Visibility is the Key to Mitigating Supply Chain Risk

As last year’s tsunami in Japan and massive floods in Thailand demonstrated, natural disasters and other events a world away can wreak havoc on supply chains, forcing sudden and major disruptions in business operations.

While it may be impossible for a company to entirely escape the consequences of a widespread deluge, volcanic plume or labor unrest abroad—or of volatile demand at home—a business with an agile supply network can thrive in spite of them, potentially outperforming peers.

A key element of a resilient supply chain is end-to-end visibility, the ability to track products at every point from raw materials to manufacturer to customer and spot potential hiccups anywhere on that route. Visibility helps businesses respond to major external events and to smaller, troublesome snags.

Enhanced by GPS tracking, cloud-based systems and other “smart” technology, as well as innovative strategies and old-fashioned relationship-building, a clear picture of the supply chain can provide nearly instant information that enables companies to adapt operations immediately.

Supply chain visibility helps flag upcoming supply or demand problems, allowing a company either to take action to prevent disasters or to respond by activating backup plans.

A lack of visibility even into the precise path a shipment takes can place a company at high risk. You need to know, for example, if your product ships directly from Singapore to the United States, or stops in Indonesia for transfer to a U.S.-bound vessel.

Would you be caught off-guard by learning your container was sitting in a troubled port?

Risk Grows in Frequency, Impact

Industry analyst Bob Ferrari wrote recently on his Supply Chain Matters blog that “something is happening in the frequency of highly unusual climate and natural disaster patterns” that is causing so-called one hundred year milestones “to suddenly be much more frequent and much more impactful to supply chains.”

The Japan tsunami eliminated most supplies of certain components for some manufacturers, requiring months of recovery and “herculean efforts by supply chain teams,” and the Iceland volcano that halted air traffic in Europe in 2010 showed the need for backup transportation plans, he noted.

“The real message regarding supply chain risk management in 2012 should be that today, every supply chain needs to have a supply chain risk mitigation and management plan. No exceptions!” Ferrari wrote.

Visibility: Easier Said Than Done

Supply chain management is a complex business, however, and achieving full visibility is easier said than done.

Companies judged to have the best-managed supply chains are typically the biggest, although others can learn from their experiences.

Apple, Amazon, McDonald’s, Dell and Procter & Gamble led Gartner Inc.’s Supply Chain Top 25 this year, a list whose members included many companies hit by last year’s natural disasters in Asia. Resiliency was a notable trend among the leaders.

Gartner said top companies like Intel, P&G and Unilever “improved multitier supply chain visibility and advanced network management capabilities to be agile in the face of disruptions, and we see it continuing to be a highly valued supply chain characteristic.” The firm linked resiliency to a company’s ability to post “industry-leading financial results year after year,” despite demand and supply disruptions.

PepsiCo, number 12 on the list, collaborates with retail partners to reduce out-of-stock store shelves and accelerate demand visibility, while Nike, at number 14, delivers its products across a complex web of suppliers, contract manufacturers and logistics providers, “building the visibility and velocity upstream that allows it to meet dramatic swings in demand,” Gartner said, adding that others can learn from Nike’s practice of building partnerships with suppliers.

There are many tools and strategies available to help companies improve visibility in their supply chains, and you will have a chance to see them at the ProMat 2013 expo coming to Chicago’s McCormick Place January 21-24, 2013. Many of ProMat’s exhibitors and educational sessions will focus on supply chain visibility solutions.

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