Can You See Me Now?
New technologies including blockchain and IoT, as well as advances in existing tools such as RFID, are helping companies gain greater supply chain visibility.
Richline Group, a manufacturer and marketer of fine jewelry, launched an initiative to gain visibility into its supply chain in 2006. The company manually assembled and entered information that it had generated internally and gathered from vendors and business partners showing how its metals and gemstones traveled from mines to retail stores.
"That process was costly, manual, and not timely," says Mark Hanna, chief marketing officer for Richline. Still, the jewelry maker continued to manually map about 600 items until 2012, when the cost and unwieldiness of the process finally prompted it to stop.
Fast forward to 2017, when Richline partnered with IBM on TrustChain Jewelry, a blockchain initiative to track and authenticate diamonds, precious metals, and jewelry at all stages of the global supply chain. In 2018, Richline completed a TrustChain proof of concept with a handful of SKUs.
"All eight supply chain partners saw each movement through the chain," Hanna says. An outside firm verified the integrity of the process. Based on the success it has seen to date, Richline plans to steadily expand its blockchain initiative to other products and retailers.
Like Richline, many companies are taking steps to gain greater supply chain visibility. It's an area that demands attention. A paltry 6% of respondents to Geodis' 2017 Supply Chain Worldwide Survey said they had full visibility to their supply chains, even though they also ranked supply chain visibility as a top three priority.
Supply chain visibility has advanced over the past 10 to 20 years. Many carriers now provide shipment visibility, often through portals or notification systems, as items leave one location and enter another. "Products are scanned both in and out," says Josh Nelson, principal in Hackett Group's transformative supply chain practice.
The challenge? Visibility often remains limited when products are in transit. While many carriers capture GPS information showing their trucks' locations, some do not make this information available, often out of a concern that the data is not complete or up to date. "That's when shippers start their phone calls," Nelson says.
Better visibility has ranked at the top of supply chain and logistics professionals' "most wanted" lists for 20 years. "What has changed is the granularity and how widely companies want to make visibility available," says Monica Truelsch, director of product management with business software provider Infor GT Nexus.
Many companies are looking for a single, aggregated source of visibility, perhaps through a control tower that allows them to look across their networks of companies, carriers, and trading partners. "Most shippers want a multi-modal view of the journey their goods take from origin to final customer destination," Truelsch says.
Greater supply chain visibility provides more certainty when organizations must match supply to demand. That can improve buying decisions as well as labor and transportation planning. It also can reduce the need for safety stock.
The growing dominance of e-commerce also prompts many organizations to strive for more visibility into their supply chains. "Visibility is 'table stakes' now," notes Stephen Bullard, vice president, product development and deployment with supply chain consultancy Tompkins Inc.
Where to Begin
Some steps are common to most supply chain visibility initiatives. A starting point is clarifying the use case for visibility; that is, how can better visibility improve supply chain operations and add value to the company?
Say a retailer is facing a run on T-shirts at some of its stores. If the company has visibility into the supply chain, it can determine whether to expedite another shipment of shirts from Latin America or divert a shipment already in transit, eliminating the need to expedite. The retailer uses real-time supply chain visibility to satisfy customers and rein in costs, providing value to the business.
Technology comes into play with most visibility initiatives. Advances in both older and emerging solutions provide supply chain professionals with a growing range of options.
A case in point is RFID. While companies have used the technology since the late 1990s, its price has dropped from about 25 cents to several cents per chip. "RFID has finally reached the point where companies can put it on every package without a huge cost," Nelson says. That makes it a viable solution even for many lower-margin industries.
While GPS technology also isn't new, it is becoming more user-friendly. Previously, when Billy Duty, global head of supply chain with specialty chemical company Altana, and his colleagues needed to check the location of their ocean freight, they'd have to look up data on each carrier's ship and find which tied to their shipment data.
"The data is now integrated to the carriers' web portals, making it more accessible and real-time," Duty says. "Now you don't have to be a logistics professional to look up the information."
Altana also uses the Internet of Things (IoT) to enhance supply chain visibility. By placing temperature indicators on the drums used to transport its products, Duty and his colleagues know if the temperature dropped below a certain level, making the product unusable. While such instances are rare, they do occur.
Without this information, a customer might use the compromised substance, potentially ruining the product it was making. "That gets expensive," Duty says. In addition, should an unauthorized in-transit temperature change occur, Altana can use data from the indicator to file a claim with the carrier.
