Supply Chain Visibility: Chasing the Big Picture
As technology brings supply chain data into focus, the ability to access and interpret business information moves from nice-to-have to must-have.
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Better visibility: It has been on the wish lists of supply chain executives for as long as there have been supply chains. But the definition of visibility tends to vary: Is it visibility to inventory? Orders? Assets? Information? Events? Nodes?
In theory, visibility leads to a host of benefits: saving money, reducing inventory, increasing turns, boosting customer satisfaction, lowering risk, enhancing compliance, streamlining transportation, and enabling agility and resiliency. But until recently, many shippers had difficulty connecting those dots.
"For years, analysts have reported that among IT spending goals, visibility has been at, or near, the top of the list," says Scott Fenwick, senior director, product strategy for Manhattan Associates, a supply chain software developer based in Atlanta. "But technology initiatives have tended to be the first projects cut, often because there has not been a clear return on investment or strong business case to get it done."
But technology is changing that equation, and making visibility a bankable investment. That's good news in light of trends such as longer supply chains, shorter product lifecycles, increased supply chain risk, the rise of emerging markets, and shifts to less costly, but also less visible modes, such as steamships and long-distance rail. Visibility becomes the driver that enables supply chain managers to operate more efficiently and proactively, despite increased challenges.
The purpose of end-to-end supply chain visibility 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," according to Gartner's January 2015 research report, Evolving Concepts in Supply Chain Visibility.
A simpler definition describes visibility as gaining insight into activities you don't control.
Gartner's definition represents the end game for supply chain operators, but they have to travel a long road to get there. Analysts identify four stages of supply chain visibility maturity. It starts with static snapshots of data, such as inventory levels at a particular point in time, then matures to dynamic views of real-time, in-transit data—the answer to "Where's my stuff?"
As supply chain visibility grows more sophisticated, analytics come into play. The next stage is predictive visibility—not just where inventory is in your own or partners' supply chains, for example, but the impact of that information. It provides context for the data.
Finally, the most sophisticated visibility stage is prescriptive—offering not just the meaning of the data, but what actions to take as a result. "This degree of visibility allows you to deal with events before they turn into problems," explains Andrew Atkinson, director of product marketing for cloud-based software developer E2open. To accomplish this, technology replaces manual processes—such as email and phone communications, and spreadsheets that are slower, less accurate, and lead to guessing—with real-time event management and data-fueled decisions.
High-tech companies tend to be more advanced in supply chain visibility due to their early use of outsourcing and the rapid pace of change, says Atkinson. In addition, consumer goods companies "are doing a stellar job of using visibility to ensure they are optimizing service to the customer," notes Karin Bursa, vice president of marketing at Atlanta-based supply chain management software developer Logility.
One example of predictive visibility comes from UPS Healthcare Strategy, a division of the company devoted to the healthcare industry. As pharmaceutical markets expand to emerging countries, pharma manufacturers say a big challenge is ensuring products stay within prescribed temperature ranges for compliance and safety.
UPS Healthcare's Proactive Response service combines skilled managers with sensor and visibility technology to monitor sensitive shipments and intervene with additional coolant or better routing when needed.
"We anticipate events before they happen," says MaryBeth Clapper, global product manager, UPS Proactive Response, for UPS Healthcare Strategy. "For example, if we expect to receive information about a movement but don't get it, the lack of information will alert us to investigate and take action."
Many supply chain and enterprise applications list visibility as a product benefit, and that reflects the problem: Broad-scale visibility isn't a single solution you can buy, but rather the benefit of leveraging multiple solutions tapping many sources of data. Companies gain and use visibility through a combination of software and business processes, says Fenwick.
Start your Engines
Companies seeking to build an engine for visibility need an information hub, according to Gartner. It's a complex model that, at the foundational level, includes an interoperability layer allowing information exchange among different systems, along with rules, events, and workflows, and a connectivity layer that facilitates filtering, evaluating, and presenting captured plans, events, and data. An integration layer enables multiple business partners and systems to connect to data in their networks, despite varied formats and capabilities, and the lack of standards beyond basic electronic data interchange (EDI).
Supply chain and other applications layer on top of this visibility foundation to use the data in context of the particular application.
Getting such an infrastructure in place is key to being able to collect, process, and analyze data to feed the many use cases shippers have in mind when they set better visibility as a goal. This infrastructure enables the following capabilities:
- Track and trace: Getting real-time views to inventory, assets, and materials in the inbound and outbound supply chains.
- Transportation budgeting: Understanding transportation needs to support bidding, contract negotiation, and carrier scorecarding.
- Transportation optimization: Shipment planning based on up-to-the-minute information, and re-planning as information changes. "You can accelerate the process and improve the quality of the plan," says Bursa. "It's relying less on the art of the plan and more on the science to get a better answer."
- Trade and customer compliance: Ensuring adherence to laws and customer requirements around movement of goods.
- Forecasting: Using current and historical data to inform future planning.
- Planning: Using inbound visibility for production planning, crossdocking, and shipment acceleration.
- Customer segmentation: Using visibility data to identify segments, and then forecast by customer, customer type, and channel.
- Sense and respond: Improving the ability to tie demand signals to efficient fulfillment.
- Supply chain resilience: Monitoring global conditions and the network to anticipate and mitigate impact.
- Customer service/omni-channel: Improving accuracy in promising order fulfillment.
- Backhaul, returns, and pallet management: Tracking inbound cargo to help staff up and prepare for receipt and processing.
