What is Supply Chain Visibility?
Supply Chain Visibility (SCV) is the ability to track and trace each and every component, sub-assembly and finished product in all steps and places it has been and will be through, even in transiting nodes on the way to its final distributor. All data and measurements will be collected nearly in real-time, kept, and managed in a logical manner so that they will become useful to management – from lower positions who supervise smaller teams to upper decision-makers. But not only to you and your company, but SCV can also be about data flowing between all of your partners in the supply chain, such as manufactures, suppliers, distributors, retailers, etc.
This system seems huge and complicated, so would taking care of it worth the trouble? The straight answer is “absolutely”. Especially now than ever, when businesses are focusing on recovering from the COVID-19 crisis, so end-to-end visibility is the most important factor of their success. There are a lot of benefits of SCV, but we will discuss the top 5 reasons why it’s playing a crucial role:
1. Keeping up with supply chain complexity
Quantzig (2018) strongly recommend increasing SCV because businesses of all sizes, from internationally operating organizations to smaller local ones, have been dealing or will have to handle the increasing complexity of supply chain. This is due to the supply chain’s nature, which is already tangled, and the rapid changes of globalization (Schuh, 2015). And as the market grows, so do the competitors. Thus, gone are the days that the supply chain looks simple and straightforward. It is now expanding with multiple layers, nodes and even each location has different “characteristics” e.g. requirements and regulations, different costs, and levels of quality. What’s more, all managers know by heart, that when the scope or scale doubles, the risks will also increase exponentially. Fortunately, Schuh pointed out that this complexity wouldn’t be as bad as it sounded if the business implemented the correct software application that could pull data into a useful form of information and tailor its needs.
2. Customer’s demand for “perfect” quality
As mentioned above, the market is getting a lot bigger; thus, competitors are increasing in number and diversity by the day. They are offering a tremendous amount of options to the consumer. In addition, thanks to technology, mainly the internet, consumers are now able to cross-check, verify, choose and review about everything and anything of whichever companies. They are demanding higher quality and less forgiving, tolerating to even minor mistakes. For that case, visibility will help your “control tower” be able to spot what’s wrong almost immediately, and prevent threats and losses to occur any further, or take a course of corrective action. Furthermore, management can look back and analyze these unfortunate events thoroughly, then pinpoint the correct root cause so as to implement better procedures. We are in the era of competing in decreasing a few percentages of risks, and SCV can give you that game-changing capability.
3. Consumer Trust
Browsing through social media recently, we can obviously see that the general public has been being more aware and more caring about business’ social responsibilities (SR). In fact, people seem to distrust most of SR movements from companies and deem corporations’ statements as decorative tools only for marketing. Even worse, many have pointed out and accused some companies of suspicious “encouragements” such as committing “green-washing”, or sourcing from third-world country sweatshops where workers are severely exploited. Perhaps your business is now under a microscope too. So let’s get ready to improve visibility as the research paper on SR and SCV [1] concluded 3 insightful information of the role of its to improve this situation: 1) increase trust from consumer, 2) increase future revenue, and 3) coupled with a mechanism for better communication, it can generate more sales. Thus, improving visibility, overall, can potentially benefit your business beyond inventory management, and expands to branding, marketing, and public relation.
4. Compliance
Now let’s dive deep into “different characteristics of many nodes” of the supply chain complexity. Nowadays, there are a lot of standards and regulations for the supply chain, in both the local laws that a company is located and foreign ones if it doing business with. There will also be more rules coming in the future, and companies must be ready to handle the uncertainty. For instance, the Modern Slavery Act has strengthened its regulations, required large businesses to report to SEC every year, and would be punished harshly for any violations. And if you are handling prescription drugs, you’d better updated FDA new rules and guidance on identifying and tracing the right way and more. In order to keep up with the rapidly changing rules and regulations, businesses, especially ones working internationally, should invest in its visibility. Not only to bear on but companies ought to try to predict for more proactive measurement.
6. Data for prediction and analyzing
After your system tracking and tracing a lot of events per day, it will create tons of raw data. It would be a waste to let all this data and numbers sitting there and looking like a mess. Of courses, we’ll need to gather and process them into useful data. With all the mentioned reasons for improving SCV above, it is clear how these information can help you and your company: track and trace to reduce loses and risks, identify threats quickly, save money by optimizing operation, overall increase revenue and sales, achieve better rating on customer services, strengthen consumer trust and keep up to date with recent compliance. Furthermore, we can use our “history” to predict the future. Running regression models or what-if analysis can assist in forecasting trends, underlying issues and business insights.
To sum up, increasing SCV is a huge and positive investment. Though it isn’t easy, we cannot deny its enormous advantages.
So our next question is, what to consider so as to improve visibility effectively?
- Workflow
It is always a good thing to list down what you need first. Mapping out a complete workflow of your operation is suggested, so as to have a comprehensive and thorough view of which specific aspect to tackle. Moreover, most of ERP software vendors don’t actually experience logistic works; thus, the clearer the workflow, the better communication you will have with your select vendor. They will be able to consult and tailor to your needs much better.
2. Key measurements
Now that we have the general idea of where are we going, we should know where we are at the moment. Without introduction, KPIs are well-known and has been a great friend to managements of all level. Hence, the next step is to determine your company’s KPIs and how they are actually be measured in real practice. What’s more, this also helps to shorten down the list and focus on what’s lacking in your current visibility. We don’t have to upgrade everything in one go, so prioritizing would help our Finance and Accounting Department to be relieved.
3. Technology
Once the vision is clear, we can confidently choose the right tools to increase visibility. We can look up and research for trendy technology to incorporate into our system, or consult with preferred vendor(s). One of the most highly recommended technology is Artificial Intelligence (AI). According to a research paper from the University of Coimbra, Portugal [3] artificial neural network gave astounding results. The system can recognize correctly more than 97%, and can potentially predict disruptions accurately.
References
- Kraft, T., Valdés, L., & Zheng, Y. (2019). Consumer Trust in Social Responsibility Communications: The Role of Supply Chain Visibility. SSRN Electronic Journal. doi: 10.2139/ssrn.3407617
- Schuh, L. (2015). Why Supply Chains are Getting More Complex – And why This is not necessarily a Problem – Inventory & Supply Chain Blog. Retrieved 2021, from https://www.allthingssupplychain.com/supply-chains-getting-complex-not-necessarily-problem
- Silva, N., Ferreira, L., Silva, C., Magalhães, V., & Neto, P. (2017). Improving Supply Chain Visibility With Artificial Neural Networks. Procedia Manufacturing, 11, 2083-2090. doi: 10.1016/j.promfg.2017.07.329
- Top Four Reasons Why Supply Chain Visibility Is More Important Than Ever Before | Quantzig (2018). Retrieved 2021, from https://www.businesswire.com/news/home/20180508006009/en/Top-Four-Reasons-Why-Supply-Chain-Visibility-Is-More-Important-Than-Ever-Before-Quantzig