It's all about visibility
Smoothly executing a global supply chain requires a view into the movement of inventory and an ability to react to the unexpected.
By Roberto Michel, Editor at Large -- Modern Materials Handling, 9/1/2006
There is a big difference between trying to manage supply chain events in real time and managing by exception. If you're managing by exception, you only need to react to unexpected conditions, rather than sweating the dozens of minor transactions that surround an order as it moves from its point of origin to the customer. Doing both is what sets apart the leaders in the real-time supply chain.
Management by exception is enabled by supply chain event management technology, or what many broadly refer to as visibility solutions. These solutions can be layered over existing transactional systems to automate response to conditions that are out of variance. Some vendors, however, contend that the traditionally internal focus of enterprise systems could limit the event management solution if it does not take into account events occurring in the larger supply chain, such as delays at a port or partner site.
"We are seeing greater implementation of visibility tools with event management, alerting and rules-based decision-making layered in," says Mike Engoian, a senior executive in Accenture's (877-889-9009) supply chain practice. With event management, says Engoian, rules are set so managers are notified when events occur such as inventory falling below a certain level or a glitch in a global supply chain. "So if a container sits in a port waiting to unload for more than a prescribed period of time—say three days at the port of Long Beach, alerts get kicked off to notify people or systems," he says.
In a 2006 study of the supply chain investment priorities of more than 200 enterprises, Aberdeen Group (800-577-7891) found visibility was the top priority in areas including supplier and global trade management, as well as transportation management. The Aberdeen study calls visibility the "motherhood and apple pie" goal for global trade, but estimates that fewer than 10% of companies have robust visibility on overseas orders and shipments.
Engoian and others believe that event management—if properly integrated with warehouse management systems (WMS), enterprise resource planning (ERP), as well as partner systems—can manage extended supply chains by exception. Integration, however, has proven a stumbling block to early packaged solutions for event management.
"The payback on [standalone] event management was questionable, because more integration work was involved, as they didn't come embedded within the user company's supply chain management tools or carriers' systems," says Engoian. "But now more of the supply chain and ERP vendors offer event management, and the carriers are beginning to build out their event management tools." Meanwhile, more of the WMS and supply chain management software suppliers are offering the functionality.
Manage the chain
Smoothly executing a global supply chain comes back to setting thresholds for variances, then managing exceptions. In this way, says Engoian, the fact that shipments from China are sitting waiting for rail transport on the West Coast can be relayed down the chain, which could give DC managers time to adjust.
"If a DC manager can be alerted in advance a shipment is not going to be there, it's better to raise the alert sooner rather than later," Engoian says. "Alerts not only give a chance to assess shipment options, but also aid in labor scheduling for warehouse and yard activity. Visibility makes for fewer unintended surprises."
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Delays at ports or in trailer loading at ports are potential bottlenecks that can be addressed via event management syetems.
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Chad Collins, director of product strategy with HighJump Software (800-328-3271) agrees that visibility is key to managing a network of logistics and contract manufacturing partners. "It's becoming less and less important which piece you own, but increasingly important that you have control over the whole network," he says.
One approach to gaining that control is using an event management layer to monitor shipments and other events while detailing options for managers, says Collins. "For instance, if a supplier is late with a delivery, do I want to ship the rest of the customer order with one item short, or hold the order and ship complete to that customer?" says Collins. "Or, if a late order is scheduled for ground delivery, is there some way to expedite the shipment?"
Event management, says Collins, should allow for multiple means of communication, from fully automated electronic data interchange (EDI) to keystroke entry by less sophisticated suppliers into a portal. "Once you establish the communication, you can push services to suppliers, like kitting or inspection, but still track it yourself," Collins says.
Another approach allows brand owners to manage global sourcing. Karin Bursa, vice president of marketing for Logility (800-762-5207), says this solution monitors shipments and delivery milestones, and also tracks packaging and labeling compliance and other details that ensure goods arrive within specification. This solution is used by companies in sectors such as apparel that need to closely monitor finished goods from partners overseas. "We've really seen an uptick in demand for the solution given the number of companies moving to off-shore manufacturing partners," Bursa says.
Core ERP—the main system for order management, inventory control, financials and other key transactions for most companies—remains too inward facing to excel at extended supply chain management, contend some suppliers.
Edward Lewis, CEO of Mitrix (949- 951-5195) says a better approach is an on-demand supply chain collaboration solution. It manages the extended supply chain by focusing on order status, shipments and actions that take place among trading partners. ERP, by contrast, tends to have an internal focus in areas like financials, costing and taking customer orders, he says.
"Companies have been unable to collaborate with their partners on a real-time basis," says Lewis. "The majority of the challenge is outside the four walls."
According to Lewis, this doesn't eliminate the need for ERP. Instead, it layers the collaboration solution over the ERP system, which is still needed for internal transactions and master data. Lewis adds that this approach is more flexible than ERP systems when it comes to letting different business units or sites handle logistics execution processes differently.
Distributed order management is another system that helps manage global supply chains. These systems overlay existing order management and WMS solutions to support an order management process that incorporates multiple sites and trading partners, according to Aberdeen Group.
Pete Racine, vice president of supply chain consulting for Click Commerce (800-899-2641), says greater outsourcing drives the need for a network-wide approach to order management. "Many of our customers have made the shift to a virtual manufacturing model where they are outsourcing core manufacturing or logistics functions," he says. "This drives the need for distributed order management to achieve extended process execution."
With an order management layer that taps into existing inventory systems, says Racine, a branded "virtual" manufacturer can best leverage all of the inventory in its network. "[Distributed order management] allocates the orders, given the customer service requirements, and may satisfy a portion of an order from different points in the network," he says.
While vendors and analysts agree that network visibility solutions are important to managing global supply chains, other, long-term strategies come into play. One of these is mitigating the risks in supply chains that might stretch across the globe. Accenture's Engoian says some clients have responded by establishing alternate suppliers closer to home.
As for the data capture that feeds visibility, Engoian and others believe that established technologies such as EDI and wireless bar code scanning remain effective. But RFID, wireless sensor networks and other emerging technologies may eventually have broader impact on supply chain collaboration, most experts believe.
"The long term prospects for RFID are very good," says HighJump's Collins. "Eventually, we'll have visibility over every asset no matter where it is.
Top capabilities desired in a SCM solution
| Most important capabilities | Respondents, % |
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Source: Aberdeen Group
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| Can manage processes that extend to trading partners | 52 |
| Provides a closed-loop environment between planning and execution to rapidly reshape demand or redirect supply | 50 |
| Delivers real-time visibility into business operations and high-lights problem areas and performance issues | 50 |
| Lets us flexibly manage multiple types of supply chains | 36 |
| Supports cross-functional enablement, including cross-functional workflow and alerts | 33 |
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