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Supply Chain Visibility

September 6, 2011


Supply chain visibility is a characteristic that most analysts believe will be increasingly important in the years ahead. They also admit it will be difficult to achieve. In an IBM study that involved conversations with nearly 400 supply chain executives worldwide [“The Smarter Supply Chain of the Future,” IBM Institute for Business Value, October 2010], visibility was singled out as the top challenge facing supply chains of the future. In another IBM study [“New rules for a new decade,” IBM Institute for Business Value, October 2010], Karen Butner asserts that visibility is one of the three “Vs” on which supply chain experts need to concentrate. The other “Vs” are volatility and value. Here’s how she defines the three Vs:

Volatility: Complex market conditions causing constant flux in demand.

Visibility: Need for integrated, timely information to make rapid decisions.

Value: Constant pressure for the supply chain and operations to create enterprise value.”

Beyond that one-line description of visibility, Butner writes:

“As the number of supply chain partners increases, the need for accurate, time-sensitive information becomes more acute. But lack of collaboration and integration between supply chain and product development partners continues to be a major concern. Product lifecycle traceability in consumer products, pharmaceuticals and other industries is a growing requirement. Yet, despite continued technological enhancements, lack of visibility to worldwide, timely information to make in-stream decisions remains a significant issue. The bottom line is that the requirements for increased visibility require the dexterity to make fast decisions in response to constantly changing market conditions.”

Butner’s point is an important one — exposure to an increased amount of data is only a good thing if it helps executives make better and faster decisions. To help executives determine whether they have the right amount of visibility in their system, Butner asks several questions. They are:

“• Do you have real-time visibility on key control point indicators, i.e., forecasts versus orders, schedules versus production capacity, inventory in transit, shipment status, etc.?

“• Do you have integrated performance management of all events with real-time dashboards, key performance indicators (KPI’s), event alerts, and performance thresholds? Do you closely collaborate with your supply chain partners?

“• Is your performance measurement system centered on customer goal achievement? Is that aligned to global versus regional versus local strategies and tactics?”

To read more about Butner’s report, see my post entitled IBM Recommends New Rules for Supply Chain Management. The folks at SupplyChainBrain assert, “Supply chain visibility is no longer just about having a ready answer when customers ask, ‘Where is my stuff?'” [“Using Visibility to Target Supply Chain Inefficiencies,” 15 August 2011] In an interview with the SupplyChainBrain staff, Steve Hensley, president of Blue Sky Technologies, claimed that the “where’s my stuff” problem “has been conquered and companies now are using visibility solutions to identify hidden pockets of inefficiency in the supply chain.” I’m not sure that many supply chain managers would agree that the problem has been “conquered.” Certainly supply chains are better at following inventories than they have been in the past; but, perfection has not been achieved. For more on that topic, read my post entitled Supply Chain Opacity: Looking through a Glass Darkly. That caveat aside, Henley’s point about how else supply chain visibility can be helpful is important. His specific point is that data can be used to ensure that every minute is used wisely and productively. The article continues:

“Identifying the loss of five minutes here and 10 minutes there can quickly add up to big savings when applied across thousands of employees, Hensley says. He notes that one of Blue Sky’s clients improved productivity by 11 percent, while another reduced indirect labor costs by 20 percent ‘just by looking in the cracks of the supply chain and identifying where things were not flowing as they should.’ One example of efficiency gaps might involve a warehouse employee who is supposed to get his first assignments within five minutes of clocking in at 7 a.m., says Hensley. ‘If this worker doesn’t get his first assignment until 7:15 a.m., it is a violation, but previously there was no way to track of enforcing this. By marrying data between the clock-in system and the warehouse management system, companies can get smart about these types of events,’ he says. Similarly, a 15-minute break in the middle of the day might turn into a 20- or 25-minute break. ‘One client found 1,800 such infractions averaging 6.5 minutes each in the first week,’ says Hensley. ‘That doesn’t sound like a lot until you start putting $38 per hour to it. All of a sudden, you are talking big money.’ Blue Sky’s technology is able to mine hundreds, thousands or millions of transactions to look for things that ‘just don’t look right,’ says Hensley. This could involve employees’ use of time, product throughput, or someone cheating on a labor standard, he says.”

