Gaining Supply Chain Visibility

Posted by Mark Brousseau

An interesting article from Compass Bank on supply chain visibility:


Supply Chain Visibility for the Mid-Market

In the summer issue of Compass on Business magazine, we offered, “Fast Forward: The Demand-Driven Supply Chain.” The article contained a sidebar called “Global Supply Chain Success Factors.”

Among the best practices we’re now hearing more about is supply chain visibility, which has been in place for large companies with complex operations for some time, but is now becoming more prevalent for companies of all sizes.

“Supply chain visibility is about balancing supply and demand, and using the links in the chain to understand how each impacts your entire business,” says Kai Trepte, co-founder of supply chain consultant John Galt Solutions. “How you go at it depends on your focus. Let’s say you’re a customer-focused company. If we break the supply chain view down into three parts, you start with having visibility around what the customer needs. Part two is what the people who support those customers need (i.e., retailers, distributors, manufacturing partners, etc.) The third component is looking at what you need for the people who support you—what you require of your manufacturing organization or of the outsourced partners who support you.”

In essence, total supply chain visibility offers the opportunity to look backward at all the isolated elements that went into creating and delivering the final product, and using that visibility to make every part of the process more efficient.

Supply Chain Challenges
It seems logical enough, yet, according to a recent survey of supply chain professionals by global supply chain research group Aberdeen Group, 75% of respondents rate supply chain visibility as among of the most challenging issues they currently face. Why has it been such a challenge?

It’s only recently that many companies have put enterprise resource planning (ERP) technology, warehouse management or return management systems—the technology that tracks the supply chain—in place.

“There have always been a number of tools available, but they’ve been expensive and time-consuming to implement,” Trepte says. “Solutions that are less complex and expensive are fairly new to mid-market companies. With lead times getting shorter and global outsourcing making product delivery times longer, greater inventory and supply chain planning have become the tools executives and managers use to make the most of the process. Five years ago, you never saw anything written about supply chain efficiency, now it’s the ‘next big thing’ in terms of gaining or maintaining marketshare.”

Benefits and strategies
The key benefit of supply chain visibility is that it allows for highly efficient planning, giving companies the opportunity to collect and analyze distributed data, generate specific recommendations and match insights to strategy.

“When you look at the metrics stored in any ERP or related system—inventory turns, forecast accuracy, periods of coverage, etc.—they’re typically backward-looking,” Trepte says. “Having data that allows you to plan and forecast going forward really changes your focus. That forward plan lets you know, for example, when inventory turns are decreasing and that you may need to get additional capital funding to cover a brief down period. Supply chain visibility allows you to do more than just react to immediate issues; it shows you the trends and makes the entire company more forward-thinking.”

In the current supply chain environment, visibility is taking on an increasingly key role. With new technologies, like radio frequency identification (RFID), becoming the norm in retail and government contracting applications, a planning system is rapidly becoming a “must have.”

“RFID is a tool that offers even greater granular and faster, real-time visibility, but it can’t exist in a vacuum,” Trepte notes. “It works best as part of a solution, improving the ability to see products at any time, anywhere in the chain and plan accordingly.”

As far as implementing a system is concerned, Trepte says that it need not be a complex endeavor. “In the mid-market, it makes sense to start small and use a solution that can scale up with you,” he notes. “We look at it as a ‘walk, fly, drive’ continuum, in which you take a series of small steps until you get to a more robust supply chain solution that meets your needs.”

Here’s how Trepte classifies each step:

• Walk—The first step can be as simple as using an Excel spreadsheet to do statistical forecasting and order planning, so you move from simply placing orders to order planning based on the history you’ve developed. You want to get people to buy into and utilize the plan.

• Drive—“Next comes automation and systemization,” says Trepte. “This is where you’ll create your key performance indicators, or KPIs, and benchmarks. The process supports demand and inventory management, sales and operations planning, rough cut capacity planning, promotion management, etc., and provides output to people who execute on those parts of the operation.”

• Fly—At this stage, you’re sharing information, in real time, throughout the supply chain.

“At the end of the process, you’ve achieved true supply chain visibility, and it’s transparent throughout your organization,” concludes Trepte. “Once you’re synchronized to that degree, planning and communication become easier and support is better—you begin to benefit from the optimum efficiencies you’re developed.”

What is your organization doing to gain supply chain visibility?

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