extended value chain, the primary risks came from fluctuations in demand, changing customer preferences, and problems with suppliers, economic changes, resource scarcity, geopolitical events, and natural disasters.
While supply chain visibility clearly offers tremendous benefits, in practice there is a major discrepancy between how important businesses say the topic is for them and how often they actually implement visibility projects. Many still compensate for a lack of visibility by throwing money at the problem: maintaining high levels of safety stock, changing modes of transport, or paying for special trips and overtime. Businesses that have already achieved relatively sophisticated supply chain visibility have more efficient processes and boast higher performance.
Why do companies hesitate to get started? The need for information and the interpretation of specific data can vary greatly from one supply chain partner to the other, which represents a great challenge due to the ever-growing number of participating parties and the corresponding, varying data requirements. The same diversity is reflected in data standards, the scope of data collected, and the semantics of the in-house IT systems used by the various supply chain parties across sectors and regions.
To complicate things further, IT tools deployed across supply chains are non-harmonised, and typically designed for a particular company's internal processes. Direct processing of outside data is either impossible or technically very difficult. The result is information that does not flow easily or seamlessly from one supply chain partner to another. The basis for functioning cross-company visibility and collaboration in procurement and distribution networks, however, is the exchange of data between all involved parties. And it can be difficult to get all supply chain participants on board and make all relevant data available. This includes the overseas supplier who needs to issue a prompt alert if a container misses its ship; the forklift operator who accidentally drops a package; or the truck driver who needs to let everyone know he's stuck in traffic.
Other important points include technical cooperation and technological sophistication. In practice, many businesses still rely largely on manual processes supported by spreadsheets, sharing data and information by e-mail or Microsoft SharePoint - a highly inefficient method that is quickly rendered inadequate as supply chains grow more complex and the number of parties increases. One recipe for success lies in eliminating the need for repeated, manual data entry. This involves using sensors not only in transport vehicles and warehouses but also on associated pallets, shipments, and the products themselves. The core technology required for end-to-end collection and electronic analysis of relevant information is already available and established today: touch-free identification via RFID, geolocation via GPS or GSM, ubiquitous computing, voice recognition, and digital image processing.
The actual challenge for IT systems lies in using all this data correctly: mapping all the resources, capacities, inventory, and processes in the supply chain, and using EDI standards to facilitate the quick exchange of information among partners. This requires nothing less than importing data from all the various sources and formats and creating seamless connections across multiple levels for all relevant business transactions. Powerful IT solutions in the form of visibility and collaboration platforms are equipped to master these challenges, but their implementation often fails because businesses don't take an integrated approach by involving all parties – internal and external – and connecting all systems. The technology can only deliver its full benefit if all supply chain partners take part and agree to cross-functional knowledge transfer and information sharing. Where this is in place, businesses are set up to reap the benefits and gain a competitive edge in today's fast-paced, global marketplace.
[1] Marchese, K., & Paramasivam, S. (2013). "The ripple effect. How manufacturing and retail executives view the growing challenge of supply chain risk." Deloitte.
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