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