What is Supply Chain Visibility?
Supply chain visibility (SCV) is the ability to track the movement of raw materials, goods, and products from supplier to manufacturer to consumer. Increasing supply chain visibility enables organizations to reduce errors, control costs, and manage inventory in motion to improve customer satisfaction. Maintaining good supply chain visibility is an integral part of supply chain management.
SCV has become paramount as more business functions that were once handled in-house have been outsourced to different companies around the world.
Couple that trend with heightened customer expectations for increased speed and transparency in the products they buy, and you have a recipe for today’s modern supply chain which has never been more complex and challenging.
But with nearly all pain points, the opportunity is often hidden inside. The breadth and depth of a company’s visibility of its supply chain network have created an avenue for shippers and logistics service providers (LSP) alike to respond more nimbly to rapidly changing customer demands and conditions. In short, good supply chain visibility solutions allow managers to implement streamlined supply chain processes and quickly deal with supply chain disruptions before they cause major issues.
In this post, we’ll define supply chain visibility and discuss key elements to consider as you seek to increase supply chain visibility (scv) and get the most ROI out of your visibility efforts.
Table of contents
Why is Supply Chain Visibility Important?
Supply chain visibility is important because it helps reduce errors and ensure a company can make and keep its promise to its customers. Visibility has everything to do with inventory management strategy, allocation and orchestration and means that you’re able to service the customer how, when and where they want.
In the last 10 years, this has become ever more complex. Not only do you need visibility across your traditional network of DCs and warehouses, but now you need to be able to see the inventory on hand with suppliers, 3PLs and in-store to orchestrate order fulfillment in a way that exceeds customer expectations while minimizing service cost.
Retailers are feeling this acutely. According to a recent Supply Chain Dive brief, retailers are learning that their businesses face a “make or break” in their supply chains about profitability. Getting supply chain visibility right is critical to becoming an agile business that moves from being reactive to proactive and customer-centric.
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7 Benefits of Supply Chain Visibility
The benefits of supply chain visibility show the many ways it can create a competitive advantage within an organization, including:
- Better customer service
- Improved inventory visibility and control
- Shorter cycle times
- More precisely positioned labor to coordinate shipping activities
- Less time spent manually gathering tracking information from all transportation parties
- Avoid detention, demurrage, delay and chargeback costs
- Better data for more intelligent business decisions
The benefits are often realized as soft cost savings. It can be difficult to create a compelling business case as a result, especially given the substantial resources required to implement full end-to-end visibility among all involved, including transportation management systems (TMS), order management systems (OMS), warehouse management systems (WMS) and enterprise resource planning (ERP) systems. So, the challenge with supply chain visibility is not whether to dedicate resources, but where and how much.
How to Improve Supply Chain Visibility
Supply chain visibility itself can be a difficult concept to unpack in a way that everyone agrees. For simplicity, it can be broken down into three different stages and three orders of magnitude within each stage. In reality, the picture is not so clear, and there are times when a certain situation does not fit so cleanly into a specific stage or level of magnitude.
To consider where to invest first for the greatest ROI, organizations should consider three stages of visibility as they occur during a shipment’s life cycle. The first area is the order level when a specific quantity of a product is requested. Next is the in-transit level which represents the physical movement of the items. Last is the invoice and audit stage which is where the transaction among buyers, sellers, and contracted LSPs is completed.
Within each of these stages, the level of visibility is determined by how an organization executes that task. In order of increasing the “field of view,” they can be completed three ways:
- Manually (through spreadsheets, emails, and phone calls)
- Automatically (by system events entered by the user)
- Integrated Approach (messages and information exchanged by independent but connected systems and supply chain visibility software)
Stage 1: Visibility in the Order Stage
Before any product is created, it must be considered as an item entering the supply chain virtually, when it is “ordered” from buyer to seller. Typically dictated by a purchase order, the item has a real impact on inventory levels and therefore the bottom line on both the buyer and the seller.
Manual Execution – This is the lowest level of visibility and can create headaches for all parties involved, as it may require manually matching a purchase order to a sales order through spreadsheets containing hundreds of thousands of lines of data with no guarantee of accuracy.
Updates regarding freight ready date to customers and LSPs are typically pulled rather than pushed out. This puts all involved in a reactive state and creates a situation fraught with frustration, delays, and unnecessary costs.
Automatic Execution – This may be done through a sales order or purchasing system either built in-house or purchased off the shelf. Rather than exclusively relying on emails and spreadsheets, these supply chain visibility software systems have a more deliberate approach to capturing and transmitting data.
Users can match a specific order with their purchase order/sales order and confirm the quantity while LSPs and customers can receive freight-ready dates, giving decision makers the ability to make some adjustments if necessary. Schedule changes can be ‘pushed’ from the system to relevant contacts when details are updated.
Automatic execution is still subject to human errors in data processing and entering. Moreover, typically these systems are not fully integrated with downstream or upstream systems, which limits visibility to just the order stage in the process.
Integrated Execution – An integrated approach, like the automatic approach, has an organized method for collecting and transmitting data. It captures order data, freight details, and product-ready dates.
Going beyond automatic, integrated users from different departments have visibility to all relevant data, giving stakeholders the ability to make swift changes if required. Furthermore, integration allows relevant LSPs to get involved sooner, giving them the ability to plan the movement of the freight in advance.
An integrated environment greatly reduces the number of touch points and creates an organized workflow for individuals to perform the most important tasks first. An integrated approach may be accomplished by an OMS or TMS – or more likely a combination of both.
