Before teaming up with supply chain management software provider Descartes a decade ago, CVS, the nation’s biggest pharmacy chain, relied on historical data and safety inventory to avoid the costly risk of running out of stock.
With annual revenue of $22 billion, CVS makes hundreds of thousands of deliveries each year from some 22,000 origin points to nine distribution centers and more than 4,100 U.S. stores. A third-party study projected potential inventory reductions of up to 17 percent within 12 months of implementing Descartes Visibility and Event Management software. CVS also replaced its existing enterprise resource planning and warehouse and transportation management systems with new inter-enterprise connectivity capabilities.
Descartes helped CVS reduce inventory through exception alerts to prevent order failures, proactive management of supply chain events and by monitoring inbound shipments with supply chain partners to decrease order cycle times. CVS plans to integrate its top 50 suppliers and a number of carriers into the system, which is expected eventually to cover up to 90 percent of all inbound volume.
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“We saw the value in connecting to Descartes’ network rather than developing our own visibility systems internally,” said Kevin Smith, senior vice president of supply chain and logistics for CVS/Pharmacy.
Supply chain visibility used to be narrowly defined as supply chain event management. Today it refers to an aggregation of data not just about supply chain activities and events but also the analytics and processes in place to make the data meaningful. In a vacuum, visibility has no intrinsic value.
“The bottom line is that data has to be actionable for specific types of problems,” said Chris Jones, Descartes’ executive vice president of marketing and services.
The CVS-Descartes partnership is an example of the closer ties domestic and global shippers are forging with third-party logistics providers to provide clarity throughout their supply chains.
That visibility ranks high in what shippers seek from 3PLs. More than 60 percent of shippers participating in Capgemini’s 2202 Third Party Logistics Study listed visibility among the five most critical 3PL capabilities. Visibility functions like an alarm system in your car that warns you when you veer into another lane; the information is only useful if you do something with it, said Fab Brasca, vice president of global logistics for JDA Software Group, a supply chain software provider. “Visibility just shows you the current state of things,” he said.
In day-to-day logistics operations or in response to events such as natural disasters, supply chain visibility is only part of a discipline that involves continuous and multitiered planning. To provide value, visibility must be linked with strategy, sales, transportation, network design and contingency planning.
Visibility has different meanings to different people. It can be defined narrowly as granular data for the progression of activities such as over-the-road loads, in-cab metrics or route deviations, or as broadly as an end-to-end window on the entire supply chain.
JDA offers supply chain visibility as an independent solution within a broader footprint of solutions. Visibility modules are designed to aggregate data from other supply chain functions such as transportation, order management, warehouse management and inventory control and to help companies manage supply-demand events. The modules provide real-time decision support and predefined events and exceptions to support workflow, and are scalable and configurable for specific business requirements.
“We define it as a central dashboard, a command and control center for the whole supply chain,” Brasca said.
Technology’s ability to capture and filter data is advancing at such a rapid rate, especially with the advent of mobile technologies, that the availability and timeliness of data soon won’t be an issue. The challenge will continue to be how to represent that data to turn it into actionable work flow.
Whether visibility is defined narrowly or broadly, solutions should be deployed to address specific challenges, including creating a common view across disparate systems and sources. Ideally, enhanced visibility enables businesses to manage exceptions and disruptive events such as production bottlenecks, natural disasters or changes in supply and demand.
When shippers have visibility into goods in transit they can reallocate inventory based on order signals, supply-demand triggers or other factors. It’s a key part of the visibility value equation, especially for shippers who source goods overseas and can use longer lead times to reallocate inventory.
Creating a more agile supply chain is a good example of the type of challenge that can be addressed by using visibility to tie functional silos and multiple domains together. To succeed, companies must have a clear understanding of their network to react to changes or events.
“Applications will give you visibility into those domains, but where we need to go is to create cross-capability work flow to allow you to tie those functions together,” Brasca said.
One of the biggest challenges to visibility in overseas markets such as China, India and Vietnam is the consistency and quality of data. Suppliers and transportation partners are frequently not tied into central networks. As a result, questions arise as to who is responsible for capturing data and passing it along to the right people and in the right formats.
The emergence of transportation portals has led to some data consolidation, but it’s ultimately up to the manufacturer or retailer to look at their supply chains and find ways to capture data. Ideally, companies should create an internal hub that involves all trading partners and have a compliance program in place to ensure that it functions smoothly.
