Global supply chains had a rough year in 2020. Between the global pandemic, Brexit, ongoing US–China trade tensions, and local disruptions, suppliers, manufacturers, and retailers alike struggled to work out the optimal course of action.
A year on, most industries are still operating under uncertain conditions. Only 21% of supply chain managers say they’re operating a highly resilient supply network today — one with good supply chain visibility and sourcing agility.
That doesn’t sound like a high percentage, does it? Especially given that most leaders started digitizing and hardening their supply chains about five years ago. Well, data from KPMG provides some telling context:
- 56% of organizations do not use tracking tools that allow for real-time reporting.
- 29% have no means for aggregating the overall risk exposure of the business.
These two numbers correlate well: When you cannot collect data, you cannot gauge risks or collect insights for decision-making. That makes supply chain recovery longer and more tedious. But more importantly, it underscores the need for adopting better supply chain visibility solutions.
What is supply chain visibility?
Supply chain visibility refers to a company’s ability to review, track, collect, and process different information throughout the supply chain and communicate it to other participants.
A supply chain is a complex mechanism, with multiple moving parts interlocked by causal relationships. Historically, most supply chain managers have focused their attention on addressing point issues at different links in the chain: procurement, manufacturing, distribution, or logistics.
But the current speed and scale of operations command greater visibility into every link. The latest generation of supply chain visibility software sets out to deliver a consolidated, 360-degree view into all aspects of the chain via enhanced big data analytics, innovative transportation and logistics solutions, and enhanced fleet management software so you can effectively identify emerging trends, predict outcomes, and exercise timely control over your operations. And ultimately, so you can achieve full supply chain transparency.
Supply chain transparency is a company’s ability to understand what is happening both upstream and downstream in the supply chain and share insights both internally and externally.
According to the MIT Center for Transportation and Logistics, there are two key aspects of supply chain transparency:
- Visibility: The ability to accurately identify, trace, and collect data from all links in the supply chain
- Disclosure: The ability to communicate this information externally and internally whenever required
The decision on how much to disclose is up to you. But remember: the provenance of supply chain data can be a powerful factor for market positioning. A “clean and green” agenda is important for modern consumers. So much so that they’re ready to pay 2% to 10% more for goods with transparent origins.
Supply chain visibility benefits: Why invest in technologies to see more?
Business leaders have a tempered view on cloud adoption for supply chains and logistics. Indeed, such initiatives are operationally challenging and budget-demanding. So what’s the payoff of investing in cloud-based supply chain visibility solutions?
Cost efficiency
Supply chain digitization helps you attain a better view of all operational processes and their efficacy. By knowing how each ecosystem participant contributes to shared goals and where bottlenecks occur, you can prescribe targeted action to each link to achieve greater good for the entire ecosystem. It’s impossible to attain cost transparency in the supply chain unless you know which factors are at play throughout the entire lifecycle.
Case in point: A chemical company used to have only country-based visibility into its operations. This fragmented view limited their ability to optimize logistics in the European region. After expanding their supply chain visibility to a regional level, the company managed to achieve 10% to 15% greater cost efficiency in inventory and transportation management — plus improve the percentage of on-time deliveries to end customers.
Improved customer experience
The customer experience (CX) has already overtaken price and products themselves as the biggest brand differentiator. The speed and quality of fulfillment and deliveries critically affect customers’ perceptions of your brand — both in the B2C and B2B sectors.
Over 95% of Millennial B2B buyers state that at least some of their orders require same-day delivery, with 71% of Gen Xers saying the same. Failure to meet the high bar of on-time delivery means a loss of business. Across sectors, consumers, distributors, and retailers are taking a hardline “deliver on time or pay the fine” approach when it comes to suppliers.
The same level of expectations extends to other supply chain management processes, including pre- and post-sales experiences.
87% of Millennial buyers say they’re likely to change a supplier to get better post-sales support, including recycling and training, in the next three to five years.
Reduced operational risks and waste
A greater degree of transparency in the supply chain helps you identify early signs of risks and operational inefficiencies. Suboptimal supply chain management choices caused 40% of food in the US food supply chain to go to waste, much to consumers’ and regulators’ dismay.
Other sectors are also struggling to contain losses, which can occur at different links in the chain. In particular, losses can be related to:
- Overproduction due to a limited view into demand and lack of forecasting capabilities
- Long lead times originating from missing data in the backend planning and scheduling system
- Unnecessary transportation resulting from gaps in logistics and fleet management
- Non-value added processing imposed for the lack of better data-backed judgments
- Excess inventory and suboptimal inventory management processes stemming from lack of coordination and centralized planning capabilities
- Routing issues and expensive last-mile delivery resulting from a lack of visibility into transportation
The above sources of waste (and the inability to identify them) further magnify the scope of supply chain risks. In fact, 57% of leaders struggle to understand enterprise-wide risk exposures within their supply chains. That’s problematic because such blind spots can be costly.
For instance, you may struggle to notice the onset of the bullwhip effect within your supply chain — a point when the downstream demand (at the customer level) causes greater variance at the upstream (manufacturing) level. When such a distortion happens, the cost of production or procurement can outweigh the cost of holding inventory. Research suggests that a one-point reduction in the bullwhip effect ratio translates to $26 in inventory cost savings and a stockout reduction of 0.15 days for one product per year. The problem is that most businesses cannot identify such fine-grained optimization opportunities without proper supply chain visibility tools.
Ultimately, real-time supply chain visibility can help businesses achieve other operational goals too.
Real-time visibility could aid supply chains in other goals
Source: Supply Chain Dive — Supply chain visibility is “awfully low,” but improving it can aid operational goals.
