Keeping track of stuff requires better visibility
BARRY ELLIOTT
We are doing some particularly interesting work for a client these days. The client is in the business of moving things from one point to another, sometimes for itself and sometimes for others. Nothing unusual in that. Physically moving the stuff - doing the storing and trucking and flying and so on - from Point A to Point B isn't the only challenge. Keeping track of it is also both important and difficult.
In this space we have often discussed such approaches as lean manufacturing, just-in-time inventory and new technologies that have delivered considerable gains in supply chain efficiency and visibility for companies in a number of industries. Reduced lead times, improved shipment accuracy, better customer service and increased regulatory compliance are just a few of the benefits.
But many companies that have invested in track-and-trace technologies and visibility programmes have yet to realise the full potential. To convert visibility into business value and to optimise supply chains, it is imperative that companies take a holistic approach.
Even minor delays and blockages can cause major problems in customer-facing operations, as well as for suppliers and business partners. Many companies struggle to locate products, assets and equipment and verify that they have been properly maintained or are ready for use. Some compensate for the lack of visibility by building slack into their supply chains, which may allow or cause containers that have cleared Customs and are ready for release to sit in ports for several days - and incur unnecessary demurrage charges. Not to mention damage or pilferage of the contents.
Furthermore, consider the effect of major delays such as a container ship held up in some bottleneck en route. Knowing about the blockage within an hour, rather than a few days, can mean the difference between huge losses in sales and increases in costs, rather than something a lot less.
Although it's important to be aware of the risks of major events and disruptions, companies also recognise that a large amount of value can be unlocked from everyday supply chain events, policies and practices. Reliable status and availability information can create much greater flexibility and power throughout the supply chain - both "upstream" (such as transport planning) and "downstream" (such as demand planning, product availability, and distribution capacity). In other words, shipments could be redeployed on the fly and minor problems solved before they become major blockages.
By refining processes and practices and strategically levering powerful new visibility tools and technologies, companies can not only establish cost-effective buffers and safety nets, but also significantly reduce supply chain lead-times and variability. And, with the ability to identify evolving issues earlier and take corrective actions sooner, they'll greatly reduce their risk exposure.
Meanwhile, companies that are unable to track shipments along every step of the distribution chain and identify threats and emerging problems will find themselves - as well as their brands and customers - at much greater risk.
Visibility has been a hot topic for supply chain executives for several years, but what does it really mean? Better visibility allows companies to analyse data in aggregate, and respond faster to issues that directly and indirectly affect the flow of goods from factory to the customer's shopping cart, but is increased visibility enough? Just keeping track of the stuff doesn't really add value.
How important are supply chain visibility, flexibility and security? An interesting Unisys article offers the following:
- Out-of-stock rates on retail shelves are 8%.
- Product counterfeiting now accounts for 5-10% of all global trade, or roughly $350 billion.
- 50% of companies have logistics asset operations that consume at least 5% of revenue and 17% of companies spend at least 10% of revenue on it.
- 50% of companies have manual asset management processes.
- Logistics and transport costs account for 9.5% of the US gross domestic product.
- Theft and diversions affect 1-3% of goods in the supply chain.
- Lead-time variability from one supply chain node to another ranges from 40% (by sea) to 95% (by air)
Visibility means different things to different organisations, of course. Next week, we'll detail an approach Unisys has developed to help customers understand why visibility matters, how they can most effectively create it and how to lever it to drive operational improvements. The approach is based on the belief that visibility only matters if it leads to improved performance and increased business value.
