SCM improvements

Don’t run your supply chain by word of mouth

Do you know what’s happening in your supply chain at any point in time? Shed some light and implement visibility – it’s worth it. Learn more.

In my last post, I shared an Aberdeen report that underlined the importance of supply chain visibility for optimizing both cost and service. We also learned from consultants at Supply Chain Insights that 96% of surveyed businesses consider visibility as important, but only 53% feel their own performance in this area is good. See my last post here.

So, we know it’s important, we know everyone wants it, and the fact that not everyone has it clearly shows it involves challenges. I promised last time to share more details on both benefits and challenges.

One thing to bear in mind: IT, IT, IT

Before we dive in, it’s important to understand that supply chain visibility today cannot be achieved without IT support. If you source next door, manufacture in-house, and deliver around the corner – yes, you might be able to get away without IT to keep an eye on things ;). But, today, such basic supply chains barely exist anymore.

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. This has led to a sharp increase of small parcel volumes globally, with highly individualized “last mile” requirements. Based on consumer behavior, there is also a high global volume of corresponding return deliveries. Businesses today face…

  • Greater customer expectations
  • Increased competition
  • Shorter product cycles
  • More complex products
  • Global procurement
  • Volatile markets
  • Natural disasters and traffic disruptions

And the only way to manage such complexity is through comprehensive IT support. “Word of mouth” is a great song (…actually, I have not heard it in a while – you can listen to it here) but it surely is a very, very bad way of running a supply chain. Unless of course, you manage the simple “around-the-corner” supply chain as described. OK, now to the benefits and challenges, as promised.

>> Fast-forward: Download our free white paper with more details on the topic here.

Benefits – in a nutshell

Operations

A key factor of supply chain visibility is real-time transparency over live operations and ongoing processes, e.g. the status of a customer order, applicable service levels, the scheduling of a picking order, the customs clearance progress, or the location of a container.

  • Having such information enables planning and optimization of capacities and resources across departments and organizations.
  • It empowers businesses to pro-actively keep customers up to date on the status of deliveries at all times.
  • It also enables the selection of carriers or transport modes by e.g. lead time, resulting in more reliable deliveries, fewer empty runs, shorter wait times, and faster inventory turn-over.

Costs

Adding transparency over costs to the equation, significant supply chain savings can be achieved:

  • 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 performance levels in line with service requirements.
  • Transparency on transport tariffs from different providers also enables cost comparisons, shipment simulations, invoice control, and provides grounds for informed decisions on best options for both cost and service.

Risks

Finally and importantly, another crucial area is transparency over supply chain risks, which makes it possible to identify, understand, and qualify existing risks. Such risks include interruptions to the procurement, production, and distribution networks. In the extended supply chains, risks involve fluctuations in demand, changing customer preferences, and problems with suppliers, economic changes, resource scarcity, geopolitical events, and natural disasters.

  • Established transparency in the supply chain enables business contingency strategies and pro-active supply chain event management.
  • This not only mitigates risks but also leads to further benefits such as better insurance premiums for example.

What’s the hold-up: challenges

Despite these tremendous benefits, 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.

  • The need for information and the interpretation of specific data can vary greatly from one supply chain partner to the other, and this represents a great challenge because of the 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 make things even more difficult, IT tools deployed across supply chains are non-harmonized, 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 party to another.
  • The basis for functioning cross-company visibility and collaboration in procurement and distribution networks is the exchange of data between all involved parties. And it can be quite difficult to get all supply chain participants on board and make all relevant data available. This begins with the overseas supplier who needs to issue a prompt alert if a container misses its ship. It applies to the forklift operator who accidentally drops a package. And it applies to the truck driver who needs to let everyone know he’s stuck in traffic.

All we need is available… but it’s the approach that counts

The core technology required for end-to-end collection and electronic analysis of relevant information is already available: touch-free identification via RFID, geolocation via GPS or GSM, ubiquitous computing, voice recognition, and digital image processing.

Powerful IT solutions in the form of visibility and collaboration platforms are available and affordable, too, 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. When this is in place, businesses are set up to really reap the benefits.

More about Supply Chain Collaboration with AEB

More about Monitoring & Alerting with AEB

More information in case studies, reports, and white papers