Supply Chain Visibility: Now You See It
The more transparent the supply chain, the more easily you can spot ways to squeeze value from your operational data.
Think of the supply chain as a pipeline. You turn the spigot, hard or soft depending on demand. Product flows through a network of pipes, all converging in one conduit that delivers the goods that you and your customers need.
Now, say those pipes are made of glass and you can watch the supply chain move. Is the flow a little sluggish? See that highway construction blocking the way? That explains it.
Will those widgets from Shenzhen arrive on time? Look, they just cleared customs and entered the main pipe; they should get here in two days.
That's what we call visibility. We'd love to have transparent pipes all the way through the supply chain, from where the supplier's source is revving up production, right down to the distribution center and out to the customer's door. The more we see, the more we know, and the better we can apply that knowledge to speed the flow.
Visibility opens a window to what goes on between the start and end of a process. "It's understanding what is happening at each point within that process, from sub-process to sub-process," says Brad Wyland, senior research analyst, supply chain execution at Aberdeen Group, Boston.
The logistics IT market offers more technology tools than anyone can count, promising windows into all sorts of processes—what suppliers are doing, where freight is, how much inventory you have, and what customers want. Companies use this information in some obvious ways: to better match incoming supply to customer demand, identify and solve transportation delays, shrink inventory, cut cycle times, provide better service to customers, and save money.
A transparent supply pipeline offers many other advantages as well, including a few that are less obvious.
INSIGHT: DATA ANALYSIS
Visibility can give companies better leverage when dealing with suppliers. By aggregating and analyzing data from several visibility systems, for example, some companies create metrics for evaluating vendors.
"Shippers can view appointments in their transportation management system and arrival dates in their yard management system, and compare that data to information in their warehouse management system," says Erik Huddleston, chief technology officer at Inovis, an Alpharetta, Ga., firm that provides solutions to support collaboration among supply chain partners (see sidebar, right).
From this data, companies get the hard facts on shipping costs and delivery performance, arming them with ammunition for negotiating with vendors.
Keeping Vendors on Their Toes
Such data also helps shippers decide which under-performing vendors they should pressure to improve, and which ones aren't worth the trouble because they don't affect the overall operation.
"Organizations are cutting back significantly on vendor management staffing," Huddleston says. Judicious use of supply chain data helps them decide how best to deploy the managers who remain.
Another way companies conserve resources is by getting vendors and customers to take on more work. Visibility helps there as well. Instead of paying employees to track inbound orders and contact suppliers when something goes wrong, shippers give vendors a portal where they can track their activities, making them responsible for spotting and fixing their own problems.
Visibility can also reduce work for customer service staff. "Many shippers have given their customers access to visibility portals that have traditionally been internal," Huddleston says.
INSIGHT: LABOR MANAGEMENT
Besides shifting some of their work to trading partners, companies with windows into the supply pipeline can better schedule labor in their own facilities. Companies with current visibility into inbound and outbound shipments use that information, rather than stale historical data, to schedule work crews in their distribution centers, reports a July 2008 study published by Aberdeen Group. When shipping schedules change, transportation managers share that information with warehouse managers. "That eliminates the problem of a full morning shift waiting for shipments that aren't coming in," says Wyland.
DSC Logistics uses supply chain visibility in a different way to manage labor. The third-party logistics provider (3PL), based in Des Plaines, Ill., has integrated its warehouse management system (WMS) with a labor management tool from RedPrairie, Waukesha, Wisc.
Each time an employee scans a bar code, the WMS reports that action, with a time stamp, to the labor management system. This tells the system how long the employee takes to perform a given task. The system compares that time to an established benchmark for that task, determining whether the worker's productivity hits above the standard, right on target, or below it.
"If we determine that it should take employees 90 minutes to pick an order, and they get it done in exactly that time, they're hitting 100-percent productivity," says Greg Goluska, DSC's chief information officer.
Workers who repeatedly fall short of the standard receive coaching and, if they don't improve, are disciplined. Employees who surpass expectations may receive incentive pay.
Tracking worker activity also helps DSC spot opportunities to improve facility layouts. "If a certain type of order consistently takes 90 minutes or two hours to pick, we can reconfigure the warehouse to cut workers' travel time," Goluska explains.
DSC implemented its labor management tool to help it work more efficiently for its clients. Companies that operate their own warehouses can take similar steps on their own behalf.
INSIGHT: GREENER ROUTING
At Stonyfield Farm in Londonderry, N.H., a transparent supply pipeline reveals new opportunities to ease the organic yogurt maker's environmental impact.
Stonyfield relies on a visibility tool provided by Miami-based 3PL Ryder Supply Chain Solutions, which handles its freight bill audits and payments, manages its carriers, and provides some of its transportation through a dedicated fleet. Since late 2006, Stonyfield has used the tool to study where its freight goes, how it gets there, and how much it costs. This knowledge is helping Stonyfield cut transportation expenditures and shrink its carbon footprint by overhauling its outbound network to save fuel.
