The essential guide to supply chain management best practices
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The earthquakes and tsunami that rocked Japan in March 2011 were unmitigated disasters on many levels.
The most alarming damage was done to the Fukushima Daiichi nuclear power plant, but supply chains were affected, as well, causing significant business disruption. Of course, a disaster of that magnitude was bound to affect supply chains, but in the aftermath, companies questioned whether the impact could have been mitigated.
For some businesses, the answer may lie in supply chain visibility tools, which allow for greater insight into the state of a business' supply chain. For example, Jabil, a contract manufacturer heavily affected by the disaster, sought to mitigate future disruptions by creating a platform called Intelligent Digital Supply Chain (IDSC), which the company claims provides end-to-end visibility on the more than 25,000 suppliers it manages.
Supply chain visibility tools enable agility
Dealing with disruptions is one of the main reasons companies consider implementing supply chain visibility, but there are other reasons, according to Bill McBeath, chief research officer at ChainLink Research. Predicting various scenarios is important, too.
"Largely, companies are looking for the ability to predict disruptions and understand disruptions as early as possible so that they can do something about them," McBeath said.
"It also depends on how their supply chain is set up. And to that point, there's this idea of market intelligence that might go beyond a formal understanding of supply chain visibility," he continued. "This means that sometimes companies want to know [if] market-wide demand is going to go up in the next six to 12 months, and maybe they should buy now, or demand is going to go down, and they should wait."
Knowing where goods are in transit is the most common benefit of supply chain visibility tools, according to McBeath. The latter involves knowing a supplier's production status. This involves having visibility into a number of factors in the supplier's plant after an order has been made, including whether they have ordered raw materials, the delivery status of the raw materials, when production starts, the work-in-progress status, quality issues and the number of units in finished goods inventory.
"People really care about knowing that something's going to be late so they can do something about it," McBeath said. "If you're smart, and a feasible alternate supplier exists, you have a second source which can fulfill the need if you have an emergency and your other supplier will be late. If you have the flexibility, you also might change your production schedule and say 'we can't make widget No. 3 because this material is not going to be here, so let's make widget No. 3 three weeks from now when the stuff does arrive. And, in the meantime, we'll make widget No. 47.'"
Supply chain visibility is also important on the outbound side, McBeath said, although this is more driven by a desire to provide good customer service. Outbound visibility creates trust and happier customers by making every effort to provide a warning as early as possible if shipments are running late, and a more accurate picture of when they are actually coming.
Major speed bumps on the road to track and trace
For all the value it provides, there are serious limitations to supply chain visibility, McBeath warned. One problem with using sensors to track things is where they are placed.
"You can put a sensor on the container, and that's fine for those shipments where the container is loaded right at the origin location and stays intact all the way to the destination at your door," McBeath said.
However, many shipments consist of pallets from different origins that are shipped to the origin port and consolidated into a container. Then, at the destination port, they are deconsolidated and put into another container or trailer. This can happen multiple times in the end-to-end journey of a pallet. As a result, visibility is lost once containers are moved off ships, deconsolidated and put onto trucks.
The ground leg can be the most challenging to track, as the trucking industry is very fragmented, and it can be difficult to integrate track and trace.
However, McBeath said that there are emerging solutions that can track pallet-level shipments, which is a more reliable unit to track through the supply chain.
"One problem with putting devices onto pallets is that, if I'm a retailer, I might be buying from tens of thousands of suppliers, so how do I get all of them to put these things on?" he said. "It will work well in certain classes of shipments, where you have more control over things. But it's early days for pallet-level tracking, and it still needs to be proven."
Digital supply chain powers and changes visibility
Historically, supply chain has been about logistics -- when and where goods are moving in and out of factories or warehouses -- but the rise of digital supply chain networks has changed all of this, according to John Ferraioli, managing director in the analytics and information management practice at Deloitte.
"We're seeing greater inputs from external sources where you have a supply chain manager who can look beyond and address issues," Ferraioli said. "What's the cutover strategy if there's a geopolitical event or natural disaster in an area that will affect my ability to get my goods? Now you can get better demand and supply synchronization."
These networks and the technology that enables them, including sensors and advanced analytic software, can provide much more insight than simply logistics. Sensors can be used to report on product quality, as well as location, for example.
"There are temperature variances in pharmaceuticals, and you need to keep the quality of the product within a certain threshold. If that's breached, the batch may be poor," Ferraioli said. "By monitoring the supply chain of the supplier and the quality of the product coming ... into your product manufacturing with IoT [internet of things], you can avoid customer satisfaction issues, performance issues, downtime issues -- all by using these new data types."
Six key areas of supply chain visibility tools
Regarding technology enablement, Ferraioli explained, six key areas are important when developing supply chain visibility: data, connectivity, security, an integrated architecture, implementation and human factors or change management.
Data is the foundation, and you need to be able to aggregate and validate it. Connectivity ties together heterogeneous platforms that have different protocols and different internal and external data sources. As the supply chain is digitized with sensors and other devices, they must be secured through encryption, access control, device authorization and other methods.
Those three elements make up the foundation of supply chain visibility systems, Ferraioli said, while the latter three provide the usability and business value. An integrated architecture sequences the connected devices with ERP and analytics systems. Implementation brings the systems to life and provides the business use cases that provide value. Change management helps with adoption of the systems by workers, who may have to learn new technology, data sources, applications and business processes, like how and when to take action on the new insights.
"All these new sources are fantastic, but if you can't make sense of them, or interpret the data that sensor is putting out and put it in context to all the other events that are happening, you have a science project, rather than a business outcome," Ferraioli said.
"It's all for better outcomes in the end, but when we look at this element of being digital, it's the data, the connectivity, and the security mapped with an integrated architecture; implementing it against a business case; and then the change management of [training] the people for the learning curve of the new technology, the new organizational change, and the new integration of these new processes. It was linear, but now it's a web -- a digital supply network."
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