Companies and managers constantly use jargon whilst talking about their specialist topic. Supply chain and logistics management is no exception.
The problem is that often the speaker and their audiences have different interpretations of the terms thrown about. This leaves a lot of room for misinterpretation by the people who want to do something but don’t want to ask “dumb” questions like “what do you mean by that?” or “how exactly will that work?”
Many terms like “agility” or “visibility” are very broad and may mean different things to different people. Very often however those terms are useful when describing operational concepts or ways of working in shorter sentences rather than long paragraphs. Here is our attempt to define some of these terms as we see and use them in our web content and documents.
The consensus is that Supply Chain Visibility is the managers’ ability to track and monitor the information about movement of goods or raw materials along their supply chains. Having timely access to data on inventory levels, transport and distribution delivery times enables companies to make informed decisions and respond quickly to changes in demand or supply. This allows companies to reduce the risk of disruptions, optimise performance of their supply chains and improve customer service delivery. Good so far, and many Control Tower type solution vendors advocate exactly that. But, as always, the devil is in the detail. Beneath the surface there are a number of questions that are much more complex to answer, for example:
- What’s the right balance between historical performance, real-time tracking and forward looking visibility and at what level of detail?
- How integrated and synchronised does the view need to be across interdependent functions e.g. procurement, inbound supply, production, finished goods availability and ongoing fulfilment?
- How do errors in the master data or gaps and delays in external data feeds (e.g. PODs) affect true operational performance?
Some teams are comfortable with just Management Dashboards and use it for retrospective performance reporting, but some leverage the new tech such as RFID, GPS trackers and IoT sensors that provide a much richer underlying dataset. But what matters at the end of the day is how this data is converted into timely and actionable insights that deliver the much anticipated benefits.
The Real-Time Visibility specific term is used when the companies are looking to identify potential delays and take proactive measures to mitigate them, such as rerouting shipments or expediting deliveries. Combining those with the accurate and timely inventory data, managers can adjust production schedules, rebalance stock, and better respond to changing customer requirements. This should subsequently improve customer satisfaction and help companies build stronger relationships with their customers. It is easy to understand how timely information on transport delays can help with customer service delivery. It would require however to employ a much more complex approach to convert this “live” data into the more tactical decisions on production capacities or stock allocations. Additionally, Real-Time Visibility helps businesses identify and mitigate supply chain risks, such as disruptions caused by natural disasters, or supplier production closures or bankruptcies. By monitoring upstream supply chain activities in “near” real-time, companies can take proactive measures to mitigate the impact of these risks on their operations. But similarly to the above, it is difficult to connect this up-to-the-hour data with more strategic decisions and time-lagging actions on supply and procurement. The right approach can really help companies optimise their supply chain operations and reduce costs by identifying inefficiencies and bottlenecks, streamlining processes and eliminating waste. Delivery of this benefits however, would largely depend on the combined people-systems abilities to:
- correctly interpret the data and translate into effective decision making
- identify trends and patterns in supply chain operations as well as underlying root-causes
- prioritise actions based on a combination of considerations ranging from immediate financial impact to longer term strategic customer relations
This would require a deep understanding of the business operations, and the context surrounding the data, as well as a combination of analytical skills and business acumen to determine which actions will have the greatest overall impact on the business.
In summary, while Supply Chain Visibility can provide significant advantages for businesses, the capture of these benefits often depends on the decision-making capabilities of people. This highlights the importance of investing in tools and processes that codify and institutionalise best practices, analytical criteria and consistency of decision-making across the entire supply chain.
Another popular term is Supply Chain Agility and when industry experts mention that they are referring to the ability of a supply chain to respond quickly and effectively to changes in internal and external factors. Agility allows companies to expand, contract or reshape their operations in order to adapt to changing market conditions, customer or channel preferences, and disruptions, while still maintaining high levels of profitability and service capacity.
An agile supply chain can be characterised by several key attributes:
- Responsiveness: A high degree of flexibility, enabling companies to quickly adjust and reallocate resources to customer demands and changes in supply chain conditions. This requires real-time access to supply chain data and the ability to make informed decisions quickly.
- Resilience: The ability to withstand disruptions and shocks caused by natural disasters, geopolitical events, pandemics, or other unforeseen circumstances. Such robustness requires “early warning systems” coupled with comprehensive risk management strategies, contingency planning and the ability to quickly recover from disruptions.
- Collaboration: Effective communications and joint decision making across both the cross-functional teams as well as external stakeholders in the supply chain, such as suppliers, contract manufacturers and retailers. This requires effective alignment on shared goals and a willingness to work together for mutual benefit.
True agility can’t be achieved without interconnected visibility of operations which relies on gathering and processing of interdependent information throughout the entire supply chain, from raw materials supply to final delivery to customers. This allows teams to see the big picture and make informed decisions with maximum impact for the business as a whole and with minimum detriment to individual functional areas.
Overall, Supply Chain Agility is becoming increasingly important in today's fast-paced and unpredictable business environment. Companies that invest in supply chain teams supported by the combination of right systems and balanced management approaches will gain a competitive advantage by improving their ability to respond to changing market conditions and customer demands.