Why Visibility Is Important in Supply Chain Management
From the great chicken shortage that affected Kentucky Fried Chicken in the UK to Apple’s iPhone X supply chain woes, to Tesla’s now-famous blame game for why the Model 3 isn’t rolling out fast enough to meet demand, it’s clear that companies still don’t have the visibility they need into their supply chains.
On the other end of the spectrum are supply chain leaders such as Amazon. While not perfect, Amazon’s supply chain serves as both battering ram and giant shield in its battle for winning ever-more market share.
Leaders like those cited by analyst group Gartner (Gartner’s 14th annual supply chain ranking puts Unilever at the top for the third straight year, with Inditex, Cisco, Colgate-Palmolive, and Intel rounding out the top five) don’t view the supply chain as simply a cost center. Instead these leaders have elevated it to a strategic weapon, with the supply chain viewed as a value generator that differentiates the customer experience and drives competitive advantage.
How do they do that? At the risk of oversimplifying, supply chain excellence starts—and ends—with visibility, but not just any visibility. The concept of true visibility has evolved over time as supply chains have become more complex and digitized.
The Rise of Digitized Supply Chains
What is true visibility? In short, true visibility is having accurate, reliable, order-level detail across every shipment at your fingertips at any moment in time.
Doesn’t digitizing the supply chain give companies visibility? The reality is that as supply chains have become more complex, digitalization has resulted in massive volumes of data being generated from disparate and dynamic sources. Today’s global trade environment relies on a chain of interdependencies with anywhere from 5 to 25 parties playing a role across 30 milestones on an international ocean shipment alone. The data collected across this intertwined supply chain is most often inconsistent, incomplete, out of sequence, and moving at varying speeds.
Instead of visibility being easier to achieve than in the past, it’s more difficult than ever.
For large importers/exporters, guesswork, inefficiencies, and extra costs are the norm, as are customer disappointment and churn, loss of competitive advantage, increased risk, and shrinking profit margins. Not surprisingly, this lack of visibility has become a huge issue for the organizations that own the cargo—including major retailers like Target, Gap, and others—since customer expectations for swift, reliable delivery have increased significantly, thanks to the standards set by Amazon and other e-commerce giants.
For shippers, carriers, terminal operators, freight forwarders, and 3PLs, guessing at important operational metrics such as booking allocations or container ETAs also causes pain. When their projections are inaccurate, they suffer the costs associated with repositioning empty containers. According to Boston Consulting Group, this costs the shipping industry as much as $20 billion annually.
Supply Chain Visibility Software is No Longer Optional
While supply chain professionals have long chased after visibility, it was still considered a nice-to-have capability by many. Manual efforts and processes filled the gaps in data and helped avert or lessen each disaster as it happened.
Those days are over. It’s no longer viable to guess at shipment ETAs or keep customers in the dark about product delivery. Companies today that lack visibility across their supply chain are consistently reactive to adverse events because they are either working from incomplete data or unable to leverage what data they do have to their advantage.
Predictive Visibility is the New Must-Have Capability
While supply chain visibility is imperative today, it’s also not enough. To gain the insight needed to resolve top operational challenges, companies are turning to predictive supply chain visibility.
Using artificial intelligence and machine learning technologies, predictive supply chain visibility gives businesses the ability to assess problems ahead of time, make contingency plans, and manage risk more effectively. It gives companies the ability to make proactive, strategic decisions that create value by:
- Increasing revenue: With predictive visibility, companies can avoid stockouts, demand higher price points for consistent delivery, accurately forecast inventory required, and gain market share and greater share of wallet.
- Decreasing costs: Lack of visibility increases costs in many ways, from detention, demurrage and drayage fees that eat away at profit to missed shipment windows. With end-to-end, predictive visibility, businesses can reduce their reliance on air transportation and shift to lower-cost ocean transport.
- Improving efficiency: Lack of insight into the supply chain creates a domino effect of inefficiencies from the back office to the warehouse. With predictive visibility, staff can spend less time manually tracking down shipments and products and more time proactively managing exceptions. Labor planning based on accurate assumptions and data helps companies optimize the use of personnel resources.
- Improving cash flow: With predictive visibility, businesses can optimize working capital and improve cash flow by reducing buffer stock and associated costs of insurance and warehousing, without the risk of increased stock-outs.
- Delivering a better customer experience: Improved on-time deliveries and insight into shipments that will arrive late helps businesses improve the customer experience with their brand. This reduces churn and creates sustainable growth in customer lifetime value. Shippers that can improve quality and consistency can deliver a customer experience that differentiates the brand.
Chief Supply Chain Officers are Strategic Thinkers
In a study of psychometric data on executives, chief supply chain officers tend to be significantly more strategic and innovative, inclined to act independently, persistent, and determined than other executives. They contemplate the future, anticipate change, and think innovatively about solutions.
Making Predictive Visibility a Reality
AI and machine learning-based technology, such as the solutions from ClearMetal, make predictive visibility a reality. For instance, ClearMetal takes global supply chain management data and automatically cleans, corrects, and makes sense of it by sequencing it properly, removing duplicates, inputting events, labeling milestones correctly, and throwing out erroneous information. Using the clean data, ClearMetal provides real-time, end-to-end, predictive visibility, risk assessments and planning capabilities.