The integrated approach is the only method that sets an organization up for true end-to-end visibility, actively working downstream with both the in-transit and freight invoice audit stages that follow.
Stage 2: Visibility in the In-Transit Stage
After the product hits the warehouse floor, it is ready to be physically moved. This can be carried out by truck, rail, air, ocean, or a combination of modes. Transportation is one of the highest costs associated with a product. Further still, it is subject to market swings that can drastically affect the cost.
Manual Execution – Visibility during this stage in a manual environment relies on operators exchanging phone calls and emails with carriers and relaying this information to the relevant parties.
Like the order stage, this is an extremely time-consuming process. It provides a limited view and only gives insight as to what has happened in the past.
Phone calls and emails typically act only as a “for your information” and are not actionable. They offer little room for decision-makers to adjust accordingly. Manually executing visibility to in-transit shipments exposes shippers and LSPs to avoidable costs such as detention or demurrage – which either must be passed along to the customer or written off by one of the parties.
Automated Execution – Visibility to the supply chain in an automated environment likely still relies on some emails and phone calls but has the ability through a TMS to translate that information into usable data.
In an automatic environment, organizations have access to historical data such as transit times, the volume of freight moving, and by which mode. These data sets can be used to make decisions such as how to staff warehouses appropriately, which lanes present the most challenges, and if they should consider switching to a quicker mode.
While visibility into the past is much more robust than in a manual environment, this siloed TMS lacks agility in making quick decisions on shipments actually in transit. Shipments in transit are still subject to the same delays and costs associated with manual tracking. Updates can be pushed out from the system, but still rely on a human at the other end to receive and process this information. By that time, especially in a global supply chain across many time zones, it may be too late to deal with problems proactively.
Integrated Execution – The integrated approach takes the benefits of an automated environment and builds on them to give organizations the ability to adjust shipments in transit much easier with real time visibility.
At the center of an integrated approach is a fully implemented and integrated TMS, which exchanges information in real-time with other systems within an organization and has electronic data interchange (EDI) with systems of other trading partners in the supply chain.
Application program interfaces (API) in a fully implemented network bridge the gap between different systems. They can complete tasks such as confirming if freight is ready for pickup, getting quotes from carriers and tendering shipments. Companies can find hard dollar savings in reduced transportation spend and soft cost savings in running an operation more efficiently.
An integrated approach relies less on the relay of information between people freeing their time to dedicate to other tasks. In-transit technology for visibility has evolved from getting the status of a shipment in transit after it reaches a hub or destination, to real-time visibility and global positioning.
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Stage 3: Visibility in the Payment and Invoice Audit Stage
Because the invoice audit and payment stage is further downstream, it does not get the attention it deserves concerning supply chain visibility. While it may not have as direct of an impact on the ordering or movement of freight, it has a direct financial impact on a company’s supply chain. Full visibility in this stage directly translates to hard dollar savings.
Manual Execution – A manual environment in this stage entails working entirely off spreadsheets. This process is very time intensive, often requiring multiple full-time employees to manage. The exact precision of accounting necessitates multiple invoice audits to confirm the amount stated is the amount owed, and that the amount paid matches.
Multiple audits help reduce the amount of error but can come at the cost of crippling an organization’s cash flow. A single shipment may have several invoices associated with it, all being sent at different times. Without any upstream visibility, pairing invoices accordingly quickly becomes an extremely fractured task that ties up too many internal resources.
Automatic Execution – Automating the freight invoice and auditing phase is typically done through an on-premise or cloud-based program like QuickBooks.
Though that software runs more efficiently than keeping data on spreadsheets, being specifically designed for accounting functions, the process of keeping track of invoices and auditing is still time-consuming. Financial information may be stored in separate ledgers, which makes pulling this information from each silo tedious to create a report.
Also, an automated solution does not give upstream visibility to finances related to the order or in-transit stages, so organizations still require a balancing act between the time spent auditing invoices and keeping a stable cash flow.
Integrated Execution – Fully integrating this stage opens a full line of sight to the financial portion of the supply chain as soon as the order is placed. A fully integrated software suite communicates with OMS, WMS, and TMS systems to provide true upstream visibility of the associated costs and spend across the entire supply chain. You also make your finance team happy by enabling direct receipt of invoices and freight documents as they occur.
Rather than pulling this information from separate and disparate systems manually or through a QuickBooks application, a truly integrated platform centralizes the information, reducing the time and effort spent on manually creating reports needed to drive intelligent business decisions. As the business grows, an integrated approach is positioned to scale with the increased volume of work, increasing the ROI on the integration.
Conclusion: How enVista Can Help Tie It All Together
myShipINFO is enVista’s cloud-based freight audit and payment solution. It provides enhanced visibility to transportation expenses using graphs that are easy to use and understand. The software gives you the power to view your entire transportation and freight spend in one, centralized interface helping you overcome the challenge most transportation leaders have – managing large amounts of disparate data in order to track and analyze their transportation spend.
enVista’s supply chain experts also have deep expertise in complex systems integrations of supply chain technologies (WMS/TMS/OMS/ERP). These systems solve critical operational challenges and provide real time visibility of supply chain data.
Clients leverage enVista as a single, trusted partner to help them drive positive customer experiences, cost savings, revenue and profitability across the arc of modern-day commerce. Our supply chain management experts can help you determine where to invest first regarding supply chain visibility to generate ROI at the quickest time to value.