In a survey of 150 global manufacturing executives, 47% committed to improving supply chain visibility and tracking. According to the Global Supply Chain Disruption and Future Strategies Survey Report, this goal was the top-ranked planned tool investment. But what does supply chain visibility mean and will this investment really give the executives what they want?
What is supply chain visibility?
Supply chain visibility often means “where’s my stuff,” or the ability to trace parts in transit from the manufacturer to the final destination. It can also mean “which companies make my stuff,” tracing parts or components all the way back through multiple tiers of suppliers back to raw materials. If the focus is on risk of individual suppliers, it can even mean “who makes my stuff,” so distress signals can be identified in advance.
Let’s say visibility allows you to locate some bolts on a truck in Kansas and learn they will be late because of a raw materials shortage delaying your supplier, because one of their suppliers went bankrupt. With this information, are you any closer to knowing what to do about it, or have you just enriched your ability to admire your problem and see it close up? This example illustrates why supply chain visibility isn’t enough.
Why transparency is better than visibility
What you really need is full transparency into the impact of this delay, not just on part lead times but how their late arrival will affect all the links in your network ending with your customer. Because we call it a supply chain for a reason – each link is connected, so if you rattle one link, you rattle the entire chain, as Boeing famously discovered in 2007 when a bolts and screws shortage delayed their Dreamliner.
But the opposite is not true – if you optimize one link, you have not optimized the entire supply chain. Which is why even knowing precisely where in Kansas the truck carrying your bolts is traveling, and when it will arrive at your plant, still doesn’t move you beyond problem admiration. These delayed bolts disrupt multiple links, from production to sales to distribution, and more. And the impact doesn’t stop there, since trade-off decisions will be required to answer questions like which customer is most important to satisfy with the limited bolts in inventory and if production capacity should be reallocated. And then decisions on these questions will in turn affect other customers in your rattled supply chain.
Agility to act on transparency
Not only do you need to be able to know the full impact of events and decisions across your supply chain, you need to be able to shift plans seamlessly to maintain responsiveness. As ARC analyst Steve Banker describes in this story, biopharmaceutical company Ipsen managed to avoid any stockouts due to the pandemic last year, in spite of experiencing up to 70% demand spikes. Ipsen faced transportation capacity constraints, complications at country borders, and even temporary shutdowns at their own plants. In response, full transparency from concurrent planning allowed them to analyze demand by country and inventory in various locations to prioritize production capacity where inventory was lower or demand signals were more erratic. With laser targeting, they adjusted manufacturing to focus on products for markets most at risk so those patients who depend on their drugs to treat cancer, neurological issues, and rare diseases would not face a stockout. Achieving their goal of no stockouts is impressive, but that they did so without significant buffering with inventory is a testament to the combination of transparency and agility.
Agility relies on having this kind transparency at your fingertips, through concurrent planning, so you aren’t waiting on analysis and a report from a link up or down the chain. Latency kills agility, because by the time the spreadsheet you need lands in your inbox the situation has likely already changed. And the linked nature of supply chains mean that collaboration is necessary to ensure that a solution to a problem doesn’t meet the metrics for one link but negatively impact another. If all the links can see the same information at the same time, they have both the transparency and agility they need to act collaboratively. Underlying both are analytics, which allow you to understand that impact by having the richest information available to make the best decisions.
Analytics inform decisions
The impact of your late bolts isn’t isolated, so you have to evaluate the ramifications of your options. Scenario analysis allows you to weigh alternatives by calculating the effects of possible changes. For this what-if capability to be enough, you need powerful analytics to be able to see how any scenario you evaluate addresses not just your metrics, say as a materials planner, but those of the entire supply chain.
In times of particular uncertainty that we face these days, the future is less clear than ever, but you can have a playbook of scenarios ready to help you act quickly when you have more information. For example, it can be more effective to make a series of forecasts, accounting for a range of outcomes from aggressive to conservative. These forecasts can then be incorporated into scenarios, so are ready with your best outcomes, depending on which reality arrives, and can quickly adapt your plans accordingly.
Sightlines for success
In the last year, many companies saw their S&OP cycles shrink from monthly to weekly or even daily cadences. Planners couldn’t afford to wait for information to cascade through the supply chain. They needed the right information right away. Supply chain visibility as traditionally understood isn’t enough, but transparency into impact, the agility to respond, and analytics to inform decisions gives supply chains the sightlines needed for success.
Polly Mitchell-Guthrie is the VP of Industry Outreach and Thought Leadership at Kinaxis, the leader in empowering people to make confident supply chain decisions. Previously she served in roles as director of Analytical Consulting Services at the University of North Carolina Health Care System, senior manager of the Advanced Analytics Customer Liaison Group in SAS’ Research and Development Division, and Director of the SAS Global Academic Program.
Mitchell-Guthrie has an MBA from the Kenan-Flagler Business School of the University of North Carolina at Chapel Hill, where she also received her BA in political science as a Morehead Scholar. She has been active in many roles within INFORMS (the Institute for Operations Research and Management Sciences), including serving as the chair and vice chair of the Analytics Certification Board and secretary of the Analytics Society.