"Winning" Companies Improve Supply Chain Visibility

Stephen DeAngelis

August 08, 2012

In American Shipper‘s third annual International Transportation Management Benchmark Study, author James Blaeser asserts that the best international transportation management (ITM) companies (whom he calls “the winners”) meet three key criteria. These key criteria all relate to supply chain visibility. These winners:

“• Report that they are capable of sending an electronic purchase order (PO) (such as an EDI 850 file) to a logistics service provider (LSP).

“• Have visibility to shipment specifics five or more days in advance of shipping. These details include the number of containers, cartons, weight and dimensions of the shipment.

“• Meet or exceed the targets provided to them by their transportation procurement function.”

Blaeser asserts that “data quality is the cornerstone of visibility.” He explains:

“International transportation is an inherently collaborative exercise that demands electronic connectivity to logistics providers and other suppliers. … Those connections are only going to be as useful as the data that they transmit. Survey respondents were asked to rate the quality of data provided by various providers in terms of timeliness, accuracy and completeness. The results are surprisingly good if you believe the conventional wisdom that carriers, in particular, do a terrible job providing quality data.”

That is good news. Not all of the news, however, is good. Blaeser notes, “[For many firms,] visibility is getting worse when measured by how many days prior to shipment a company knows the specifics, such as the number of pieces, weight, etc.” The best companies (Blaeser’s “winners”), “are actually getting better. Bear in mind winners only needed five days notice to qualify as a winner, and here the average winner has 16 days.” Blaeser concludes:

“Here’s where the ROI comes into play. Companies that have visibility to shipment specifics can optimize their transportation plans. Goods that are needed faster can be expedited to market. Costs can be taken out through mode shifts to lower cost options where applicable. Destinations might be changed altogether to take advantage of other opportunities that have arisen, or to overcome unforeseen disruptions that have come up since the PO was cut. There are many scenarios that can play out; the point is none of them exist without visibility.”

John Yuva, editor of Inside Supply Management, reminds us that achieving supply chain visibility is not easy. [“Transparency Runs Deep,” April 2012] He writes:

“The global marketplace is a volatile space for any business. Maintaining the supply and demand balance among suppliers and customers requires transparency on several levels. Input of and access to accurate and timely data are necessary to achieve a balanced supply network; however, gaining real-time visibility throughout multiple tiers of the supply chain remains an elusive endeavor in many companies.”

Lalit Wadhwa, vice president of global supply chain operations at Avnet, told the staff at SupplyChainBrain that visibility is especially important for supply chains that are highly complex and geographically dispersed. [“Evolving Requirements for Supply Chain Visibility,” 31 May 2012] Wadhwa stated, “A product might be designed in North America or Europe, but it generally is manufactured and assembled somewhere in Asia. The result is that, at any given point in time, the OEM really doesn’t know what is happening at each manufacturing location. Visibility to the extended supply chain is what OEMs want.” The article continues:

“Lacking this visibility has negative implications in three areas, Wadhwa says. The first is inefficient use of working capital. ‘If you don’t know what inventory is in the supply chain around the world, chances are you are duplicating inventory and making things you don’t need,’ he says. The second negative impact of poor visibility is very high process costs, particularly expedited transportation costs. The final and largest impact is an unsatisfied customer, which ultimately will lead to loss of revenue, he says. … Supply chain visibility requirements for electronics OEMs continue to evolve, Wadhwa says. ‘Our customers now want to see not only what is happening within their supply base, but what is happening in the next tier of suppliers,’ he says. ‘They want to know that those suppliers are able to deliver as promised and will not cause a manufacturing delay.’ In addition to next-tier visibility, OEMs also want the next iteration of solutions to enable companies to quickly tie together multiple nodes in the supply chain, such as demand signals and the supply base, in a cloud environment. Third, they want a solution that can be deployed very rapidly and at low cost, says Wadhwa.”

