For some years now, “supply chain visibility” has been held up as the solution to every supply chain director’s problem. Constantly monitor where your goods are and you will minimize inventory, reduce time to market and – most importantly – cut costs, we are told.
But does that really happen? Is all that data used to its maximum extent or does it just accumulate in an unused pile once a couple of bottlenecks have been identified and eliminated?
The danger is twofold: that different parts of the supply chain are so overwhelmed with data that it becomes unproductive for both transport suppliers and shippers to do anything more than a general analysis.
Or, conversely, that the wrong type of data is collected, missing precisely the “right” data, maybe further back up the supply chain, that would be most useful for generating potential efficiencies.
A recent analysis by Softship Data Processing, a specialist supplier to the maritime industry, has found that 140,000 pieces of information are generated when one container ship (admittedly one of the largest 15,000-TEU vessels) visits one port.
From quoting and booking, to Customs and security data, to tracking the movement of the containers from the port gate to loading on the ship, up to 25 different parties are involved in generating and collecting data.
If that is the amount of information from just one port, imagine the total data that could potentially be generated for each global shipment – from sourcing and procurement to final delivery and invoicing.
Companies, and individuals, are already overloaded with information from a wide variety of sources – from emails and newsletters to spreadsheets and management reports.
How then do companies ensure the relevant data and information – whether from sophisticated supply chain software systems or market intelligence from a casual conversation – is identified, captured and, most importantly, acted upon.
What does ‘visibility’ mean in today’s supply chains?
Supply chain visibility, in its simplest sense, means knowing which materials and goods are located where, in what amounts. This knowledge used to be held by various people in a supply chain who would talk to each other to share information and make decisions based on industry expertise and familiarity with customer demand.
The evolution of global sourcing and procurement means visibility, certainly real-time visibility, can be achieved only through dedicated IT solutions including enterprise supply chain management systems.
And these systems certainly exist. All the relevant stakeholders can access data related to the key operational matrices they need. The location and quantity of every piece of inventory is precisely pinpointed. And sophisticated mathematical models are used to predict future customer demand.
But gathering information is only the first step in improving supply chain efficiency. Unless stakeholders have the expertise to identify what data is important (or, just as importantly, what data is missing), the potential for significant improvement is very low.
As analyst John Simone, writing a blog for the IBM Center for the Business of Government, says: true visibility means more than just awareness of where materials are at a given point in time or the amount of goods in a warehouse.
“Instead, visibility means a window into a wider range of data, supply chain processes, events, and patterns that enable automation, dynamic responses, and predictability.
“Great visibility into a complex, 21st Century supply chain not only answers the basic questions of what is the current state, but it also helps answer questions like: how are we in this state; why are we in this state; and what will the state look like in the future?”
Simone was referring to government and military supplies primarily, but the principle is the same for every supply chain.
Visibility is just the first step
In order to achieve maximum levels of efficiency in a supply chain, companies need to not only achieve the true visibility as described above. They need to understand the ramifications of the data they have generated and what actions they need to undertake to drive productivity, improve customer service and cut costs.
Producing the data is a vital step – but it must not be seen as an end in itself. It is a tool, not a result.
And, just as importantly, companies must recognize that identifying the relevant data and market intelligence is a never-ending process. With all elements and costs in the supply chain, both internal and external, subject to change, constant vigilance is needed.
Fuel prices and freight lane capacity (and therefore logistics costs) fluctuate, the cost of labor and materials almost inevitably rise, competitors launch new products or identify new markets, and supply chain variables change.
Many of the processes will be automated and, with statistics produced by the thousands, it is easy for the stakeholders to retreat to their own departments or businesses and believe the system looks after itself.
But, simply installing a supply chain management system – no matter how sophisticated it may be and how much “visibility” it provides, is not enough. Unless it is continuously monitored and revised, the competitive advantages it initially brought will soon be lost.
Maintaining the advantage
So, once supply chain visibility had been achieved, how is it maintained and how do companies ensure they use the generated data to maximum effect?
The consultants who recommended the supply chain software system are long gone and everyone in the company is busy running the day-to-day operation. The process which produced an entire end-to-end analysis has disappeared.
One solution is for companies to work with a supply chain consultancy which remains part of their business growth plan by taking over the actual physical movement of the goods as a logistics provider. A “consultancy” that not only recommends the software system, but adapts it for each customer’s precise needs, oversees the implementation and then continues to work with the company to actually deliver the goods and meet the challenges of the changing marketplace.
This not only gives businesses the confidence to manage the “risk” of making the necessary – sometimes revolutionary changes to their supply chains – it also ensures that the consultative approach that was so valuable in the first place is maintained.
Supply chain visibility is, quite rightly, considered a key to optimizing the supply chain, but we must always remember that it is a highly sophisticated tool that needs to be handled by the best professionals to achieve the maximum results.
Delivering the benefits
Challenging economic times, rising fuel costs and a competitive business environment means that companies today must continuously look for new and better ways to reduce costs and improve business performance.
Many companies have multifaceted global supply chains that include a variety of sourcing areas and multiple modes of transportation. By harnessing live feeds and building truly meaningful business intelligence, companies can utilize their supply chain visibility to build efficiencies and reduce costs (whilst reducing risk), making them more competitive.
The reality of the economy we face today – higher prices for diesel, shortage of truckers, and no end in sight – is motivating companies to seek out new, more efficient business models for sustained success and environmentally friendly operations. They are all dealing with the same issue: how to reduce operational expenses and maximize profits when spending levels remain at low levels.
Harnessing information and using it effectively is a major opportunity for companies to reduce costs and increase their service offering.
Source: Virtualized Logistics
Keywords: supply chain, supply chain management, supply chain planning, optimizing supply chain operations, optimal logistics operations