"By reviewing six months of the tool's data, we realized a significant opportunity in consolidating our less-than-truckload (LTL) network into our truckload network," says Ryan Boccelli, Stonyfield's director of logistics.
Although carriers prefer one-stop hauls, company officials explained that they would burn less fuel if they designed runs that include multiple stops. So, for example, one of Stonyfield's carriers now takes a full truckload on a 10-stop run from Londonderry to the Northwest.
"Rather than shipping to an initial pool point somewhere in the Midwest, then to an additional pool point, the carrier stops at a DC in Las Vegas or Cheyenne, Wyo., then heads up to Seattle," Boccelli says. To sweeten the deal, Stonyfield also gives that carrier a few single-stop loads.
Stonyfield and Ryder both belong to the U.S. Environmental Protection Agency's SmartWay Transport Partnership, a consortium of shippers, carriers, logistics companies, and truck stops working to reduce transportation costs and save energy. Ryder exports data about Stonyfield's shipping activities from its visibility tool directly into the SmartWay Freight Logistics Environmental and Energy Tracking (FLEET) Performance Model. The EPA uses FLEET to measure the actions companies are taking to save fuel and cut carbon emissions.
Using data on freight operations to refine its routes has paid off in progress toward both of Stonyfield's goals. "From 2006 to 2007, we cut net freight costs by eight percent and our carbon footprint by 40 percent," Boccelli says.
The results for 2008 aren't in yet, but Stonyfield continues to peer into its pipeline and find further opportunities to modify its routes, especially as it adds new customers.
Besides using historical data to make strategic changes to their routes, shippers can also use recent operational data to make money-saving transportation changes in the near term. "Information from last month or last week is great, but if shippers have information available immediately, they can be proactive and work more collaboratively with their carriers," says Wyland.
Take a company that typically trucks goods from the West Coast to an East Coast port, then puts them on a container ship. "A shipper could get a better deal next month because one of its carriers also has an intermodal capacity issue," Wyland says. "The shipper could move product via rail instead of truck for the next month and cut transport costs by 50 percent."
Along with visibility into freight movements, a view into inventory status can help shippers boost the bottom line.
"A good inventory policy states the threshold for any class of inventory," says Anne Patterson, vice president of client delivery at FreeFlow, which helps companies dispose of goods they can no longer use. "Visibility tools help monitor when inventory crosses that threshold."
A sound policy also spells out what action to take when a company identifies at-risk inventory—when a product line becomes obsolete, for example, or when a manufacturer is carrying too much of a certain component. Among other services, FreeFlow operates a variety of online auctions. An action plan might dictate using a specific auction based on factors such as the type of inventory a company needs to sell—such as finished goods or components—and the inventory's status—unused but obsolete, returned to be sold as-is, or returned and refurbished.
Along with a plan, a company needs visibility and a series of rules to trigger action. To gain visibility, FreeFlow's customers transmit data from their enterprise resource planning systems into decision support systems, which they configure to reflect their inventory policies.
"Many companies have the notion that dealing with at-risk inventory comes up maybe once a quarter," Patterson says. "Then it becomes a fire drill, and they've already lost a percentage of profits to price erosion."
With the right visibility decision support tools and proper discipline, companies can dispose of at-risk inventory after quickly reviewing the data once a month. That allows them to recover more of the products' value.
Whether they're peering into inventory levels, following goods along their transportation routes, watching over employees, or composing pictures of vendor performance, shippers stand to gain from making their supply pipelines transparent. What you don't see can hurt you, and what you do see can help a great deal. To the smart supply chain executive, that's clear as glass.
INVITING YOU TO A VISIBILITY VORTEX
Visibility manifests itself in countless ways—from straightforward real-time shipment information to historical and actionable data that flows across logistics disciplines. Increasingly, businesses are exploring innovative ways to drive greater transparency in their supply chains. Take the emerging popularity of social networking sites.
If you've been sucked into one of these virtual vacuums, perhaps you've considered its potential within an enterprise—for example, an intuitive interface that enables business contacts to serve up function-specific profiles, communicate mutually inclusive data, and post relevant status alerts, feeds, and photos to pre-screened supply chain friends. No more batch emails canvassing for the right contact, or "cold calls" to an overstuffed voice-mail box.
Or maybe you've marveled at the possibility of a robust database chock-full of supply chain contacts—an infinite Rolodex of soon-to-be friends that intuitively spins introductions the moment you acquire a new business, install a new transportation management system, or plug in a new vendor.
As is often the case with cutting-edge technology, what is imagined already exists.
A select number of retailers and suppliers, such as Big Lots, Macy's, and Tommy Hilfiger, have been beta-testing a social networking platform pioneered by Inovis, an Alpharetta, Ga.-based IT solutions provider.
