Lack of transparency in the supply chain makes it difficult to respond to changes in demand and reduces your ability to identify and address critical issues. By increasing supply chain visibility, you can mitigate potential challenges before they impact your bottom line.
What is supply chain visibility?
Supply chain visibility refers to a business’s capacity to track, monitor, and understand the various elements and processes involved in its supply chain. It’s achieved through clear, real-time insights into the movement of goods, the status of inventory, and the performance of suppliers and partners.
Optimal supply chain visibility provides access to up-to-date information about the status and location of goods within the supply chain. This extends from the initial stages of raw material procurement, through to production, distribution, and delivery. It also encompasses the flow of information and materials within the supply chain network.
By increasing supply chain visibility, a company can make better decisions and maintain a competitive edge in today's fast-paced business landscape.
Inventory visibility in supply chain management
Inventory visibility in supply chain management refers to how a business accurately and comprehensively tracks the quantities, locations, and statuses of its products or materials at any given point in the supply chain. Improved inventory visibility helps prevent overstocking and stockouts to enable greater operational efficiency and business-wide cost savings.
The importance of supply chain visibility
Supply chain visibility is instrumental in enhancing efficiency, reducing risks, and delivering value to both the company and its customers. It's a critical component of modern supply chain management.
The main benefits of supply chain visibility include:
- Optimised operations: It allows companies to track the movement of goods, monitor inventory levels, and assess supplier performance.
- Responsive decision-making: Real-time data about the supply chain enables quick decisions when it comes to changes in demand, disruptions, or unexpected events.
- Risk mitigation: Visibility helps identify potential risks and vulnerabilities in the supply chain. This includes everything from transportation delays to supplier issues or geopolitical events.
- Inventory optimisation: Knowing where products are in the supply chain helps in managing inventory levels effectively.
- Customer satisfaction: Customers today expect transparency and timely delivery.
- Compliance and sustainability: Visibility aids in ensuring compliance with regulations and standards. It also supports sustainability efforts by providing insights into the environmental impact of the supply chain.
However, studies show that most businesses are not achieving optimal supply chain visibility and therefore not operating as efficiently as they should. A 2022 report by Deloitte found that only 13% of businesses could map their entire supply chain network and that up to 22% have no visibility beyond their immediate suppliers.
Who should care about supply chain visibility?
“Within 10 years, supply chain disruptions can tally to nearly half (45%) of a year’s worth of profits for business.”
Supply chain visibility is essential for various stakeholders across the business landscape. Here are some examples:
- Businesses, regardless of their size or industry, should prioritise supply chain visibility. It directly impacts their operational efficiency, customer service, risk management, and ultimately, their bottom line.
- Consumers and B2B clients increasingly value transparency and reliability in their interactions with companies. They want to know where their orders are and when they'll arrive, and expect accurate updates. Supply chain visibility directly influences customer satisfaction and loyalty.
- Suppliers and partners in a supply chain network can better align their operations with the needs and schedules of their customers. This fosters stronger relationships and can lead to more collaborative and efficient supply chain processes.
- Logistics and transportation companies can manage their operations more effectively thanks to supply chain visibility. It allows them to optimise routes, manage capacity, and provide accurate tracking and delivery information to their clients.
- Governments and regulatory bodies have a vested interest in supply chain visibility, especially in industries with strict compliance requirements. Transparent supply chains help ensure adherence to regulations related to product safety, quality, and environmental standards.
- Activists and advocacy groups with growing concerns about sustainability and ethical sourcing are increasingly interested in supply chain visibility. It helps verify compliance with environmental and social responsibility standards, providing assurance to concerned stakeholders.
Laws around end-to-end supply chain visibility
Supply chain visibility is not only an essential operative function for product-based businesses but there is a growing requirement for elements of the supply chain to be documented by law.
There are various regulations and industry-specific standards that touch on aspects of supply chain transparency and accountability. Here are some examples:
- Conflict Minerals Reporting (Dodd-Frank Act): This U.S. regulation requires companies to disclose their use of certain minerals, often associated with conflict in the Democratic Republic of Congo and neighbouring countries. It aims to ensure companies are not inadvertently funding armed conflict.
- Modern Slavery Acts (various countries): Some countries, including the UK and Australia, have enacted laws that require companies to disclose their efforts to address modern slavery and forced labour within their supply chains.
- Food Safety Modernisation Act (FSMA): In the United States, FSMA focuses on preventing food safety problems rather than reacting to them after they occur. This involves extensive record-keeping and traceability requirements in the food supply chain.
- EU General Data Protection Regulation (GDPR): While not directly focused on supply chains, GDPR has implications for data sharing and transparency within supply chain operations, especially when dealing with personal data.
- Product safety regulations: Various jurisdictions have product safety regulations that may require manufacturers and distributors to be able to trace products through the supply chain in the event of a recall.
- Customs compliance and trade regulations: These vary significantly by country, but many require accurate and transparent reporting of the origin, contents, and value of goods being imported or exported.
It's important to note that these are just examples, and the legal landscape can evolve. Industry-specific regulations may also exist, particularly in sectors like pharmaceuticals, aerospace, and healthcare, where traceability and supply chain integrity are critical.
