Supply Chain Visibility 101

Supply Chain Visibility is the capability to have (near) real-time information on the status of supply, demand, inventory, and capacity information across the entire supply chain. Supply Chain Visibility would involve –
• Having real-time visibility into status and location of goods in transit
• Having an accurate and close to real-time data about the demand from all the channels and customers
• Having an accurate information about future deliveries from suppliers
• Knowing accurately how much inventory is in the supply chain, and where exactly it is located
• Having a measure of current and future capacity utilization at manufacturing plants
• Having a visibility into the production status at outsourcers

Although end-to-end visibility of supply chain remains a utopian ideal, it is not always possible to achieve it in practicality. Hence a company needs to prioritize the areas where improving visibility lead to maximum return for the buck. For instance, a Consumer Packaged Goods (CPG) manufacturer might find maximum benefit in getting accurate information about real-time demand from retailers based on Point-of-Sale (POS) data. A component manufacturer might want to get real-time data about status of jobs that it has outsourced to sub-contract manufacturers. A retailer might benefit most by having accurate real-time information of incoming supplies into its Distribution Centers and stores from logistics providers.

Supply Chain Visibility comprises of two distinct features –
• Collaboration of data between supply chain partners providing real-time and accurate information across the supply chain
• Providing real-time event based alerts to supply chain partners that would enable prompt reactions to events & exceptions

A recent study by IBM found that Supply Chain Visibility was rated as the biggest challenge by largest number (70%) of Supply Chain executives across the globe. The study also found different programs being implemented by organizations for improving supply chain visibility. Some of the most common supply chain programs were –
- VMI implementations
- Collaborative planning with suppliers
- Collaborative Planning, Forecasting and Replenishment
- Continuous replenishment of material for customers
- Real-time sharing of inventory and demand data between supply chain partners

Supply Chain versus Value Chain

Value Chain and Supply Chain are similar concepts and hence confused by many. Though similar, Supply Chain and Value Chain are not identical. Let’s see what’s the difference is between the two.

Supply Chain, as you know, refers to the flow of material from suppliers to the customers (or as some might say, from suppliers’ suppliers to customers’ customers), and the flow of information in both the directions. It is about ensuring that goods and services are produced and delivered in the most efficient and cost effective manner. Supply Chain deals with efficiency. It asks the questions like what should be done to reduce distribution costs by x percent or to reduce lead-time by x amount. It deals with issues in integration with supply chain partners to improve the flow of information and improve efficiency. The keyword here is “efficiency”.

Value Chain, on the other hand, deals with more strategic decisions pertaining to the supply chain. It deals with long-term decisions about structuring the supply chain in a way to get competitive advantage in the market. Value chain asks how does one get maximum value for the company and its supply chain partners. A typical Value Chain decision would be whether to source components from low-cost Asian supplier or to manufacture components locally close to the market in the West. These decisions have long-term implications to the supply chain. Value Chain deals with gaining competitive advantage in the market using your supply chain. Decisions pertaining to forward and backward integration fall in domain of Value Chain.

Mandating your suppliers to send Advanced Shipment Notice of raw material shipped and deploying systems to improve efficiencies using ASNs is a Supply Chain activity. Deciding on whether to manufacture or buy locally or buy globally is a Value Chain activity. In short Supply Chain is tactical, Value Chain is strategic. 

What this blog is about

Hello friends! Welcome to my blog on Supply Chain Management and Project Management! As you would have guessed from the name of the blog, it is about spreading knowledge about two areas of growing importance in today's economy - Supply Chain Management, and Project Management. This blog will feature my thoughts on issues related to these two subjects.