Aaron Baker, Senior Director, Supply Chain Development, Damco
From a software technology perspective supply chain visibility is not challenging per se. In its rudimentary form supply chain visibility follows a basic procedure of input, process and output. So why is the question ‘where is my stuff?’ still a considered a Critical supply chain industry question? To answer this question properly we need to step back and think about it in the context of an enterprise business challenge instead of a tactical question. Specifically, what enterprise challenges can be answered once you get the right balance of people, process and then technology?
"The fragmented or siloed approach to supply chain management is being reengineered for optimal end-to-end supply chains that minimize or maximize cross functional KPIs"
The change in mind-set is to think of the data that fuels supply chain visibility as something that needs to be managed by dedicated people, similar to how products on a store shelf needs to be continuously managed to ensure availability. Imagine if a store shelf was partially stocked and many of the goods were left in the storage room - not even opened from its original shipping carton. You could not reliably offer products to be sold.
To get reliable supply chain visibility, companies need to manage the process on a continuous basis. They understand the business benefits of having either in-house or outsourced providers control the process by people with ‘boots on the ground’, where the operations takes place.
Managing What Matters in the Supply Chain
In many industry verticals we see mature organizations shifting from mitigating supply chain costs to creating enterprise value. The fragmented or siloed approach to supply chain management is being re-engineered for optimal end-to-end supply chains that minimize or maximize cross functional KPIs, thereby balancing profitability while meeting unpredictable customer demands. We have seen the business benefit of supply chain data to be a proven enabler for this transition to many of our customers, in areas such as lead time reduction, on-time-in-full (OTIF), gross margin, sustainability and product availability on the shelf as top priorities. These focus areas are what matters for mature organizations.
Many organizations outsource process management to not only include the functional physical management and movement of shipments between supply chain nodes; they also outsource the creation and fortification of data connectivity across the supply chain - from the point of production to the point of consumption (e.g., the creation of an advanced ship notice ASN to be linked to a shipment milestone). Thereby linking the international with the domestic supply chains as well as inducting wholesaler shipments into retail networks. The value is not just getting the data for visibility. The value becomes exponential when you can answer enterprise challenges for holistic end-to-end improvement.
It is commonly understood the key to end-to-end process management is managing the digital and physical supply chains with equal focus. This requires an accountable team to manage orders throughout the supply chain. They proactively reach out to vendors and carriers about shipments and applicable status milestones.
The below examples illustrates how end-to-end supply chain management can use reliable data to design and implement tangible value for true company innovation.
Designing Operations for Complexity – linking the International with Domestic networks
Using purchase order (PO) data and inbound milestone events, we were able to merge a large retail company’s outbound domestic shipments with their supplier’s inbound shipments. The solution required not only the physical infrastructure, but the connectivity to synchronize the two critical flows electronically and have an account team manage this process and provide real-time status events to control the process and exceptions proactively in real-time. This solution allows for the wholesalers to bypass their own network and get paid faster. These programs are managed from end-to-end with full visibility and resulted in a lead time reduction by an average of 13.7 days and reduction of carbon emissions by over 1.8 million kg annually. The critical success factor was to have all electronic information flow through our systems to provide carton level visibility.
Fitting a Technology Company into a Fast Fashion Supply Chain Network
As a deeply rooted supply chain partner for one of the tech world’s largest portfolio providers in the tech industry vertical, our services span global end-to-end activities such as a centralized origin hub with dedicated account teams. These teams continuously interact with vendors and OEM/ODMs to capture data for enhanced visibility in order to detect and act on risks and opportunities more quickly, and to improve supply chain decision-making. Shipment management includes monitoring goods in transit into destination markets globally where a destination team manages high velocity cross-dock and transload facilities as well as over the road truck delivery. With reliable supply chain data, we were able to propose a global supply chain improvement project to the Latin American markets. The objective was to consolidate the majority of the Asia to Latin America traffic through direct shipments to subsidiaries and channel partners using full containers and to consolidate factory direct shipments that do not have sufficient volume to complete full container shipments.
Using twelve months of actual shipment data and customer demand data, were able to identify which orders could be shipped directly into the sixteen Latin American country markets to satisfy actual end customer demand versus which could be held as inventory for postponement and late stage differentiation of product for the final market.
Through an extensive logistics and distribution analysis we identified that a Panama hub should be used instead of the previous multiple hub distribution points. The calculated savings resulted in an average of a 9 day decrease in lead time and a savings of $9m in costs annually. So what are the right business questions to ask? Companies with mature supply chains are not asking ‘where’s my stuff? Instead, they are asking:
1) Who should manage the data from my supply chain operations to maintain its reliability?
2) What business control can I improve with the information within the supply chain data?
3) How can I use my supply chain data to react to customer demand variability with agility?
Once you determine right questions, then you can make the software technology work for you.