How to improve supply chain visibility with emerging technologies
There’s no shortage of supply chain transparency software and monoline solutions for addressing supply chain transparency issues at certain stages. Yet 85% of business leaders struggle due to inefficient digital technologies in their supply chains. Why?
The short answer is because supply chain visibility is hard to get right. By design, supply chains were never meant to be transparent.
- Manufacturers and suppliers prefer not to disclose too much information to maintain a competitive advantage or prevent criticism.
- Upstream supply chain data is rarely collected or may contain errors due to missing data management practices.
- The ROI of investing in supply chain transparency has been elusive for a long time. Hence, justifying investments in transparency has been tough.
In 2021, every leader recognizes that data is key to effective supply chain management. However, insights are impossible to obtain without breaking through existing silos and implementing new track and trace solutions, be they IoT- or blockchain-based.
Both internal stressors (higher efficiency, lower operating costs) and external stressors (consumer demands, emerging compliance requirements) force businesses to act fast.
How can you ensure that your new supply chain visibility software becomes an enabler — not a constraint — to better supply chain management?
You’ll need a proper roadmap for adoption featuring the right mix of people, information, and technology. Here’s one we propose:
1. Complete supply chain digitization
In 2017, organizations have digitized 43% of their supply chains on average. In 2021, the number is closer to 70% to 90%. If you’re not quite there yet, prioritize the outstanding use cases.
Effect of push technologies and pull demand on the digital supply chain
Source: PWC — How digitization makes the supply chain more efficient, agile, and customer-focused
Companies that have successfully completed supply chain digitization now have:
- Integrated planning and execution capabilities
- Complete shipment and logistics visibility
- Efficient spare parts management
- Smart warehousing operations and shipping container tracking
- GPS-based asset tracking for equipment and products in and out of facilities
- Predictive and prescriptive supply chain analytics capabilities
Pursue one use case at a time. First, improve your ability to collect all necessary data for one function (e.g. logistics) or all Tier 1 or 2 partners. Such point improvements will provide a lift in operational metrics and help you build a business case for further improvements.
Some leaders in the space have even gone as far as creating supply chain digital twins — a digital representation of certain entities within the supply chain such as logistics operations, warehouse and distribution centers, or manufacturing facilities.
2. Enhance your data analytics capabilities
Data is a means to an end for achieving transparency in the supply chain. If it’s siloed, unavailable, or contains errors, you can’t use it to drive continuous improvements.
As part of your digitization plans, you should also work on a new data management strategy for your operations. In particular, you should:
- Identify and consolidate crucial data sources. Most managers struggle to obtain upstream data as well as rapidly locate and access downstream data. Run an inventory of existing data sources and request access to extra information from all ecosystem participants. Then consolidate data streams into a secure data lake — a centralized repository that will act as the ultimate source of truth.
- Develop a data governance framework. For 60% of SCMs, poor master data quality, standardization, and governance are the biggest blockers to mastering the digital complexity of supply chain operations. It’s important to focus on creating unified data catalogs and standardized data asset repositories for both external and internal real-time data sources. Ensure that you’re using consistent rules for validating data sources, can conduct timely data audits, and ensure utmost security. Automate the process of capturing, cleansing, and maintaining supplier data. A strong data governance framework lays the groundwork for subsequent supply chain analytics adoption and increases your teams’ effectiveness.
- Consider different big data analytics scenarios. Supply chain analytics comes in different types — descriptive, diagnostic, predictive, and prescriptive. The latter two are in the highest demand. Predictive analytics solutions are well suited for an array of use cases: demand forecasting, spare parts management, fleet management, warehousing, and container shipment management, among others. However, all of these scenarios require a strong data culture and high data management maturity. Without good training and data validation, even state-of-the-art machine learning algorithms will fail to yield accurate results.
3. Improve transportation and logistics visibility
Logistics arguably remains the sore spot in supply chain management — especially in response to the latest disruptions due to the global pandemic.
Per Capgemini, 70% of organizations named “inbound and outbound logistics” as a key focus area for improving supply chain sustainability in 2021. In addition, over half of managers are seeking ways to contain the following costs:
- Outbound transportation costs
- Inbound transportation costs
- Reverse logistics costs
Sustainability and cost optimization can be effectively tackled with similar remedies — end-to-end tracking and intelligent routing software.
The ability to track and trace shipments is a basic requirement for most suppliers. But such baseline visibility doesn’t suffice when it comes to cold chain logistics or next-day deliveries.
To better understand how their assets move (and in what conditions), SCMs should look into tracking technologies that prove real-time visibility, such as:
- IoT sensors for precision tracking of assets and their transportation conditions (temperature, pressure, position, real-time location)
- RFID and NFC tags for providing real-time visibility into product movements through warehousing and logistics facilities as well as for monitoring stock accuracy and inventory levels at different locations
- GIS and GPS data to enable asset and equipment tracking as well as real-time route optimization and estimated time of arrival (ETA) calculations
Data from all these sources can be connected to a centralized logistics management solution for managing on-premises assets, incoming and outbound shipments, fleets, or scheduled pickups by third-party logistics providers from a single interface.
Strengthening your supply chain vision
The nineteenth-century retailer John Wanamaker once said: Half the money I spend on advertising is wasted; the trouble is I don’t know which half.
In the twenty-first century, many supply chain managers operate under the same principle: They have a limited view into waste areas and constrained abilities to harness improvements. The good news is that supply chain management technology has made a significant leap in the past five years alone. You no longer need to guess — you can tell with great precision when disruptions and inefficiencies occur with the right supply chain visibility solutions.
Contact Intellias to discuss your journey to end-to-end supply chain visibility and improved logistics and transportation management.
