Today’s Supply Chain Secret Sauce: More Visibility, Fewer SilosNovember 16, 2011 by Michael Koploy
Improving visibility is a high priority for many supply chain leaders. In fact, a May 2011 study by Capgemini found that improving supply chain visibility was the top initiative for executives, with 45 percent of respondents putting it at the top of their lists.
There are a number of benefits that can be realized with improved visibility, including optimized inventory, improved forecasting and increased collaboration. So what’s hindering leaders from achieving visibility? According to Karin Bursa, Vice President of Logility, one of the biggest challenges is that leaders often lack access to the data they need to make decisions. “The problem is many companies either don’t have access to [data], or are spending too much time trying to make heads or tails of the data,” she says. “The right visibility affords the supply chain team to proactively identify and resolve issues.”
I would agree. By creating more transparency throughout the supply chain, managers can prioritize where to invest in network improvements. Today, integrated software solutions are essential in helping leaders collect, manage and share the types of data that make this level of visibility and proactive decision-making possible.
Spreadsheets Lead to Delayed, Disconnected Data
The first step to increasing levels of visibility is abandoning what Bursa calls a “silo-based approach.” Or more specifically, organizations will need to move away from spreadsheets and isolated software systems, which limit access to real-time information.
The truth is, very few supply chains can be considered “simple” anymore. Even companies with streamlined product lines often source from all over the world. Therefore, access to accurate data in real time is vital to an organizations’ ability to plan, analyze and react.
When using spreadsheets, there’s a wide range of potential issues – from information being more difficult to track down to out-of-date and inaccurate information. Additionally, these offline spreadsheets are often disconnected from other supply chain members – making it more difficult to keep track of key aspects of operations. Yet even with these drawbacks, many can’t beat the Excel addiction. Spend Matters Editor Jason Busch even wrote a comical article on the topic, likening Microsoft Excel to an addictive substance for procurement experts.
However, “Excel junkies” aren’t limited to procurement departments. According to Logility’s Bursa, spreadsheets are still a primary source of frustration throughout the supply chain. “Just mention, ‘death by spreadsheets,’ to any supply chain practitioner and you’ll get a nervous chuckle of agreement,” says Bursa.
The answer to this dilemma goes beyond simply ditching spreadsheets or adopting a standalone supply chain software solution. Rather, organizations should look to adopt a centralized suite of software solutions that connect various departments, suppliers and distribution partners.
Software Collaboration Required for Visibility
By creating a centralized network of software, organizations can increase communication and share information in real time – giving leaders an accurate picture of the supply chain at every critical point.
The U.S. Navy, for example, recently adopted such a supply chain hub. In the article, John Simone, CTO of IBM’s Public Sector Supply Chain Practice, notes this hub supports approximately 8,000 transactions per month. It’s an approach that’s already proving beneficial, with a reported $2.5 million in cost savings. Establishing this type of network means adopting an enterprise software suite that offers integrated forecasting, sourcing, purchasing, warehousing and transportation applications.
While the hub system is ideal, it requires all departments and groups within the supply chain to adopt an enterprise solution suite in unison. However, some businesses would rather use the departmentalized route: Invest in best-of-breed applications for each specialized group on an as-needed basis. Whether researching a sourcing, supply chain planning or warehouse management system (WMS) application, organizations should be on the lookout for a few core requirements that will assist in visibility improvement:
- Automatic identification and data capture (AIDC) throughout the entire manufacturing and logistics life cycle.
- Visible inventory data that is accurate, up to date and accessible to users across the supply chain.
- Programmable and pre-set notifications that alert pertinent groups and empower increased collaboration.
In an article, John Atherton, VP of Strategic Consulting at GT Nexus, stresses that executives need to turn on the lights and focus on visibility if they want to make sound investments in the supply chain that yield the highest return. By adopting solutions with these features, supply chain managers gain access to not only more accurate inventory data, but can also obtain greater insight into all supply chain processes.
Three Examples of Visibility Impacting the Supply Chain
To get a better idea of how visibility can impact the supply chain, let’s look at how it can directly affect supply chain planning, procurement and execution. Some examples of how managers can take advantage of increased visibility include:
- Improved inventory policies. Supply chain planners can ditch “rule of thumb” inventory policies (such as holding 20 days’ worth of supply for all products), and analyze inventory rules on a per-item basis. They could analyze the impact on costs of changing service levels, such as a change of 98.0 percent to 97.9 percent customer service.
- Accurate procurement analysis. Purchasing leaders can include prior supplier performance when considering recurring bids. Additionally, visibility allows purchasers to more accurately analyze spending habits, prioritize commodities and identify areas to improve.
- Better communication with transportation and manufacturing. With electronic data interchange (EDI), information from manufacturing and transportation departments can be integrated and compiled within the warehouse manager’s WMS. All parties can be notified of an incoming shipment or a production delay – smoothing out the entire logistics process.
As shown above, improved end-to-end visibility allows supply chain managers to better automate day-to-day activities and focus on more strategic responsibilities – leading to operational excellence that can reduce costs and increase efficiency.
Now I would like to open up the discussion to hear about more real-world anecdotes of visibility and what it provides. If you’ve engaged in initiatives to improve visibility, or had increased visibility lead to cost savings, please share your comments below.
Thumbnail image created by eduardomineo.