As Blaeser noted above, “Data quality is the cornerstone of visibility.” Just as important as data quality is data management. John Fishell, Vice President of Product Management and Training at Apriso Corp., writes, “Increasing complexity, information overload and rising quality levels are driving fundamental changes across a number of industries. This has created a greater need for manufacturing intelligence coupled with a need for better systems to manage the ‘flow’ of information.” [“Maintain Quality in a Complex Supply Chain With Better Information Management,” SupplyChainBrain, 31 May 2012] Fishell continues:

“Managing the flow of operations data from manufacturing operations and suppliers, while keeping an eye on quality and customer demand, is a delicate balancing act, especially as businesses increasingly rely on global, multi-tier suppliers for critical components. As a result, manufacturers need to proactively meet complex supply chain issues head-on by making better use of data to enable greater manufacturing intelligence through the use of expanded flows of information, driving higher quality and responsiveness standards.”

Data management, of course, relies heavily on the ability to integrate data from disparate sources that use various formats. As Fishell notes, “Today’s factories increasingly rely on data from multiple sources along the supply chain to produce their output.” Adding to the challenge is the fact that these multiple sources are “generating record volumes of information” and, for best results, this data should be dealt with “on a more real-time basis.” Fishell continues:

“In other words, collecting operations data at the end of the week or the month will no longer suffice. Do you need to know information on every factory every minute? Certainly not. But, if you have a performance issue, supply issue or supplier quality challenge, then the faster you can respond and take corrective action, the smaller your problem becomes and the less of an impact on your customers. Balancing this information flood is becoming increasingly difficult to not only sort and analyze, but to simply manage effectively without potentially crippling many manufacturing operations in the future. It’s not going to get any easier. Industry estimates suggest volumes of information are now growing worldwide at a minimum of 59 percent per year.”

Because the volume of data is big and getting bigger, the best visibility solutions will analyze the numbers and alert decision makers only when problems are detected. This management-by-exception approach frees high-priced talent to deal with problems when they arise but otherwise frees them to pursue other activities when operations are running smoothly. As Fisher puts its, “Although technology has already streamlined factory operations and relationships along the supply chain a great deal, the ability to intelligently process and use an ever-increasing volume of information, both quickly and efficiently, will be an important differentiator between the companies that succeed and those that fail in a global business environment.” He continues:

“Winners will know what is going on faster, and are typically also capable of implementing change quicker. Moving faster creates sustained competitive advantage by better meeting the needs of tomorrow’s customers – a ‘must have’ advantage to compete in the future.”

Fishell insists that better information management also improves product quality control; thus, preventing devastating blows to a company’s reputation. He explains:

“Quality has taken on a whole new level of importance for manufacturers. However, maintaining a high-quality level in a global, complex supply chain has become increasingly challenging. The brand damage that has resulted over the past few years due to low quality products has been substantial. … No longer is it sufficient to simply identify a quality problem. It must now also be possible to take immediate corrective action to contain any potential fallout from a quality issue. With today’s tight production schedules and Just-In-Time inventory strategies, a quality problem along the supply chain left unchecked can quickly balloon into a very serious issue – one that significantly impacts brand integrity and the bottom line. … In order to strike the delicate balance between quality, cost and managing product complexity, many manufacturers must now consider new ways to generate efficiency. This includes streamlining operations, performing continuous improvement checks and improving the way they work with suppliers and partners all over the world. Importantly, each of these activities requires a higher level of visibility into a company’s manufacturing operations and, especially, those of its suppliers and partners.”

The bottom line is that visibility affects all aspects of a supply chain and supply chains affect all aspects of a business. Fishell insists that visibility challenges “need to be met with more standardized processes and standardized data, resulting in better analytics. Manufacturers need to empower managers with the right systems, tools and information in order to respond quickly to new, developing situations as they occur.” Fishell concludes:

“Complexity, quality and data overload are driving the need for greater manufacturing intelligence, which in turn is driving fundamental changes across the manufacturing industry. As supply chain complexity continues to increase, companies will be tasked with even greater data and process visibility demands in the years to come by customers, strategic partners, shareholders and employees alike. Fortunately, technologies exist to begin to address these challenges. The visionary companies that understand the need for greater visibility into their manufacturing performance now have the opportunity to gain significant market share in the future.”

I couldn’t have said it better.