Three Dimensions of Supply Chain Visibility

Three Dimensions of Supply Chain Visibility

Here is a true story.   

It's peak season, and the main character - a large electronics retailer - is coping with the annual headache of sourcing more than 60 percent of its merchandise from hundreds of overseas vendors. The supply network is global and complex. The order-to-delivery lead time for one product, in one lane, is 63 days. The retailer makes it work by weaving together a makeshift international network of 3PLs, ocean and air freight carriers, forwarders and brokers.

The buyers made their sourcing decisions based on good demand forecasts. This is not a story about poor forecasting. It's a story about poor visibility. As you'll see, what this company didn't know hurt its bottom line. Halfway into peak season the company runs a promotion on one of its most profitable products. In a few test markets, the retailer lowers the price point and sees a jump in sales. Within weeks, the company shifts its pricing strategy downward in all but two markets and orders more product.

Vendors are pressured to ramp up supply and aim for the early side of ship windows. Critical shipments shift from ocean to air freight. Air is eight times more expensive, but for the retailer this is peanuts compared to what can be picked up in added sales.

This is where logisticians earn their stripes. Traffic managers and planners pull out all the stops to get the job done. All seems to have ended well until the financial analysis begins to appear. The star product is turning out, on closer review, to be a loser, one of the poorest performers the company has ever seen.

Worse, there is more product on hand, in stock, ready to be pushed to stores. Product is still arriving from overseas. How did they get it so wrong? Tracking back, they find that the actual landed cost of this particular product was grossly miscalculated and poorly monitored as conditions changed. The toll of crisscrossing sourcing and logistics decisions, made in the heat of battle, without good information and broad coordination, eroded all the profit - and then ate into the red zone on a grand scale.

This story and others like it are, sadly, commonplace. Going global can make a difference; it can be good for the bottom line, but mastering global supply chains is tough.

How should companies prepare themselves?

Technology can play a big role, but traditional supply chain visibility systems that focus purely on the physical supply chain deliver only a slice of the complete picture. Full visibility and control is a three-dimensional affair. Importers and exporters must monitor the physical flow of shipments. But they must also monitor the financial flow and the range of documents and data upon which these first two flows rely. 

 

1st Dimension:  The Physical Supply Chain

The vast majority of companies rely on third-party service providers to supply not just data but the information systems themselves. Since inventory is managed and controlled by multiple partners, and these partners each rely on dedicated systems of their own, the end customer is deprived of even this first level of supply chain visibility. For most companies, even this baseline goal of a single, reliable, continuous view of the entire physical supply chain is a pipe dream. 

 

2nd Dimension: The Financial Supply Chain

This is a supply chain dimension our electronics retailer could have used. Merchants may be using systems that trigger alerts when things go wrong - such as late vendor bookings. But without the parallel ability to see and track costs as they accumulate through the supply chain - by SKU, by shipment, in real time - they are blind to the larger implications of sourcing and logistics decisions made every day. Visibility into the financial flow allows companies to catch costing aberrations early and to take action immediately, before those aberrations explode into full-scale financial disasters.

 

3rd Dimension: The Document & Data Supply Chain

Lapses such as missing documents and inaccurate records impede the flow of goods. They keep containers stranded at origin waiting to clear the 24-hour rule. They hold up shipments clearing Customs at destination, and stranded at other points. They put the physical supply chain at risk. But they also tax financial operations and personnel along the value chain who must re-key and re-use the host of required trade and logistics documents. 

 

The Internet has emerged as the uncontested business-to-business communication platform, spawning a whole new breed of technology companies. In the world of global supply chain management, Internet-centric technology companies will play an increasingly active and vital role. Neutral technology vendors that have managed to find a way to link partner systems and deliver broader, cross-partner visibility to companies directly will be the preferred choice of companies. And these technology platforms will give their customers full, three-dimensional visibility:  visibility to the physical supply chain, visibility to the financial supply chain, and visibility to the document/data supply chain. 

These systems provide more than software:  they provide partner connectivity and IT infrastructure. And, because they are hosted by the technology vendors themselves for a fraction of the cost of traditional "do-it-yourself" software systems, the barriers to getting started are low.  This isn't Star Wars anymore.

The technology exists. It's proven. And leading companies are leveraging these technology platforms today to take supply chain control to a whole new level.