IoT devices also can help supply chain professionals better track inventory and supplies. For example, one vendor to the automotive industry had trouble tracking the 4 to 5 million reusable containers it uses to move parts throughout its manufacturing plants and within its suppliers' facilities. At any time, 20 to 30 percent of containers would be within its network of suppliers and its own facilities, but in unknown locations.
Because the totes were misplaced, the company or its suppliers would sometimes need to use specialty packaging. Those packages cost several hundred dollars each, for a total annual expense that ran into the millions. "This is a hard cost," says Vidya Subramanian, vice president of products with Roambee, an asset-monitoring solutions provider. "The data IoT sensors provide gives direct, bottom-line savings."
Robotics Play a Role
More than 10,700 robots were shipped to companies across North America in the first quarter of 2018, up 22% from the same period one year earlier, according to the Robotic Industries Association.
Robots can play a role in enhancing supply chain visibility. When humans use paper and pen or even spreadsheets to track their actions within a warehouse, they're likely to introduce errors that can hinder visibility and also are difficult to trace. With robots, software tracks every movement.
In addition, artificial intelligence algorithms enable robots to calculate a probability matrix of the location of misplaced items. Robots also can photograph "pick and place" actions, allowing companies to identify issues before they become problems and defend against damage claims.
As Richline's experience shows, blockchain is another tool that can enhance supply chain visibility. "Blockchain provides an immutable shared record of transactions," says Chris Hayes with IBM's Watson supply chain B2B product solutions. This improves supply chain visibility by ensuring one single version of the truth. Even in supply chains with automated transactions, the complex relationships between participants can result in multiple versions of the truth, which can lead to disruption and boost costs.
One potential obstacle to blockchain is that all supply chain partners have to provide information, often through online platforms. If a company isn't on the same platform as other partners, it will be difficult to interact. As the platforms standardize, however, sharing information will get easier. "There will be a tipping point," Nelson notes.
While the opportunities blockchain affords are real, many organizations likely will struggle in the short term to derive economic value from it. Within 10 years, however, they will benefit from the improved visibility blockchain offers.
One key to robust supply chain visibility is solid electronic connections to an organization's business partners. Electronic data interchange (EDI), while one option, has several shortcomings: EDI transactions are processed in batches, rather than in real time, and the format allows an exchange of only limited amounts of information.
EDI can also be costly. As a result, many companies reserve EDI for their most significant business partners.
Almost every company today, however, uses email. Elemica, which features a digital supply network of companies and their suppliers, customers, and logistics providers, offers a solution that enables "transactional emails" that provide visibility to the underlying transaction.
The email is not simply an image, but contains the logic of, for instance, the prices and number of units indicated on a purchase order. The emails are automatically integrated within the buyer's ERP system. Because they're not compiling information from static emails, companies have greater visibility to their transactions.
A growing number of companies are offering solutions that connect supply chain members through application programming interfaces (APIs). APIs refer to software intermediaries that allow two applications to talk to each other in real time and with two-way communication.
For instance, through these systems, the information on a bill of lading can be digitally transmitted to an organization's data systems, reducing the risk of mismatched account numbers and other mistakes. Or, if a truck is running late, a manager can alert the dock supervisor, who can then adjust schedules.
"The end game is not just asking, 'what's the best technology?' but also asking, 'what will provide the data needed to improve operations?'" says Jason Kerner, vice president, solutions engineering with project44, which offers an end-to-end API solution.
The GIGO Principle
Once data is captured, it likely will need to be cleaned. Most information systems differ at least slightly; for instance, units of measure may be inconsistent. The GIGO principle (garbage in, garbage out) applies within supply chains just as it does in other functions. Mistakes in one area can become exaggerated as they travel along a supply chain.
As companies collect more data from across the supply chain, the volume can quickly become overwhelming. In most cases, it makes sense to focus on exceptions, which can help limit costs stemming from, for instance, lost or delayed shipments.
True supply chain visibility begins with product concept and extends to payment receipt. It also requires company-wide transparency. "Visibility disrupts the information silos that are historically inherent in the supply chain," says Gary Barraco, director, global product marketing with Amber Road, a trade management software provider.
Moreover, visibility is key to agility, or the ability to react quickly to obstacles. Agility enables organizations to lower their risks, respond effectively to changing demand, and reduce costs.
"Companies can only realize agility if they have visibility," Barraco says. "You can't dodge an approaching train if you don't see it first."