Integration and communication challenges abound when companies add new technologies, business processes, or partners to their supply chain networks. Inovis found this out the hard way as customers began relying on its solutions to synchronize trading partner databases.
"It is very difficult to get the right partner contacts by email or phone, especially when they can number in the hundreds or thousands," says Erik Huddleston, CTO for Inovis. "Working with customers shifted this burden to us. We learned their pain firsthand."
Trading partner databases often lack a strong technology that integrates social roles on top of data flows—essentially connecting people with information. While several solutions on the market synchronize data, these applications overlook the human roles that make these processes work. This omission created a visibility demand now supported by the Inovis Social Network, a fully integrated component of the developer's Community Management module.
Columbus, Ohio-based overstock merchandiser Big Lots found itself drawn to the Inovis Social Network as it began rethinking its strategy for managing vendors. "When we initiated a vendor compliance program, we emailed our inbound routing guide and used Excel as a reporting tool to track information," says Katy Keane, vice president of transportation services for Big Lots. "That process was paper- and labor-intensive."
Big Lots recognized it needed a solution for automating and managing vendor compliance. It began using Inovis' Deduction Management and Scorecard modules to ensure it had accurate vendor compliance contacts and to collect and disseminate appropriate data to these contacts.
Big Lots sends onboarding notices to all its vendors through Inovis' networking platform. Supplier contacts have a unique sign-in and can create a profile within the portal. These "friends" may include vendor compliance, sales, IT, EDI, accounts receivable, and logistics contacts.
Users have the flexibility to build out their contact profiles per unique specifications, then update as necessary. Profile information can include a supplier's advanced shipment notice capabilities, which enables customers and consignees to leverage rich line-item shipment information. Or vendors can feature information about IT readiness, lead-time requirements, ship-to locations, and business process capabilities such as 24/7 support for inbound shipments.
Companies such as Big Lots can similarly dictate the type of information it pushes out to vendors. "Within this database, we keep vendors up to date on company activities," adds Keane. "We advise them of holiday hours, corporate updates, and DC shutdowns."
By building out these profiles within and beyond the enterprise, businesses can share macro information with all partners or introduce explicit business process instructions to filtered contacts, matching decision support with appropriate functional roles.
"It provides an immediate tool to send information directly to the right vendor contacts," says Keane.
Compressing Time, Expanding Flexibility
The strategy behind this new networking protocol is to cross-pollinate organizations using traditional partners and trading profiles that Inovis has captured to enrich and empower customers. By sharing data and driving visibility across the supply chain, companies can push people to need, and need to people, based on that traditional relationship.
Aside from the practicality of linking the right information and contacts, Huddleston sees considerable strategic advantages as businesses saturate their databases.
"The network greatly enhances execution time for new business processes, new vendor/item introductions, and new sourcing protocol," he says.
"Flexibility is ultimately dictated by the ability and expediency with which businesses can connect to new trading partners," Huddleston adds. "With all supply chain partners at your fingertips, this connectivity reduces total cycle times associated with new supplier engagements, from getting legal agreement sign-offs to new product labels. It can compress total elapsed time by 20 percent."
Beyond ensuring faster introductions, the Inovis Social Network greatly amplifies responsiveness to supply chain exceptions, routing need-to-know information and alerts to contacts that can immediately initiate resolutions.
Within its vendor compliance program, Big Lots has already been able to leverage this real-time visibility to identify and thwart potential problems. "We recently had an issue with one of our key replenishment vendors, our 'never-outs,'" shares Keane. "We had a spate of chargebacks concerning the palletization of a core product at each of our five DCs."
Big Lots' vendor compliance personnel saw the daily charges, recognized the anomaly, went into the database, contacted the vendor, and informed it of the chargebacks.
"With our new system we can attach photos to these alerts, along with comments and additional load and SKU information," she adds.
With a network touting more than 20,000 organizations across extended vertical industries, including high-tech and apparel, Inovis allows users to opt in and build out that extended social network so it becomes a source for seeding information. This is the type of networking potential that already exists among mainstream social gathering portals, and one that Inovis perceives canvassing the supply chain, inwardly and out, as well.
As Inovis continues to pollinate customer databases, keeping information up to date, cross-organization synergies will drive freshness and accuracy. This robustness has companies such as Big Lots enthusiastic about the system's potential.
"When Inovis adds enough partners to the system, we hope it will manage the database on a subscription basis," Keane says. "If they build it out with profiles of more companies, and keep vendor and retailer information up to date, we would be able to seamlessly plug in new partners."
Executing this social networking model facilitates passive information exchange, which, in turn, enables proaction.
"It gives companies answers before they have questions. Imagine how that translates to added value. They can start making strategic decisions proactively," Huddleston says.
In terms of building better relationships with vendors, the social aspect is without parallel, notes Keane. "It enables partnership as opposed to punishment. The depth of interaction is key," she says. "The network offers two-way connectivity for sharing issues and ideas."