Although no one really enjoys having big brother constantly looking over their shoulder, minor breaches of standards can accumulate into major challenges when supply chain efficiency and cost reduction remain high priorities for companies and consumers alike. Returning to a more traditional discussion of supply chain visibility, James LaTart appears to disagree with Hensley that most supply chain visibility challenges have been conquered. “For well over a decade,” he writes, “we’ve talked about how supply chain visibility will help minimize the impact of disruptions, decrease order cycle times and risk, and improve service levels. Yet, after all these years, why are people still talking about supply chain visibility like it’s in the future?” [“Invisible Visibility,” Logistics Viewpoints, 2 August 2011] The obvious answer is that visibility challenges remain. LaTart infers that Hensley isn’t alone in believing that visibility has been achieved. He writes:

“You may be thinking you’ve had visibility within the four walls of your DC for years via your warehouse management system (WMS). If you have multiple DCs running the same WMS, you probably have visibility across those as well. But if you have multiple warehouse management systems, often through acquisitions or decentralization strategies, or if you have smaller warehouses and storage facilities that are not automated, your visibility may be severely restricted.”

LaTart would probably agree with Hensley that the challenges he points out would qualify as “hidden pockets of inefficiency in the supply chain”; but, these are pockets involved with the “where’s my stuff” problem. LaTart, however, believes that trans-organizational visibility is far from being conquered. He writes:

“What happens when you go outside your organization to suppliers, co-packers, contract manufacturers, 3PLs, distributors and other partners? Chances are visibility across this environment is slim to none. Why is that exactly? It’s not the technology — system-to-system data sharing has been around for decades. It’s just that people don’t want to share. We’re afraid our partners won’t keep our data secure, or that they might use it somehow to take advantage of us. But the fact is supply chain leaders have been exposing their data to partners for years through networks such as Walmart’s Retail Link. The demand-driven, hyper-competitive global marketplace is forcing companies to collaborate to meet customers’ heightened demands for lower costs and faster, more personalized service. Accomplishing it requires cooperation and collaboration between all members of the value chain, and that means sharing data.”

I’ve been writing about transparency and trust since the earliest days of this blog. Those subjects affect all sorts of transactions not just not supply chain activities. For my latest post on this topic, see Globalization, Trust, and the Supply Chain. LaTart claims that the solution lies in the clouds. He continues:

“One solution is the much-hyped, under-utilized cloud, with a new class of collaboration applications that allow trading partners to share information about orders, inventory, and shipments over secure private networks, similar to how information has been shared internally for years, but with tighter control over security.”

As I have noted before, my company, Enterra Solutions®, believes that Attribute-Based Access Control is an excellent way to ensure that the right data gets to the right people at the right time while ensuring that other proprietary data is unavailable to prying eyes. LaTart continues by providing an example:

“A typical CPG company with multiple plants, suppliers, and co-packers is likely receiving raw materials from many suppliers for use in their plants, as well as for use by contract manufacturers that make some of their products. For traceability and potential recall purposes, they have to track these raw materials across their network, and the finished goods these materials went into. They also need to know when and from which suppliers and plants all the finished goods are coming from in order to plan customer order fulfillment. As you can see, gaining visibility to materials and goods across this network is a major challenge. Now let’s move this scenario to the cloud. What if all of this CPG company’s raw materials and finished goods suppliers, contract manufacturers, co-packers and other partners could easily enter inventory information through a private cloud portal hosted by the company or a third-party hosting service? Suddenly, all the information the CPG company needs for traceability and fulfillment is at their fingertips. Built-in tools would handle the translation and integration of transactions in various formats from the network partners so the IT stumbling block is removed. Other tools would allow the company to assign security and access to information based on partner and user roles. Tools might also provide capabilities for placing orders, arranging shipments and processing billing.”

The fact that few such systems actually exist (though they do seem to be increasing) is why LaTart claims that today visibility is invisible. He concludes:

“With this type of collaborative cloud capability, visibility is no longer invisible. The CPG company has immediate visibility to all of the information it needs to compete more efficiently and effectively, as well as the traceability required for compliance or recalls. And suppliers become more efficient and better partners. Just think, maybe all of that talk about the benefits of supply chain visibility will finally come true!”

Matthew Menner, senior vice president of Transplace, claims that instead of providing the basis for confrontation, improved collaboration and information sharing results in “more constructive and improvement-oriented conversations.” He says, “When the right information is gathered, and there is confidence in its accuracy, companies can use that data to analyze supply chain operations and present it internally and to partners as a basis for improvement.” [“Attacking Transportation Challenges in the Retail Supply Chain,” SupplyChainBrain, 27 June 2011] In other words, supply chain visibility may require trust but one of its resulting benefits is an increase in trust. Supply chain visibility can help reduce natural tensions and align stakeholder partnerships in more positive ways.

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