Supply Chain Visibility

If manufacturers understand the importance, why aren’t more able to incorporate it?

By Terry Weiner, MEP Supply Chain Optimization team member

In most of the surveys we see about supply chain challenges, it is supply chain visibility that consistently ranks near the top as most necessary. Okay, but why is visibility so important to overall success?

According to Jeff Dobbs, Global Sector Chair, Diversified Industrials and a partner with KPMG, “obtaining real-time visibility across all tiers in the supply chain can significantly increase speed to market, reduce capital expenditures and manage risk.” He went on to make this profound statement, “moving toward a demand-driven supply chain is probably the single most important step a global manufacturer can take today.”

Yet, most organizations don’t have visibility of key supply and demand data for more than one tier up or down from their own position.

In the ideal world of a demand-driven supply chain, flow of product to the end customer and from the furthest upstream supplier, is synchronized to provide a smooth and efficient flow of material. In this ideal, the supply chain is also responsive to variations of demand.

The goal of supply chain visibility is to:

1. Reduce business and supply chain risk
2. Improve lead times and performance
3. Identify shortage and quality problems along the supply chain

So why is this ideal state so difficult to achieve?

To understand the problem we need to first look at the real world as it exists today.  To begin with, information in most organization exists in silos.  The sales department has its projections and budget, production has its production schedules, buyers have supplier cost and delivery schedule data, etc. The focus of this fragmentation of data is designed to serve the purposes of the individual departments in the organization instead of that of the entire supply chain.  In addition, each of the suppliers and customers has their own silos of information, not commonly shared with other supply chain partners.

In a recent Gartner research paper (April 2013) the goal of supply chain visibility was described as follows –

“The aim of end-to-end supply chain visibility (E2ESCV) is to provide controlled access and transparency to accurate, timely and complete events and data — transactions, content and relevant supply chain information — within and across organizations and services operating supply chains.”

So how do we get there from here?

A concept that has gained a lot of discussion lately is that of the supply chain control tower.  The control tower makes key data available to the partners in a supply chain facilitating coordination of customer demand with supplier response. For a supply chain control tower to transform available data into usable information, development is required in three areas:

1.    � Processes – Processes need to become more collaborative, with data sharing and planning being done across departments as well as between organizations. Coordination of sales projections and the supply chain can assist in helping suppliers to anticipate future demand.  Organizations need to develop specific data requirements that can be shared between partners in the supply chain to make demand planning possible.

– Risk management also needs to be implemented to mitigate the potential of supply chain interruptions.

2.     Relationships – Information must be shared across processes not only within the organization, but within the functional silos such as planning, sourcing, production, and delivery. It also across requires information sharing between business functions and outside the enterprise, providing a real end-to-end process view to all supply chain partners.

– Collaboration is needed to foster a level of trust between tiers. Information has to be shared across the supply chain in order to connect partners in the network and provide a real end-to-end process view.

3.    � Technology – A major challenge in the sharing of information between tiers is the problem of passing data between disparate information systems.  How do you connect a company with an enterprise-wide ERP system with a supplier who manages their business on a spreadsheet? Innovations such as cloud computing, and data collection and analysis software are now making supply chain control towers possible.  Once a dataset is designed to give supply chain partners the information they need for sensing and shaping supply chain demand, the data can be communicated up and down the supply chain for analysis and planning.

The real time end-to-end data that the supply chain control tower provides enables companies to manage demand signals more accurately to reduce inventory levels, answer customers’ requests faster and more accurately, and smooth the effects of demand variation.

Companies interested in increasing visibility or incorporating a strategy to overcome additional supply chain challenges such as risk or sourcing considerations can look to MEP centers for help.  The program converts supply chain strategies into tangible supply chain collaboration by utilizing an approach that equips manufacturers with the tools needed to improve. See a complete list of offerings. MEP leverages its expertise resolving the challenges experienced by U.S. manufacturers to create stronger supply chains that function at advanced levels.

Terry Weiner is a Senior Consultant with California Manufacturing Technology Consulting (an MEP affiliate). Terry has over 20 years experience in process improvements, quality management implementation and supply chain optimization. He is one of the lead subject matter experts for MEP’s Supply Chain Optimization program. Contact Terry at weiner@cmtc.com.