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Where In The World Is......?
A typical consumer product goods company will ship billions of items each year to distribution centers (DCs) and retail shelves across the globe. Keeping track of where product is whether in motion or at rest isn’t just a challenge being faced by this industry sector. It is a huge task for every business today.
By Mary Collins Holcomb, Ph.D.
The effort of keeping track of where things are increases in size and complexity due to the global operating environment and multiple supply chain partners who have unique business processes and information technology (IT) systems.
Access to, and the availability of, supply chain technology has never been greater than it is today. The Internet provided an accessible means for creating electronic networks that would enable trading partners to “see” product flow throughout the supply chain with minimum (or no) human touch to make this information available. Technology makes it possible to know where product is in the supply chain at all times through seamless, real-time access to information. This capability is what visibility is all about. Visibility allows all supply chain members to easily see and manage the flow of products, services and information in real-time or near real-time, from end-to-end as needed.
Visibility is the enabler that maximizes supply chain performance. Some specific examples of the benefits that can be realized are:
• Permits web-based order status from creation to delivery, decreasing the reliance on manual status checks for orders and shipments
• Allows proactive exception management and creates the ability to redirect in-transit, inventory-reducing, safety stock and expedited shipments
• Reduces cycle stock reorders
• Improves integration between your business units and your supply chain partners that leads to improvement in inventory turns
• Decreases supply and carrier variability that in turn reduces safety stock
• Enables measurement and management of supplier order cycle times, carrier transit times and trading partner contract compliance
• Improves management of transportation assets
Before the horrific events of September 11, 2001, efficiency and effectiveness in operations primarily drove the need for visibility within the enterprise and across the supply chain. Enabling visibility of inventory and product availability, and order status information, provided opportunities to drive down costs, improve service, and generally create value for customers and supply chain members. Security needs in the post-9/11 environment have made visibility even more important. We now realize that visibility in the supply chain also helps ensure safe and secure flow of product while keeping speed in the equation.
Assessing the State of Visibility
Since the mid-1990s, companies have been striving to capture and use time-critical business data that would enable them to become more flexible and responsive. Logistics was an early adopter of information technology for decision-making across a number of activity areas including vehicle routing and scheduling, order processing, and inventory replenishment. These systems generated a wealth of data for decision-making. While these systems generated a wealth of data, in most cases they were stand-alone systems (or tools) within the firm that were not integrated with other business planning and execution systems. The data from a particular system captured only a certain segment of the product flow. This lack of internal systems integration severely limited the firm’s ability to make data and information available to external trading partners.
Advances such as electronic data interchange (EDI), point-of-sale systems, and expert systems allowed many companies to reduce their costs and improve service. Various firms were even able to build competitive advantage by using technology to differentiate their offering. A growing number of firms utilized the data and information from these systems to respond more rapidly to events both planned and unplanned. The nature of this response was still reactive. With markets moving faster and faster, a company and its supply chain members need the ability to anticipate problems and provide a series of solutions that re-optimizes the event. The ability to achieve this level of supply chain management is only possible if true visibility exists.
Where are companies currently in their efforts to enable visibility? Providing the ability to know where product is in the supply chain is still primarily accomplished by relatively low-technology methods telephone and email. There is, however, some good news. Our research findings indicate that information visibility inside the enterprise is much better than external visibility. Inside the four walls of the firm, information such as finished goods inventory at the plant and DCs, customer order status, and outbound shipment status is moderately available. Visibility of this same information would be valuable to external supply chain members. The bad news is that this information is not as visible to external users. External supply chain members have the least visibility to demand forecasts, production schedules, and finished goods inventory at the plant.
Visibility also involves timeliness of information. Our research found that a significant percentage of internal users have timely supply chain data available for decision-making. Unfortunately, access to this information can be somewhat labor-intensive, as the majority of firms do not have a central database, applications, or hardware/software interfaces.
Logistics and supply chain professionals also reported that having real-time (or near real-time) information available would provide the means for companies to achieve two significant objectives: improve customer service and improve operating efficiencies. Although these objectives reflect the local firm’s perspective, they also have implications for the entire supply chain as currency of data and information effects speed and responsiveness in the marketplace.
How Does Your Firm Measure Up?
Because visibility involves people, processes, technology and information flows, it is an inherently complex issue. It isn’t as simple as making a list of the required elements. Instead, visibility enables capabilities that ultimately transform the way a firm and its supply chain partners conduct business.
How does your firm measure up with respect to visibility? Answering the following questions will provide a quick assessment of your firm’s current capabilities.
Simply score your answers to the questions as follows “1” if you have the capability, “0” if you don’t have the capability.
Can you ……
1) Identify the current location and status of your outbound shipments?
2) Identify current levels of inventory by location, by SKU?
3) Determine the status of customer orders, and the ability to fulfill their requirements (inventory, warehouse capacity, carrier capacity/availability,..)?
4) Notify customers upon order receipt regarding the ability to fulfill their requirements?
5) Respond proactively to order exceptions?
6) Develop and integrate these capabilities at the global level?
7) Reallocate inbound global materials while they are still in transit based on local current needs?
8) Identify intermediate points of inbound materials beyond order acknowledgement and order shipment?
9) Rapidly respond to events that interrupt product flow?
10) Proactively and seamlessly provide customers with their order status?
Total your points and multiple by 10.
In our experience, a score of 90 or higher is rare. Most firms typically score either 60 or 70. Analysis of firms with this score shows that the 3 to 4 missing capabilities are not specific to industry sector, size of firm, or supply chain position. Irrespective of whether you are in the electronics industry or the consumer package goods industry, possess small or large revenue base, are a vendor or a retailer none of these elements will be determinants in reflecting the capability that your firm currently has in place. Each firm seems to have developed a different roadmap for developing and implementing visibility across the supply chain. The median score (60 or 70) also indicates that enabling end-to-end visibility in the supply chain is challenging everyone.
Closing the Gap
Our research indicates that significant work remains for companies to enable visibility in the supply chain. The concept is easy to comprehend, but extremely difficult for supply chains to achieve. Individually, businesses know that having the ability to view orders, inventory and shipments would allow them to manage supply chain events in dramatically different ways. In an ideal state, a single, electronic, communications hub would automate the exchange of information and data between a firm’s business management systems (such as ERP) and the equivalent systems at suppliers, third-party logistics (3PL) providers, and customers. communications would not depend on the standardization of technology, data or message formats.
Managing complex, global supply chains has caused many firms to rethink how they approach the management of business. In order to reach and maintain the desired level of operations excellence, a firm and its supply chain partners must have the capability to answer “when, where, how, and why” in a manner that meets the information requester’s needs. Visionary firms are building this through visibility.
If this is the case, why hasn’t more progress towards true visibility in the supply chain been realized? The reality is that visibility entails multiple elements and layers like those detailed in the assessment questions above. Firms are struggling with many of these underlying issues such as connectivity and data collection, cleanliness, and accuracy. This doesn’t include the overarching structures people, processes, and technology that add to the complexity of enabling visibility. Last, but not least, the willingness to change and the capability to understand and use technologies are mandatory for the firm to be successful in creating and sustaining visibility. All in all, it’s a daunting effort for any company. Fortunately, the payback for the firm is tremendous the achievement of world-class operations excellence.
This article is based on collaborative research conducted by Dr. Mary Holcomb, University of Tennessee; Dr. Karl Manrodt, Georgia Southern University; and Mr. Tony Ross, Capgemini U.S. LLC Visibility: Tactical Solutions, Strategic Implications and Connectivity: Enabling Visibility in the Adaptive Supply Chain.