How to Improve Supply Chain Visibility

The adoption of visibility concept has been accelerated rapidly. In this article, you will learn basic concept and how you can improve supply chain visibility.

What is Supply Chain Visibility?

Nobody knows exactly how the visibility concept was developed. So we dig deeper and found that one of the earliest articles about this was "Electronic data interchange in the automotive industry: managing information flows for greater profitability" by Jerrold Donington (1995). At that time, there were the growing complexities of the international business environment and the increasing level of inter-company dependency. Then companies needed to eliminate uncertainties, reduce unnecessary inventory, respond faster to improve customer service. Visibility was defined as:

"The flow of information, across the supply chain to coordinate supply chain processes"

The author suggested that EDI is used to achieve this goal. For your information, EDI system project in 1995 was capable to handle various kinds of data transmission such as,

- Planning Schedule & Sequence
- Product Transfer and Product Activity Data
- Order / Delivery Status

Supply Chain Visibility Concepts

Articles based on the practitioner's perspective to focus heavily on barcode, EDI, RFID, software system and the connectivity issues. From an operations management perspective, visibility is about inter-firm collaboration, information sharing, quality/timeliness/freshness of shared data.

Even though sophisticated visibility software is implemented, there are ways that allow us to see situations with better clarity. To learn more about this, more information has been gathered from the articles as below,

- Building the Resilient Supply Chain by Martin Christopher and Helen Peck

- Mitigate Supply Chain Risk Through Improved Confidence by Martin Christopher and Hau Lee

- The Bullwhip Effect in Supply Chains by Hau Lee, V. Padmanabhan and Seungjin Whang

Information is then grouped and converted in the infographic as below,

How to Improve Supply Chain Visibility

1. Reduce stocking points
Visibility can be diminished by multiple stocking points in the distribution channel. Instead of seeing one figure for one SKU as in centralized distribution, companies with too many stocking points are suffering from multiple data of the same SKU. Then, reducing stocking points is a way to avoid information overload.

2. Shorten pipeline
The prevalent use of procurement, outsourcing, global sourcing, supplier negotiations, increase the members of the supply chain including related processes. Then, it takes more time for the information to flow from one end of the pipeline to the other end. As a result, people can't understand the whole thing about what happens and where.

Shorten the pipeline can be done through the use of intermediaries such as trading companies, international procurement office or even fourth party logistics providers. The key is that the focal company communicates with a "hub" of intermediaries.

Another way to shorten the pipeline is to reduce the number of suppliers or supply base reduction.

3. Find the bottlenecks
Do you really have to see anything and everything that happens in the supply chain? The answer is NO. Finding the bottleneck such as production facilities with quality issues or high downtime can save you time and resource to fix the big problems. The option is to implement six sigma quality program.

4. Smooth ordering
This principle is based on the bullwhip effect concept. Certain behaviors such as order batching or excessive promotions at the end of the quarter can create the "peak and valley" demand pattern that is difficult for downstream supply chain members to manage. The use of an annual contract or blanket orders will help your supplier manage the demand much easier.

5. Avoid safety lead times
The classic symptom of a material planning system is to use "safety lead times" to compensate for lead-time variability. Basically, people add a bit of an extra lead-time to every step of the order cycle. For example, adding 3 days for a possible delay in customs clearance or adding 2 days for extra quality inspection. The result of this is that you can't actually believe the lead-time information in your own enterprise system.

6. Destroy functional silos
People tend to pay attention to certain aspects of data only. For example, procurement people always monitor incoming material closely. When there are problems, procurement people may hesitate to discuss with the production department because they don't want to go outside the departmental wall. Functional silos are then a problem that delays the internal communication and lowers visibility from the inside.

7. Invest in agility
The ultimate goal is to make a proper decision quickly. To achieve this goal, companies need to develop a multi-skill workforce, empower employees to make decisions and simplify the internal rules and business processes. Then, a lean and agile organization is something that you should develop.

As you can see, the way to create better visibility is centered around the design of your supply chain, internal behaviors, and competency of the internal team.

Do you think supply chain visibility is easy to implement?

- Donington, J. (1995). Electronic Data Interchange in the Automotive Industry: Managing information flows for greater profitability. Financial Times Management Reports.

- Christopher, M., & Peck, H. (2004). Building the resilient supply chain. The international journal of logistics management, 15(2), 1-14.

- Christopher, M., & Lee, H. (2004). Mitigating supply chain risk through improved confidence. International journal of physical distribution & logistics management, 34(5), 388-396.

- Lee, H. L., Padmanabhan, V., & Whang, S. (1997). The bullwhip effect in supply chains. Sloan management review, 38, 93-102.

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Last review and update: December 11, 2021
All contents are written by Ben Benjabutr unless marked as [Guest Commentary]

About the Author and Editor:
Ben Benjabutr is the author and editor of SupplyChainOpz. He holds an M.Sc. in Logistics Management with 10+ years of experience in supply chain management. You can contact him via e-mail.