Executive Briefings

Why Your Company Will Implement Supply Chain Visibility Tools

Companies today have more powerful supply chain visibility tools than ever. Solutions exists that leverage web technologies and allow various supply chain departments in an organization to get real-time and accurate information about inventory, orders and shipments in both their inbound and outbound networks.

Why Your Company Will Implement Supply Chain Visibility Tools

This includes insight into inventory currently in their network (for example, in distribution centers and stores), but also product with their traditional partners or in transit. For example, many companies today deploy supplier portals so they can get real-time information about product on order with suppliers, and know exactly when it plans to be shipped and delivered.

By integrating supply chain visibility systems with their transportation carriers and freight forwarders, they can also get real-time visibility to inventory in transit (both into and out of their facilities).

For many companies, the benefits of more real-time visibility in their supply chain are obvious, and the cross-departmental value is real. But many companies have held out.

This will likely change in the coming years, and more companies will implement supply chain visibility primarily because of some key industry value drivers in which supply chain visibility is the foundation.  So what are the trends that will ultimately be the reason your company implements a supply chain visibility solution?  Here are the likely candidates:

You Are Doing More International Sourcing

Clearly companies of all types are sourcing more product from international suppliers. No matter where your product is coming from, the benefits of looking beyond domestic suppliers usually can mean substantial reduction in purchasing costs.

But international sourcing has its challenges, including longer lead times, more lead-time variability, and working with less sophisticated suppliers. All of this leads to less control over your inbound supply chain, and creates challenges for your buying, planning, transportation and distribution departments.

For example, buyers and planners make purchases based on lots of factors (price, demand, inventory carrying costs, etc.). But they also have to consider lead time and lead-time variability.

Lead-time variability from international suppliers is much greater (much less certain) than from domestic suppliers.  It's more likely that a product with 30 days lead time will be early or late by five days than a product with only a seven-day lead time (which probably will only be late by two days at most). Inventory planners have to account for this by slightly increasing safety stocks.

International sourcing creates similar challenges for transportation and distribution departments that just don't exist with domestic suppliers. Typically this is due to less control over your supply chain due to an increased use of freight forwarders and 3PLs.

Supply chain visibility tools and applications like supplier portals help manage inbound sourcing to reduce lead time and lead-time variability. Delays in the supply chain that create uncertainty can more quickly be identified and addressed.  Supplier portals make working with less sophisticated suppliers more manageable.

Likewise, supply chain visibility tools give you greater insight into your network if it's being controlled by third parties.  This is a big benefit to logistics personnel in charge of transportation and distribution of your inbound freight who are suddenly working with mostly third parties.

As a company goes to more international sourcing, these tools become much more critical to ensure that the cost savings from purchasing overseas isn't cannibalized by higher supply chain costs.

You'll Want to Dynamically Distribute Inbound Inventory

Better inbound visibility can enable tremendous things besides keeping costs in check. Another industry trend driving supply chain visibility is more dynamic distribution of inbound inventory.  This ultimately allows companies to make smarter, more real-time decisions about where they should deploy product coming from suppliers.

It's best to explain this concept by thinking about how the routing of inbound inventory has traditionally worked. Typically, a PO is generally for a supplier, and the destination for that product (like a given distribution center) is pre-determined well in advance. If a company has multiple distribution centers, and they want some product to go to each DC, then all of that is pre-determined as well, and in some cases multiple POs are written, one for each DC.

The problem with this, especially for product with long lead times, is that demand changes between the time a PO is issued and the product is delivered.  Today companies want to make last minute decision about where inbound inventory from suppliers is deployed in their network based on the latest demand information.

Large retailers with online routing portals started this trend many years ago when requiring suppliers to do "routing requests" before shipping product. This allowed the retailer to indicate to suppliers at the last minute if the product should go to the DC, direct to stores, or some combination of both.

With today's supply chain visibility tools, any company sourcing products from anywhere can make dynamic inventory distribution decisions for inbound product based on current demand.  This works by waiting for the supplier to indicate that the product is ready to be shipped, or sometimes even waiting until it is in transit (like on a shipping container) or arrived at a port to make last-minute directives about which DCs the product should ultimately go. 

Some companies are taking this several steps further, and making last-minute decisions to route inbound product directly to stores, customers or some other fulfillment channel. This is all based on their supply chain visibility systems notifying them exactly where product is in their inbound network so it can be matched with the latest demand.