Organisations operating in multiple countries or industries often must navigate a complex web of regulations to ensure compliance with supply chain visibility requirements. Consulting legal experts or industry associations can be essential in understanding and meeting these obligations. Always check for the most recent and applicable laws and regulations for your specific industry and location.
How to improve supply chain visibility
There are many ways to improve supply chain visibility, and the right way to do so will depend on the business and the products you sell. Let’s look at five of the most effective techniques.
1. Supply chain visibility software
Supply chain visibility software helps you gain comprehensive insights into your supply chain operations. It integrates various data sources and technologies to provide real-time tracking and monitoring of products, inventory, and logistical processes.
By using tools that can trace the journey of goods from their origin to their final destination, supply chain visibility software can give you clear and transparent visibility into each stage of the supply chain.
These types of supply chain software typically include features such as:
- Inventory management
- Demand forecasting
- Order tracking
- Performance analytics
- Purchasing
- Supplier management
By utilising such software, you can make informed decisions, respond promptly to changes, and optimise your supply chain processes.
2. Supply chain mapping
Supply chain mapping is a strategic process that involves visually representing and understanding the interconnected network of suppliers, manufacturers, distributors, and other entities involved in the production and distribution of goods or services.
By creating a clear and detailed overview of the entire supply chain ecosystem (including the flow of materials, information, and finances), this exercise helps you identify key stakeholders, assess dependencies, and uncover potential risks or inefficiencies within the supply chain.
A visual depiction of supply chain relationships can enhance overall transparency in your supply chain operations. Supply chain mapping is a valuable tool for managing risks and ensuring smooth operations in today's complex and interconnected global markets.
3. Supplier communication
Establishing clear communication channels and technology interfaces with suppliers and partners allows for seamless sharing of information while ensuring everyone is working from the same set of data.
Here are some ways you can improve supplier communications:
- Initiate transparent, accessible, and clear communication frameworks.
- Set expectations early for things such as lead times, order quantities, quality standards, and delivery schedules.
- Request and provide timely updates on order progress.
- Share (where appropriate) sales forecasts and demand projections with suppliers.
- Engage in collaborative planning sessions to align things such as production schedules, inventory levels and order quantities.
- Define key performance indicators and metrics that you and your suppliers can use to assess performance.
- Create a resolution protocol with clear processes for addressing and resolving issues or discrepancies.
4. Supply chain integration
Supply chain integration refers to the strategic alignment and seamless coordination of various elements within a supply chain network. It involves integrating processes, systems, and data across different stages of the supply chain, from sourcing raw materials to delivering the final product to customers.
This integration facilitates the efficient exchange of information, streamlines communication, and enhances collaboration between various stakeholders throughout the supply chain.
The ultimate goal of supply chain integration is to create a cohesive and agile supply chain ecosystem that can respond effectively to market changes, reduce operational costs, improve product quality, and deliver better customer service.
5. Workflow optimisation
Supply chain workflow optimisation involves the systematic improvement of processes within the supply chain. You can achieve this by carefully analysing and reconfiguring the steps involved in sourcing, production, distribution, and delivery to eliminate inefficiencies, reduce costs, and enhance overall productivity.
Through methods like automation, process reengineering, and the adoption of advanced technologies, businesses can achieve smoother operations, faster cycle times, and better resource utilisation.
Supply chain workflow optimisation is a critical aspect of modern business strategy, enabling companies to stay competitive and resilient in dynamic markets.
Supply chain visibility solutions
In addition to the steps above regarding the improvement of supply chain visibility, we’ll leave you with some final tips.
Here are a few more ways to optimise supply chain visibility in your business:
- Utilise advanced technology: Adopt modern technologies like IoT (Internet of Things), RFID (Radio-Frequency Identification), and GPS tracking to access real-time data on the location and condition of goods.
- Invest in data analytics and AI: Leveraging data analytics and artificial intelligence can provide valuable insights into supply chain trends, potential risks, and opportunities for optimisation.
- Standardise data formats: Ensure that all stakeholders in the supply chain use compatible data formats and systems. This minimises errors and makes it easier to share information.
- Prioritise security and data protection: Protect sensitive supply chain information from cyber threats and unauthorised access. This helps maintain the integrity and confidentiality of the data.
- Establish Key Performance Indicators (KPIs): Define and measure relevant KPIs to track the performance of the supply chain. This could include metrics related to lead times, inventory turnover, and on-time delivery.
- Engage in continuous improvement: Regularly review and assess the effectiveness of supply chain processes. Identify areas for improvement and implement changes to enhance visibility and efficiency.
- Provide training and education: Ensure that employees and partners understand the importance of supply chain visibility and are trained to use the systems and technologies effectively.
- Monitor and respond to events: Keep a close eye on any disruptions or changes in the supply chain and have contingency plans in place to respond swiftly to those changes.
- Collaborate with technology providers: Engage with technology vendors and service providers who specialise in supply chain visibility solutions. They can offer expertise and tools tailored to your specific needs.
By employing these strategies, businesses can enhance their supply chain visibility, leading to improved operational efficiency, better customer service, and reduced risks associated with disruptions.
