Vikings were skilled seafarers who traded across wide areas of Europe. They loved to take risks, and even without a compass they may have reached America some 500 years before Columbus. The invention of the compass in the 14th century, however, changed the rules of the game and kicked off the age of discovery, a period of extensive overseas exploration. Then Columbus discovered America, changing the course of history forever.
In comparison, most businesses are navigating the ocean of supply chain without a compass. They have neither clear visibility nor understanding of demand signals. The same applies for supply chain risks: most companies are essentially managing their supply chains by guessing its future behaviour based on past data and experience.
Digitisation – through the internet of things, big data analytics and the cloud – is promising a supply chain compass that can shift supply chain management from the age of experience to the age of discovery.
Visibility is the supply chain compass
In my latest blog, I discussed digital obesity and introduced our research on the Matrix methodology to support community members on their journey towards supply chain digitisation.
The Matrix methodology shows that businesses have greatly invested in technologies in order to support both supply chain planning and execution. The first looks at past transactions to predict the future; the latter stores supply chain transactions that enable the process workflows. However, businesses lack supply chain visibility tools. They have no compass.
Our report, ‘Becoming a smarter manufacturer’, published in November 2015, shows that the lack of visibility is the fundamental barrier to further performance improvements in supply chain. The ability to collect, analyse and use information in real time is critical for organisations that wish to achieve higher levels of agility and responsiveness.
The future of supply chain is visibility
A comparison of the current level of visibility and the expected level in five years’ time reveals that the largest share of organisations still has limited visibility, and less than 10% have an ability to orchestrate the supply chain in real time. However, over the next five years, the situation is set to improve significantly, with half of respondents planning to achieve end-to-end supply chain visibility.
Many supply chain leaders are already on their way and are partnering with supply chain technology vendors to gain more supply chain visibility across different aspects of their supply chain:
- UK-based coffee shop chain Costa Coffee uses real-time data transmitted from its vending machines to enable demand-driven auto-replenishment based on the machine-learning planning engine from technology vendor ToolsGroup.
- Electric car manufacturer Tesla uses a combination of carrier electronic data interchange (EDI) messages and supplier advance shipping notifications (ASNs) to get real-time alerts on inbound logistics to its assembly operations in Freemont, California, through a mobile application from technology vendor Elementum.
- The railroad, marine and mining equipment manufacturer GE Transportation collects and analyses real-time data from running transport equipment using GE Digital technologies to then feed insights back to repair factories, which route the necessary repair or re-manufacturing production operations.
- The sports footwear and apparel company Brooks Running uses TransVoyant’s machine-learning capability to track the geographical position of vessels and calculate the estimated time of arrival based on a range of information, including weather conditions or supply chain disruptions.
- Mars uses the cloud-based supply chain visualisation and mapping software Sourcemap to support its Sustainable Cocoa Initiative. The tool is used to monitor and evaluate sourcing improvement projects, establishing a direct communication channel between cocoa-producing communities and Mars.
What all these cases teach us is that visibility is the essential driver for supply chain agility. It completes traditional supply chain planning capabilities with real-time information that inform decision-makers and support rapid supply chain reconfiguration.
As my colleague Kevin O’Marah pointed out in his blog on the future of supply chain planning, it’s fair to expect that, with digitisation enabling real-time data to be accessible, actual inventory, capacity, cost and lead time information will be used for planning decisions. However, it will not only accommodate the base plan for the next week or month, but a continuous planning process at the speed of the omnichannel world we now live in.