Orchestrating this type of dynamic supply chain takes lots of synchronized systems, but the foundation for it all are supply chain visibility tools.  Knowing exactly when a supplier is ready to ship you product, or exactly when it has reached a hub or port enables companies to add this flexibility to their inbound network.

You'll Want to Enable More Advanced Order Allocation

In addition to using supply chain visibility to make their inbound supply chains more responsive, companies are using it to do the same on their outbound supply chains as well.  As companies add capabilities to see more of their entire network of inventory in real time, a natural extension is using it to make smarter customer order allocation decisions.

Again, think about this from a traditional point of view.  For many companies, order allocation has always been matter of matching up customer orders to current "on-hand" inventory (i.e., inventory in their distribution centers). This was the inventory they could "see" (and more specifically, the only inventory their order management systems could see).

However, if an order management system now has a more complete picture of all the inventory in the network, including inventory in-transit to my DCs, inventory on order from suppliers, and even inventory in places like stores, it can make smarter order allocation decisions.

For example, if I have a high priority customer orders that has a three-day delivery window (has to be shipped within the next three days), it might make more sense to allocate it against inventory I know I plan to receive in the next two days. This allows me to use current inventory on hand for lower priority (but more urgent) orders that need to be shipped today.

Likewise, with better visibility to all the inventory in my network, I may want to divert orders periodically to alternate DCs, or even send them to suppliers for drop-shipping if they can meet the need for me.

Allocating against in-transit or on-order inventory, DC routing, and drop-shipping, are all some of the examples of smarter order allocation decisions companies can make when their order management systems are improved by better supply chain visibility.

These techniques also require other advanced applications to make these advanced processes work (like more advanced order management systems), but again the foundation is supply chain visibility.

Finally, it should be stated that any company in an omnichannel or multichannel environment, where inventory is shared to fulfill orders across multiple channels (think retail stores, plus e-commerce, plus catalog), makes enabling these techniques even more critical.

Supply chain visibility hasn't hit "mainstream" when it comes to supply chain applications. It may not have come to your organization yet.  But there's a good chance it will.

Source: Manhattan Associates


Keywords: supply chain visibility, supply chain management, supply chain IT, logistics & supply chain, supply chain solutions

This includes insight into inventory currently in their network (for example, in distribution centers and stores), but also product with their traditional partners or in transit. For example, many companies today deploy supplier portals so they can get real-time information about product on order with suppliers, and know exactly when it plans to be shipped and delivered.

By integrating supply chain visibility systems with their transportation carriers and freight forwarders, they can also get real-time visibility to inventory in transit (both into and out of their facilities).

For many companies, the benefits of more real-time visibility in their supply chain are obvious, and the cross-departmental value is real. But many companies have held out.

This will likely change in the coming years, and more companies will implement supply chain visibility primarily because of some key industry value drivers in which supply chain visibility is the foundation.  So what are the trends that will ultimately be the reason your company implements a supply chain visibility solution?  Here are the likely candidates:

You Are Doing More International Sourcing

Clearly companies of all types are sourcing more product from international suppliers. No matter where your product is coming from, the benefits of looking beyond domestic suppliers usually can mean substantial reduction in purchasing costs.

But international sourcing has its challenges, including longer lead times, more lead-time variability, and working with less sophisticated suppliers. All of this leads to less control over your inbound supply chain, and creates challenges for your buying, planning, transportation and distribution departments.

For example, buyers and planners make purchases based on lots of factors (price, demand, inventory carrying costs, etc.). But they also have to consider lead time and lead-time variability.

Lead-time variability from international suppliers is much greater (much less certain) than from domestic suppliers.  It's more likely that a product with 30 days lead time will be early or late by five days than a product with only a seven-day lead time (which probably will only be late by two days at most). Inventory planners have to account for this by slightly increasing safety stocks.

International sourcing creates similar challenges for transportation and distribution departments that just don't exist with domestic suppliers. Typically this is due to less control over your supply chain due to an increased use of freight forwarders and 3PLs.

Supply chain visibility tools and applications like supplier portals help manage inbound sourcing to reduce lead time and lead-time variability. Delays in the supply chain that create uncertainty can more quickly be identified and addressed.  Supplier portals make working with less sophisticated suppliers more manageable.

