Part of bulletproofing your business is preparing for the unexpected. That includes doing a better job of managing your supply chain so you can respond quickly to emergencies. Companies are partly vulnerable due to the widespread adoption of lean inventory practices over the past 20 years. (For more, see my Oct. 10 column, "Sept. 11 attacks reveal supply-chain vulnerabilities".) But many companies are unprepared for supply-chain disruptions because they don't know which goods and materials are in the supply chain or where they are. For example, shortly after Sept. 11, some cargo ships were kept from docking in U.S. ports--and that left some companies with goods on the ship in the dark. "They could identify that a container ship was stranded, but they didn't have the visibility into what was on the ship, what was in each container, and who was depending on it," says Dwight Klappich, an analyst with Meta Group.
The answer to avoiding such a situation is supply-chain visibility. Good supply-chain visibility means a supply-chain manager can identify purchased materials as they move through suppliers' production flow and transportation networks to the company's receiving docks. By the same token, the company must have the same visibility into outbound goods as they are manufactured, assembled, stored in inventory, and shipped through the transportation network to customers' receiving docks.
Once you can see what's going on in your supply chain you still need to be able to adapt quickly to whatever fate throws your way. You can further bulletproof your operations by building in supply-chain flexibility, which is the ability to restructure the system quickly and inexpensively. For example, if a supplier loses a warehouse in a fire, you may need to identify and make arrangements with alternate suppliers and then make logistical arrangements so the new suppliers get their materials to the right manufacturing facilities on a timely basis.
It's surprising just how difficult visibility is to achieve. Companies that have multiple ERP systems supporting different aspects of their operations, such as manufacturing and warehousing, often have what Klappich calls "black holes." That means you can't extract relevant supply-chain data because the systems aren't optimized for this--nor can they provide a coherent view of the supply chain as it progresses through different aspects of a company's operations. This is particularly common in companies that have grown through mergers and acquisitions, creating a crazy quilt of e-business software.
Outsourcing aspects of a company's operations can lead to another kind of black hole because you may not have visibility into your trading partner's systems. Before you sign contracts with suppliers, manufacturing partners, or logistic providers, investigate whether they can give you the information you need on a timely basis--and make that part of the negotiation.
Software approach to visibility
Although many companies have adopted supply-chain management software, these applications don't necessarily provide operational visibility into their supply chains. Supply-chain planning software can help companies design efficient supply chains, but it doesn't provide immediate visibility into operations.
In contrast, supply-chain event management software is specifically designed to provide supply-chain visibility and respond to disruptions. Different aspects of this functionality are available from vendors such as Celarix, Descartes, Manugistics, Optum, Saltare, SeeCommerce, Tilion, and Vigilance. Tilion, for example, focuses primarily on providing visibility through real-time data collection, transformation, and reporting. SeeCommerce focuses on measurement tools that help direct what happens in the chain. Saltare and Vigilance are good at identifying disruptions to the flow of materials and using work-flow and modeling abilities to improve a supply-chain manager's ability to respond.
These products and services aren't designed to replace traditional supply-chain software, and IT managers would need to investigate how they would work with their enterprises' existing applications, architecture, and business processes.
You can't solve the visibility problem just by choosing the right software. Before putting any application in place, you will need to carefully investigate your company's supply chain and figure out its vulnerabilities and inflection points. Carefully consider the integration requirements by identifying where the information is and how much work and money will be required to connect the systems.
Although providing visibility throughout your entire supply chain might look great on paper, it can take a long time to complete the necessary software integration. During this time, your supply chain is exposed. "You don't need to know everything about your supply chain at all times," says Kevin O'Marah of AMR Research. "Don't try to model the whole chain. Just pick the piece known to impact your operations."
This kind of thoughtful but targeted approach is probably the best solution to the visibility issue for most enterprises. The worst thing a company can do is to ignore the problem and put off investigating its supply chain's blind spots. That's a disaster waiting to happen.
Do you think visibility is really that important? What's the best way to build a supply chain that can adapt to unforeseen disruptions? E-mail Adrian or Talk Back below.
