What is supply chain visibility?
If you asked 10 different organizations’ supply chain leadership to define “supply chain visibility,” you would likely get 10 different answers. The only thing these myriad responses would have in common is they would be less myopic in their definition than their predecessors’ generation. It used to be that simply knowing the locations and quantities of the assets needed within your organization’s four walls to conduct current operations was deemed good enough. In other words, it meant knowing “where is my stuff?”
Today’s world class organizations realize they need to take a more expansive view of their end-to-end supply chain to avoid critical risks to current operations and protect future profitability. The colloquial answer you might hear today from industry vanguards is multi-faceted: “Where is the stuff I am going to buy in the future from my network of supply partners? Where is the stuff I already sold to my immediate customers but is languishing in distribution channels? At what stage of its lifecycle is the stuff that is in the hands of my end users?”
Before you attempt to answer any of these questions, you need to answer a much more important one: why should you care? Setting aside the near limitless benefits garnered by best-in-class capabilities in this area, here are the top 3 risks you can avoid by improving your organization’s supply chain visibility:
1) Extended supply chain disruption
Tsunamis. Wildfires. Earthquakes. Floods. Volcanos. Blizzards. Hurricanes. The odds of any one of these causing a disruption may seem low individually, but collectively, it is a near certainty a devastating natural disaster will strike your supply chain given a long enough timeline. In fact, each one of the events listed above happened at least once somewhere in the world in 2018. Let us not forget the human made disruptions as well; political unrest, trade wars, and labor disputes are just a few events that can cripple your supply chain just as easily as Mother Nature. When you start to consider the global nature of most supply chains in the modern era, you realize it is only a matter of time before an event like this shuts down a critical aspect of your supply chain for an extended period of time.
The best organizations in the world rely on leading practices for Supply Chain Risk Management to mitigate and recover from these disruptions, taking action at the first indication of trouble. Their excellence in this area is built upon a foundation of supply chain visibility. While these elite organizations calmly execute a pre-formed, well-devised recovery plan, companies lacking supply chain visibility struggle to even answer the question, “Are we affected by this?” In the meantime, the world class organizations swiftly secure scarce resources and contract previously unutilized excess capacity, leaving little resources available and a long road to recovery for those that failed to understand the importance of supply chain visibility.
In addition to avoiding the downside of poor disaster recovery on the supply side, excellent supply chains also have the unique ability to truly help people on the demand side in the face of disaster. In a more famous example, a few hours after a devastating earthquake hit Japan, 7-Eleven executed food replenishment for its affected stores using helicopters while the vehicle-based emergency response was paralyzed by gridlock. This likely could not have been done without effective supply chain visibility.
2) Customer dissatisfaction
Imagine it’s Friday night and you order a pizza. An hour passes and you’re getting hangry (a real word now) so you call the pizza shop to ask about your order status. The manager tells you “My driver just called to say he is finishing another delivery two blocks away, and he will be there in 5 minutes.” You would probably calm down a little bit. If instead the manager said “I don’t know, but my driver left a while ago so it should probably be there soon.” It’s likely you would not be as happy, even if the pizza did in fact arrive 5 minutes later just like the first scenario. So why are you more dissatisfied even though the outcome was the same? As with many things in life, the hardest part is not knowing.
In the connected world of today, real-time status information is becoming a must. Effective supply chain visibility allows you to provide better information to your downstream partners and customers, even if it is not the answer they wanted to hear. Supply chain planning is all about consistency and confidence, and keeping your customers informed is part and parcel to keeping them satisfied. You can only do this if you have supply chain visibility.
3) Recall ability and emergency reverse logistics
Another key difference between excellence in supply chain visibility today vs. yesteryear is this skillset now involves looking in both directions: upstream to your supply network and downstream to your customer base. Even in the best of circumstances, unfortunate events are going to happen. Products are constantly being recalled for being unsafe, noncompliant with government regulations, infiltrated by counterfeit parts, containing hazardous or toxic substances, affected by known technical problems, and a plethora of other unforeseeable problems. The question is not whether you can stop these things from happening (the answer is likely “no”), but rather how can you be ready to resolve these issues as quickly and effectively as possible.
Executing emergency reverse logistics in response to such an event requires supply chain visibility to quickly understand:
- a) Are any of my suppliers (or my suppliers’ suppliers) affected?
- b) How many of my customers are affected and where are they?
- c) What is the most expeditious method to remove the undesirable product from my customers and ensure they are properly resupplied?
Failing to manage recalls properly can at best lead to loss of reputation and at worst lead to loss of life. In extreme versions of these events, you will not have time to perform manual data calls and brute force your way to resolution. The processes and infrastructure for supply chain visibility need to be in place long before the alarm sounds.
Achieving true supply chain visibility by today’s standards is difficult. There is really no other way to summarize it. Organizations that are good at it spend significant time and resources honing their skills and putting into place the systems and processes that enable it. And while software tools can be very helpful in this arena, I have sat through enough demonstrations to say that anyone who tells you their supply chain visibility platform is a single cure-all for all problems related to this topic is lying to you. For all the slick marketing decks and beautiful user interfaces, I have yet to see a tool that accounts for the underlying fundamentals of supply chain visibility. It requires cooperation, collaboration, trust, and, most of all, hard work to get it right.
What system do you have in place today for supply chain visibility? I’d love to hear your thoughts and questions.