“The more you can create a universal view of those sources the better,” Brasca said.
When it comes to visibility, the cart is currently before the horse because many companies have way more supply chain data than processes in place to make it actionable. The breakthrough will come when item-level visibility can be tied into planning, analytical and business intelligence tools for real-time decision making, said Sean Coakley, senior vice president of sales and marketing for Kenco, a Chattanooga, Tenn.-based integrated logistics services provider.
At Kenco, visibility is defined two ways: as a tool for supply chain execution and as a key component of strategic and tactical decision-making in multiple activities, including order, inventory and returns management. “That is true supply chain visibility, having all those actionable items in one data warehouse to support decision making,” Coakley said.
The track and trace capabilities FedEx and UPS first brought to the market were a fantastic innovation that redefined supply chain visibility. For online shoppers, end-to-end tracking is a nice convenience. For companies, it’s a bonanza that enables dynamic decision-making based on real-time data instead of aggregated data. Real-time visibility also makes it easier to calculate the true cost of end-to-end logistics instead of having to rely on post-shipment analysis of landed costs.
“That enables you to do real analytics and not just silo analysis,” Coakley said.
Kenco works closely with a major medical supply company to support its product trials business, which requires a dynamic distribution environment for immediate or next-day shipments to hospitals and doctors’ offices. Inventory management systems are tied into mobile applications for real-time allocation of goods.
The scope of visibility varies by industry. Hospital supplies and automotive parts tend to be tracked at the part number or SKU level while consumer products are mostly tracked by pallet or truckload. Hurdles to improved visibility include shipper master data that may be missing purchase orders or parts numbers, or contain other inconsistencies. Frequent product changes by manufacturers cloud the picture.
“The next step for visibility tools is to clean up master data so we have a faster, cleaner flow of information,” Coakley said.
There are visibility gaps in transportation management. Providers that rely on EDI updates from carriers must augment communications with smaller carriers that may not have access to EDI. A peek behind the scenes at some 3PL call centers is like finding a wizard behind the curtain; instead of a seamless flow of electronic data, there are many people making telephone calls to truck drivers.
“In reality, visibility is limited by gaps in integration,” Coakley said.
Radio frequency identification and global positioning systems can fill in some of the gaps, but those technologies aren’t cost-effective enough for widespread use. Mobile technologies and voice recognition software soon will play a bigger role in supply chain visibility management.
Descartes defines four core processes — commercial, logistics, transportation and product information — that converge under the mantle of supply chain visibility. Combined, they cover granular data such as pallet weights and measures and the full range of logistics activities, including ordering, inventory and commercial documents. Information is made actionable through multitier processes occurring over Descartes’ network of logistics-intensive companies, which includes more than 35,000 companies in 160 countries.
“They are all closely tied in,” Jones said. “We provide the infrastructure that allows you to bring all those pieces together, all the stuff that people need to have.”
There is a lot of specialization in the application of visibility tools and processes based on industry, geography, types of data needed, distribution networks, transportation modes and other factors. To maximize cost savings through the use of visibility modules, 3PLs, retailers and suppliers must work together to coordinate the flow of goods. For example, by adding load flow control, dock appointment and yard management to supply chain visibility, systems products can be deployed throughout the network in advance of arriving at the distribution center, adding efficiencies to inventory management.
Visibility systems should be flexible enough to accommodate low-tech suppliers in emerging markets such as China and Vietnam. They should include non-systems assistance capabilities for providing visibility into point-of-sale data, labeling and shipment information.
A key focus area for Descartes is measuring data quality. For many shippers, visibility is limited when goods are shipped out of China and emerging markets in Southeast Asia, depending on who is stuffing the container.
Things are changing slowly as more supply chain partners become aware of the potential value of improved visibility backed by actionable processes.
The earthquake and tsunami that struck Japan in 2011 illustrates the importance of supply chain visibility, but Jones stresses that visibility is a tool, a means to a greater end. What really matters is resiliency, so that once alerts and warnings are sent, you can respond to them with corrective action.
“Visibility only shows you what the problem is,” Jones said. “If you have only one way of getting the product out, you’re going to be stuck.”
Contact David Biederman at firstname.lastname@example.org.