When it comes to supply chains, what you see is what you get. The more you can see into the chain, the more benefits you can receive — including optimized inventory management, cash flow and customer satisfaction. Customers today expect real-time information about product availability, order status and delivery. As a result, incomplete information can negatively impact your relationships with customers and, ultimately, your profitability.
In fact, according to a 2010 survey by Oracle of 100 supply chain executives in the UK, poor information flows across supply chain operations potentially cost companies in the manufacturing, retail, distribution and wholesale sectors £1.2bn (CAD $2bn) every year in lost sales. This represents a great deal of wasted profits.
Many supply chains now traverse the globe, adding time and complexity to managing the flow of goods. It is, therefore, essential to have a reliable business intelligence system that facilitates information sharing among suppliers, transporters, manufacturers, warehousers, distributors and customers. The ability to view timely, accurate information from the beginning of the chain to the end is essential for:
– Reliable forecasting
– Accurate decision-making
– Minimizing risks
– Optimizing inventory turnover
– Reducing days and costs in supply chain cycles
– Healthy cash flow and profits
– Customer satisfaction
– Competitive advantage
While achieving perfect supply chain balance may never be possible, companies must have the ability to collect data from all stakeholders in the chain to effectively integrate customer needs with purchasing, inventory management and delivery. Many businesses have solid information in their internal environments, but often lack similar data from their supply chain partners.
Relying on a patchwork of systems and software to address supplier management, purchase order processing, receipt of goods and inventory management — as many companies do — often leads to missing links. These are information gaps at critical junctures in the supply chain. Optimizing efficiencies requires addressing some of the following gaps to seamlessly integrate information.
Do we know what information our customers expect from us?
Speed and dependability are the keys to satisfying customer expectations. However, suppliers often fail to meet these expectations because they have not determined the specific information customers want and when they want it. Acquiring these details is crucial for domestic manufacturers in order to compete with offshore manufacturers.
A supply chain system should include mutually agreed upon standards that address customers’ preferences and priorities for measuring and communicating expectations and results.
How quickly do we learn about delays in supplier production schedules?
When goods are sourced internationally, materials planning is often characterized by complex sources of supply and long lead times. Since manufacturers may purchase materials and parts worldwide from a variety of sources, issues — such as an absence of materials required for production or an overabundance of in-process inventory — can be catastrophic. Timing is even more challenging for seasonal businesses that produce different products in different periods of the year. Relying on email updates from suppliers is simply too risky because internal ERP (enterprise resource planning) data may be late or incorrectly entered.
The ability to view suppliers’ production scheduling and automatic notification of delays offers greater control over purchasing, inventory management and product delivery. This requires integrating an MRP (material planning requirements) component into the supply chain management system with all stakeholders sharing data. MRPs coordinate timely information across multiple, interdependent organizations: order schedules, confirmations and changes and performance and exceptions reports. The more timely and accurate the information, the lower the risks of missing parts, over-ordering, under-ordering or expensive changes to production schedules.
Do we know where our goods are located?
Ocean container transport is a common component of many global supply chains. Yet the transportation duration for these often-weeks-long voyages is influenced by an ever-expanding variety of factors. For example, heightened security can lead to longer shipping periods and more onerous information requirements. Congested port traffic conditions can also impact travel duration and variability. Even “green” requirements for energy consumption and carbon emissions can impact the choice of route and the speed of travel.
In order to optimize delivery schedules, expected delays must be factored into manufacturing and shipping schedules. However, these types of uncertainties in ocean travel make it challenging to determine precise delivery times.
Real-time tracking of ocean freight provides the timely information you need to efficiently coordinate container shipments. Rather than learning of delays weeks after their occurrence, tracking in real-time enables close monitoring and timely responses. Delays can be estimated within a closer margin, allowing advance communication with customers and avoiding frustration, penalties or cancellations.
Do we know the date that containers require customs clearance?
Since free storage times at ports is generally limited to a few days, customs clearance is another juncture where slow information often leads to holdups and expensive charges.
When ocean voyages are tracked in real-time, advance notice of ship arrival time and the contents of goods enable customs clearance documents to be forwarded to the broker before the ship lands. This facilitates faster clearance and prevents queuing. Containers quickly back up at port when customers have not pre-arranged inland transport. Therefore, determining the day that a shipment arrives allows appropriate timing of trucking arrangements, while helping to avoid time delays and potential demerit charges as containers wait at port.
Carefully assess system capabilities
These missing links highlight the need for greater collaboration and integration in today’s complex supply chains. Many companies still rely on systems designed for a single-entity environment, rather than the expansive network of partners that comprise most chains. Among the top reasons cited for poor information flow by the executives who participated in the Oracle 2010 survey was information held in multiple, isolated databases and spreadsheets and the complex nature of the supply chain.
A company should be able to view an immediate, global picture of its supply chain in order to anticipate delays and make necessary adjustments. When assessing the capabilities of software to manage supply chain information, the following elements are necessary to avoid critical missing links:
– Real-time detailed visibility into every key juncture in the supply chain, i.e. demand, procurement, production, transportation and inventory
– Portals connecting the entire supply chain from order through delivery
– Collaboration capabilities that allow stakeholders of the chain t
o readily share information regarding supply and delivery
– Ability to integrate varying information formats from various supply chain partners
– Open-endedness and flexibility, enabling easy modifications and integration with other systems
– Capability of generating alerts of events that require attention throughout the supply chain
– Ability to create “dashboards” that enable consolidated viewing of information from multiple sources
While multi-enterprise visibility continues to evolve, new technologies are increasingly capable of eliminating missing links.
For example, an automotive parts manufacturer that distributes products manufactured in its Canadian facilities as well as factories in China has a growing base of US customers who require increasingly precise delivery times. To meet these expectations, the company upgraded its information network to connect all customers with production and delivery in all factories.
Any scheduling delays are immediately transmitted to every stakeholder in the supply chain. Improving the accuracy of estimating arrival dates has enabled the manufacturer to sell products even before they become inventory. The company improved the efficiency of its sales cycle by about 15 percent, while significantly enhancing customer satisfaction.
A supply chain management system that integrates end-to-end information enables participants to effectively manage changes and disruptions — wherever they occur. Ultimately, solid information enables every member of a supply chain to make informed, timely decisions, reduce risks and enhance their competitive advantage.
Michael Stranz, CA, CPA, is a partner in the BDO Solutions practice of BDO Canada LLP (www.bdo.ca/solutions). He helps organizations streamline business processes and improve operational efficiency through information technology solutions. For more information, please contact Michael at 519 772 0334 or mstranz@BDO.ca.