- Network planning: Re-evaluating the current network in the context of the evolving supply chain.
For many shippers, the challenge lies not in getting access to the data to achieve these use cases, but in actually using it, says Manik Sharma, vice president of industry strategy and innovation for Kinaxis, a cloud-based supply chain software developer with headquarters in Ottawa, Ontario, Canada. "Visibility is the big ask" from prospects and customers, he says. "In most cases, they have data coming in, but they're not able to connect that data.
"If I have a shipment and data coming in, the data has to reflect into the manufacturing plan so I can see what the impacts are, but often that connection does not exist," he adds.
Technology gaps are one reason companies have not attained the visibility they are seeking, but growth through acquisition and proliferating supplier bases are also obstacles in the path to making those essential connections. Other obstacles include conducting supply chain planning via spreadsheet, which isolates information. This separation is an obstacle that companies have to overcome to attain visibility, says Sharma.
How Tech is Evolving
Solutions designed to meet visibility goals are becoming more real time and granular, and are making increased use of advanced analytics. Technology advancement has made it easy to pull data from varied sources and exchange it with business partners, as well as perform data harmonization through simple configuration instead of writing code, says Sharma. Increased computing power and data collection are also important advancements supporting better visibility.
"Once supply chain managers get a taste of data, they want more," says Fenwick. "More information helps achieve new business processes and better decision-making."
One important use case for visibility is tying together demand and supply chain planning—including distribution and transportation—through visibility solutions. "It's a blending or merging of the process of supply chain planning," Bursa explains. "It's something we've been talking about for the past decade, but practitioners are now in a position to leverage."
Visibility of both components allows companies to see the impact of demand on the supply chain side of their business. Companies can consider what a 10-percent business increase in a given region means for the operation's global supply chain. Or, conversely, they can discuss the implications on meeting demand if a tsunami disrupts their supply chain. And they can determine what informed decisions must be made to proactively address the situation before the impacts are felt.
Proliferation of data sources is helping visibility become more granular. EDI transaction data and bar-code data collection can now be supplemented with data from RFID devices, GPS, on-board computers in trucks, drivers' mobile devices, sensors placed on assets or alongside cargo, and even social media data to add richness and detail. But this access to information is also driving the big data problem in the supply chain—another reason analytics are becoming essential to finding meaning in the fire hose of data.
Another trend is toward architectures that enable collaboration. Trading partners need visibility to the same knowledge base in order to function, so communication must be bi-directional. For some businesses, this requirement points to the need for a cloud architecture to translate messaging formats and ensure trading partners can interact with data at their own levels of capability.
Supply chain communications require one-to-one, one-to-many, and many-to-many communications, says Atkinson, because supply chains are really networks of trading partners. Many shippers get stuck at the integration step, but a cloud architecture overcomes this. "Cloud-based connectivity is best for the connectivity layer as opposed to one-to-one communications," he says.
Insource or Outsource?
With the considerable time and resources required to reach more sophisticated levels of visibility through technology investment and process change, some shippers choose to instead rely on the IT investments of their third-party logistics (3PL) partners. Because they serve customers across industries with widely varying requirements and capabilities, 3PLs are pushed to create highly flexible platforms that can be customized to meet specific needs.
"Our customers generally expect that we should be leading-edge and aware of the latest innovations," says Gary Allen, vice president of supply chain excellence for Miami-based 3PL Ryder System. Some customers procuring more tactical services simply need visibility into shipments, while a 4PL customer may seek more extended visibility via a control tower and analytics tools.
"We use a hosted modeling tool," Allen explains. "Typically we design a customer-facing Web front end. Underlying that, we buy services from providers that can extract the data. The important thing is not bringing in the data updates, but how you use them in modeling to provide insights."
A major investment in cloud technology in 2011 helps UPS deliver IT services to its wide range of customers, but that's not the only factor shippers should consider in the build-it-or-buy-it decision. The challenge to continue to grow and deliver value to shareholders is putting pressure on many companies to invest their resources wisely to meet those goals, says Eric Souza, product marketing director, global forwarding, for UPS.
"Advancements in technology have made supply chain visibility more accessible through tools such as cloud-based applications," he explains. "But companies have to evaluate whether acquiring that in-house is the best answer for their companies. Is that a core competency that makes sense?
"Some companies go down that path, but don't achieve the business objectives they set out for," Souza adds. "They have the tools, but they also need the knowledge, experience, and network to achieve those results." Offering those capabilities is part of a 3PL's value proposition.
For future versions of their solutions, developers of visibility products are also focusing on managing the big data problem that access to additional data is creating, primarily by continuing to enhance analytic capabilities. Another approach is enabling this data to be consumed via mobile devices. What's clear is that visibility is making the leap from nice-to-have to must-have, with the ROI evidence now available to justify the considerable investment required.
Meanwhile, shippers are challenged to meet some developing threats to supply chain visibility driven by cost reduction through mode shifting. Steamship overcapacity is causing increasing unreliability in sailing schedules, compounded by the ongoing threat of port strikes, says Souza, and some shippers are using non-traditional modes such as rail from China to Europe.
All shippers, but particularly those with sensitive goods, need monitoring and feedback to ensure safe transport, but ocean and rail modes can be a less reliable source of such data. "As an industry, we face additional challenges, and it's not 100-percent clear how we will solve them," Souza notes.
What is clear is that with today's dynamic and volatile market conditions, the need for better supply chain visibility is pressing—and will only grow.