You've heard the buzz by now: visibility software lets supply chain managers pinoint the exact location and status of shipments anywhere in the supply chain. Operating in real time, it tracks goods whether they're within the distribution center's four walls, at another facility or even in transit. It cuts production costs by reducing unintentional inventory build up, alerts managers to delays and kicks customer service levels up a notch.
But DC managers who expect to hop on the fast track to supply chain success simply by providing some visibility are bound to be disappointed.
It's not enough to locate inventory in the supply chain. You have to use the information that visibility provides to make strategic decisions that help DCs serve customers better. As John Langley, professor of supply chain management at Georgia Institute of Technology, puts it, "The objective should not be visibility. The objective is having information available so managers can take action when needed. Visibility for its own sake provides no value."
Though it may not stand on its own, visibility becomes a very powerful tool when used in conjunction with topflight business processes. But that assumes that a company has its supply chain management house in order. At a minimum, that means it has the following in place:
Without those elements, a visibility solution cannot live up to expectations. But in combination with them, visibility can quickly push DC operations to new levels. Armed with accurate and up-to-the-minute data, DC managers can monitor transactions and shipments, respond to late or inaccurate shipments, and perform all the tasks normally associated with real-time management of the supply chain.
Access to the right info also let s managers focus their attention on the largest or most strategic customers and the processes that most directly affect supply chain performance. In short , visibility provides the foundation to achieve what should be the true goals of all businesses: kicking up customer satisfaction levels and securing a stronger competitive position by making the entire supply chain perform as a single entity.
Not there yet
Many companies have achieved visibility within their own factories, warehouses and distribution centers. Some can also locate goods from suppliers and finished products that are in transit to customers or retail outlets, either with their own visibility capability or, more often, through integrated transportation service providers such as FedEx or United Parcel Service.
Very few companies, however, have achieved end-to-end visibility through out their supply chain, though many are working toward that goal. Intel Corp., the giant semiconductor manufacturer, is a case in point (see sidebar). Intel has launched a major corporate initiative aimed at improving supply chain ef ficiency. The goal is for managers to know the location and status of all inventory, regardless of its position in the supply chain, enabling them to make decisions on the fly, all in the interests of better meeting customer needs.
But what Intel and others have found is that the complexity of today's supply networks makes true supply chain visibility tough to achieve. "The biggest challenge is that the supply chain contains so many disparate participants, it's hard to tie them together," says Langley. "In theory, you can establish visibility in your supply chain, but saying it and doing it are two very different things."
What customers want
All too often, visibility initiatives fail because managers have neglected the critical behind-thescenes work that's required for success. Too many companies continue to see visibility solutions as tools that can simply be slapped on existing operations to produce significant benefits. More and more,software vendors are trying to help potential clients through a step-by-step process that will ultimately allow them to focus on their own customers' needs.
"The most important thing is that companies considering visibility and similar solutions first look at what their customers want and how they can improve customer service," says John Davies, co-founder and vice president of Optum. Based in White Plains, N.Y., Optum markets supply chain execution software , including a supply chain visibility and event management tool called TradeStream.
Davies adds that it's essential to examine all business processes that affect—or may affect—customer satisfaction. "We try to help them determine what has to happen both within their company and through out the entire supply chain,a ll the way to delivery of the product to the customer. Then—and only then—should companies apply software tools to these processes."
At the same time, the more astute observers warn companies not to get too hung up on the tools. True supply chain integration demands a lot more than software, hardware and other high-tech apparatus. To get the most from visibility solutions and other systems designed to improve supply chain performance, manufacturers must bring all key players into the picture.
Though everyone agrees that collaboration is critical, they also agree that there is no simple formula for how to go about it." Everyone should collaborate," says Dr. Karl B. Manrodt, assistant professor in the Department of Information Systems & Logistics at Georgia Southern University and co-author of a report title Visibility Ã£ Tactical Solutions, Strategic Implications, which summarizes research conducted by the consulting firm Cap Gemini Ernst & Young, Georgia Southern University and the University of Tennessee." But the critical thing is for companies to first identify their most critical customers and suppliers. Then they have to determine exactly how to collaborate with each, and the approach can vary significantly from one situation to the next."
Manrodt also notes that although conventional wisdom dictates that interaction should begin with the people at the top, that may not be practical." Executives should certainly collaborate with each other, but they're typically so busy that it's hard to get their support," he says. "So companies may have to aim for some small success first, t hen bring in their executives to collaborate."
Because visibility capability is so critical for other supply chain improvements, most industry sources believe it will soon become standard issue in supply chain management software.
"I believe that before too long, visibility will become a standard part of the offerings of not only software companies but also logistics service providers," says Georgia Tech's Langley. "Transportation management systems and warehouse management systems will include visibility functionality."
Still, James R. Kellso, manager of supply network research at Intel Corp., isn't expecting a visibility explosion anytime soon. The transportation industry has to get financially healthy b efore carriers will invest in such capabilities as standardized shipment visibility, he reports. "Right now, there is great pressure on costs,and that pressure has limited investment by carriers."
But, as with everything else in the IT world, that will change. Within five years, Kellso predicts, visibility capability will be fairly standard among carriers. When that happens, DC managers had better be poised to take the data and run with it.
James R. Kellso of Intel faces the classic visibility challenge, if such a thing can be said to exist. As manager of supply network research at semiconductor giant Intel Corp., Kellso oversees an organization that has a good grip on where items stand in its internal supply network. But now, Kellso has to figure out a way to track inventory that is no longer in the company's direct control Ã£and do it flawlessly and in real time.
"We have great visibility within the systems that we own and manage, such as internal shipping and our own warehouses," says Kellso. "But we have spotty visibility as products move from place to place out of our direct control. Our level of visibility once product leaves our control is totally dependent on the capability of individual carriers."
Therein lies a problem. Kellso reports that there is a great deal of variance in the ability of transportation service providers in this area. "Some can provide timely visibility information," he says, "but most cannot." Kellso hopes that will change soon. Once everybody's operations are in sync, he notes, "I can treat in-transit inventory the same as I do inventory that's sitting in one of our warehouses. I can change it; I can repackage it." And that could save a lot of money.
Another problem he faces is a potential failure to communicate: For full-blown integration to take place, internal and external systems will need to "talk" to each other and that is unlikely to happen anytime soon. "The systems that exist are proprietary," says Kellso, "so there are massive—and expensive—connection and translation challenges."
Help may be on the way, in the form of industrywide communications standards that would greatly reduce the complexity and costs of integrating internal and external systems. For its part, Intel supports the efforts of RosettaNet, the standards organization that is composed of companies in the information technology, semiconductor manufacturing and electronics components industries. The goal of RosettaNet is to create and implement communications interfaces that will align business processes between supply chain partners.
Last year, RosettaNet merged with the Uniform Code Council (UCC), the group that develops standards for product identification, including bar codes. Mergers of standards organizations are becoming more common, as various industries strive to establish the communications standards that are so essential to supply chain integration. Will those mergers accelerate the development of standards? Kellso and his colleagues hope the answer is yes.