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What Is Supply Chain Visibility and Why Is It Important?

08 June 2020

The term supply chain visibility relates to knowing what’s going on in your supply chain. Despite its deceptively simple meaning, it’s not something that’s easily achieved. Over the last few years, numerous organizations have experienced unplanned supply chain disruptions caused by abnormal weather events, natural disasters, factory fires and other forms of supply chain disruption.

When these events are analysed, it’s not unusual to discover that companies were caught off guard because of poor supply chain visibility. In some instances, companies didn’t know where suppliers and sub-suppliers were located, while in others they were unaware of critical dependencies in their extended supply chains. These same issues are still apparent as businesses attempt to restart production in the aftermath of the COVID-19 lockdown.

 

What Is Supply Chain Visibility?

A common thread running through the different definitions of supply chain visibility is the ability to track raw materials and components from original suppliers and manufacturers through the organization’s manufacturing facilities to customers. For retail operations, this definition extends to include tracking goods from suppliers through to end customers.

In an ideal situation and with good supply chain visibility, the chief supply officer would have access to detailed order status data such as:

·         Order receipt by supplier

·         Status of raw materials to complete order

·         Supplier's manufacturing program and status

·         Delivery date from supplier

·         Shipping details

·         Customers and regulatory information

·         Current order status, especially with regard to actual progress to plan

To gain the full benefits of supply chain visibility, such supply chain information should be trackable in real-time, although, in practice, few organizations fully achieve this degree of sophistication.

 

Characteristics of a High Visibility Supply Chain

The predominant characteristic of a high visibility supply chain is an ability to establish, at a glance, the overall status of all elements of the supply chain together with the ability to dig down to get more details.

In the manufacturing context, it should be possible to determine that all inputs required for manufacturing are available, either in stock or as pre-planned deliveries. Ideally, there needs to be a degree of integration between the company’s, suppliers' and logistics operators’ systems to allow verification of the location and status of any order.

If something goes wrong, as it inevitably will, a high visibility supply chain will immediately flag that there’s a problem. Thanks to the integration with suppliers' systems, this should allow sufficient time to resolve the issue or make alternative arrangements.

 

Why Is Supply Chain Visibility Important?

Most modern supply chains are extremely complex. In a 2017 global supply chain survey of more than 600 high-level global supply chain professionals conducted by logistic company Geodis, 70% noted that supply chain complexity was a major issue with regard to supply chain visibility. It was interesting that only 6% of those surveyed believed their company had been able to achieve full visibility over all internal, inbound and outbound aspects of their supply chain. Most companies surveyed were unanimous in their view that improving supply chain visibility was as important to the organization as product availability and on-time delivery. As an indication of the importance of supply chain visibility, those companies with full supply chain visibility had achieved, on average, a higher EBIT related to turnover than those with limited visibility.

These figures illustrate the importance of high supply chain visibility and the advantage it offers over companies struggling at lower levels of visibility.

 

Different Types of Supply Chain Visibility

The requirements for supply chain visibility vary greatly depending upon the industry. In some instances, there’s the need to monitor and track individual components, while in others, tracking is at batch level. But, in both instances, traceability and visibility requirements include more than the physical location and status of components, but also quality control and other information such as:

·         Batch or lot number

·         Order information

·         Date of manufacture

·         Material certifications

·         Supplier information

·         Legal and safety certification

 

In some instances, manufacturers need to track individual products and components by their unique serial number or identification code. This is important in instances where products are similar but not identical, such as in vehicle manufactures where different trim and colour options apply. In other instances, what’s required is the ability to determine the status and location of batches of identical components or products to ensure market requirements are met.

In many instances, there’s the need for visibility that goes beyond Tier 1 suppliers through to Tier 2 and Tier 3 suppliers, to be able to determine issues that may arise from incidents and disasters that may affect raw material and component suppliers.

 

Issues Affecting Supply Chain Visibility

The biggest problem with supply chain visibility is getting information together in the right format and place. Taken holistically, a company’s supply chain starts with its smallest and farthest supplier and extends through the organization to the final customer. Tracking products through this network is a challenge, especially if the organization has different software packages for each application. Even within an organization, it may be hard to obtain supply chain visibility unless all-in-one ERP solutions are used like SAP, NetSuite and Oracle. Also, information must be current to be actionable, so it needs to be available in real-time. Another factor to consider is that the same information should be available throughout the organization, not just to the CPO, so salespeople talking to customers have access to exactly the same information as purchasing and logistics.

 

Techniques and Tools to Enhance Supply Chain Visibility

Taking into consideration supply chain complexity, the first step toward achieving supply chain visibility is to clearly define the organization's goals. Working on the premise of the need to learn to walk before you can run, these goals should be realistic and take into account the organization’s maturity level, its IT systems and expertise. Often it may help to bring in a third-party logistics specialist to assist.

This would likely include the need to review the IT setup and invest in appropriate supply chain software to interface with suppliers, logistics partners and corporate software. This may also entail the need for data conversion using electronic data interchange (EDI) processes to allow corporate systems to read and use suppliers’ information. Another possibility is to consider supply chain modeling software that’s able to extract and analyze appropriate information from the data warehouse.

 

Using IoT to Track Consignments

While it’s possible to use input from suppliers and logistics companies, direct tracking using IoT technology offers numerous advantages. Various tracking options exist, including RFID technology, connected IoT sensors and specialized low-frequency tracking networks able to track and monitor the location and status of shipments. Apart from the ability for real-time tracking, these IoT devices can monitor temperature, moisture, shock loads and other parameters essential for ensuring the safety and integrity of cargo.

 

Can Advanced Analytics Improve Supply Chain Visibility?

It’s already apparent that true supply chain visibility is an elusive target. Even when organizations have a state-of-the-art corporate system, it's likely there will be numerous supply chain visibility gaps to overcome. Additionally, information provided by transactional systems such as ERP and MRP2 software does not always facilitate the necessary step of guiding decision-making. Instead, all that these systems often provide is information that simply states whether a particular order is on time or not.

As Lora Cecere states in her article "Visibility: If Only I Could See," many companies struggle to interpret supply chain information and determine what to do. In her opinion, to achieve true supply chain visibility, companies need to move beyond knowing what’s happening (descriptive analytics) and to predicting what will happen, taking the step toward prescriptive analytics and cognitive analytics, which can guide informed supply chain decision-making.

Despite these challenges, there are many benefits of increasing supply chain visibility. Taking a leaf out of Cecere’s book, a good place to start may be to use advanced analytics software to access the organization’s structured and unstructured supply chain data. Using this software, it would be possible to create a model of the organization's supply chain, and then use it to increase supply chain visibility and determine the best supply chain decisions and trade-offs to help the organization move forward.


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Contributed by: Tim Blake, Business Modelling Associates (BMA). BMA is the official distributor for River Logic’s Enterprise Optimizer® platform across Africa