Likewise, supply chain visibility tools give you greater insight into your network if it's being controlled by third parties.  This is a big benefit to logistics personnel in charge of transportation and distribution of your inbound freight who are suddenly working with mostly third parties.

As a company goes to more international sourcing, these tools become much more critical to ensure that the cost savings from purchasing overseas isn't cannibalized by higher supply chain costs.

You'll Want to Dynamically Distribute Inbound Inventory

Better inbound visibility can enable tremendous things besides keeping costs in check. Another industry trend driving supply chain visibility is more dynamic distribution of inbound inventory.  This ultimately allows companies to make smarter, more real-time decisions about where they should deploy product coming from suppliers.

It's best to explain this concept by thinking about how the routing of inbound inventory has traditionally worked. Typically, a PO is generally for a supplier, and the destination for that product (like a given distribution center) is pre-determined well in advance. If a company has multiple distribution centers, and they want some product to go to each DC, then all of that is pre-determined as well, and in some cases multiple POs are written, one for each DC.

The problem with this, especially for product with long lead times, is that demand changes between the time a PO is issued and the product is delivered.  Today companies want to make last minute decision about where inbound inventory from suppliers is deployed in their network based on the latest demand information.

Large retailers with online routing portals started this trend many years ago when requiring suppliers to do "routing requests" before shipping product. This allowed the retailer to indicate to suppliers at the last minute if the product should go to the DC, direct to stores, or some combination of both.

With today's supply chain visibility tools, any company sourcing products from anywhere can make dynamic inventory distribution decisions for inbound product based on current demand.  This works by waiting for the supplier to indicate that the product is ready to be shipped, or sometimes even waiting until it is in transit (like on a shipping container) or arrived at a port to make last-minute directives about which DCs the product should ultimately go. 

Some companies are taking this several steps further, and making last-minute decisions to route inbound product directly to stores, customers or some other fulfillment channel. This is all based on their supply chain visibility systems notifying them exactly where product is in their inbound network so it can be matched with the latest demand.

Orchestrating this type of dynamic supply chain takes lots of synchronized systems, but the foundation for it all are supply chain visibility tools.  Knowing exactly when a supplier is ready to ship you product, or exactly when it has reached a hub or port enables companies to add this flexibility to their inbound network.

You'll Want to Enable More Advanced Order Allocation

In addition to using supply chain visibility to make their inbound supply chains more responsive, companies are using it to do the same on their outbound supply chains as well.  As companies add capabilities to see more of their entire network of inventory in real time, a natural extension is using it to make smarter customer order allocation decisions.

Again, think about this from a traditional point of view.  For many companies, order allocation has always been matter of matching up customer orders to current "on-hand" inventory (i.e., inventory in their distribution centers). This was the inventory they could "see" (and more specifically, the only inventory their order management systems could see).

However, if an order management system now has a more complete picture of all the inventory in the network, including inventory in-transit to my DCs, inventory on order from suppliers, and even inventory in places like stores, it can make smarter order allocation decisions.

For example, if I have a high priority customer orders that has a three-day delivery window (has to be shipped within the next three days), it might make more sense to allocate it against inventory I know I plan to receive in the next two days. This allows me to use current inventory on hand for lower priority (but more urgent) orders that need to be shipped today.

Likewise, with better visibility to all the inventory in my network, I may want to divert orders periodically to alternate DCs, or even send them to suppliers for drop-shipping if they can meet the need for me.

Allocating against in-transit or on-order inventory, DC routing, and drop-shipping, are all some of the examples of smarter order allocation decisions companies can make when their order management systems are improved by better supply chain visibility.

These techniques also require other advanced applications to make these advanced processes work (like more advanced order management systems), but again the foundation is supply chain visibility.

Finally, it should be stated that any company in an omnichannel or multichannel environment, where inventory is shared to fulfill orders across multiple channels (think retail stores, plus e-commerce, plus catalog), makes enabling these techniques even more critical.

Supply chain visibility hasn't hit "mainstream" when it comes to supply chain applications. It may not have come to your organization yet.  But there's a good chance it will.

Source: Manhattan Associates


Keywords: supply chain visibility, supply chain management, supply chain IT, logistics & supply chain, supply chain solutions

Why Your Company Will Implement Supply Chain Visibility Tools