Supply chain visibility
A LARGE printing corporation on the outskirts of Manila was able to grow its business tenfold thanks to job contracts with large firms and multinationals. The printing company’s stakeholders had invested a great deal in stateof-the-art equipment to assure compliance to the high quality standards of its customers.
As the job orders rolled in and sales grew in volume, however, the printing firm began to experience challenges in delivering to customers. Delayed deliveries resulted in delayed collections, sometimes even cancellations, such that revenues were affected and cash-flow was crunched.
An assessment of the printer’s operations revealed the following: • The printer’s marketing department signed contracts with customers which detailed the needed items and quantities needed to be printed for as long as the next six months; The production department would only know the next week’s production schedule as the marketing department did not share details of the customer contracts; The warehouse department would requisition the purchasing department when production department shows them the schedule; The warehouse department would deliver to customers based on availability of products; Customers would often change order priorities at the last- minute which would result in costly changeovers, overtime, and last-minute rush requisition of materials. It is typical in many supply chains that the departments of purchasing, production, logistics, and planning would not be thoroughly communicating with each other. This would even more so between sales, marketing, accounting, and supply chain functions. The visibility of information between department and functions is and continues to be a major challenge and an opportunity in practically all industries.
The introduction of Enterprise Resource Planning (ERP) software has given business stakeholders the capability to make visible wide-ranging information across an organization and even beyond. Stakeholders not only can know what and how much will be sold, how much inventory there is, how much should be produced, and what raw materials are needed but also they can find out how many or how much pending customer orders there are, what materials suppliers have yet to deliver, what can be promised to customers, and how much the firm owes suppliers.
This visibility of information across major departments presents a huge potential for competitive advantage. Visibility allows functions to understand and synchronize objectives and targets such as deliveries versus pending orders, deliveries against production schedules, production schedules against inventories, inventories against purchasing plans.
However, as supply chain networks become more complex especially as a result of globalization where sourcing and manufacturing of goods cuts across geographical boundaries, visibility poses both a threat and an opportunity in two fronts:
Demand side visibility. In the complex networks of wholesalers, distributors and retailers, customer demand information may take more time to reach manufacturers due to geographical boundaries or just by the sheer number of customers a firm serves. Outdated information can spell the difference in a firm’s response to changing customer needs. This is how e-commerce is defeating the brick-andmortar tradition of retailers in which consumers have greater visibility on product information versus what they see on store shelves.
Supply side visibility. Visibility between vendors and firms can be very mutually beneficial. But just like the demand side, the complex networks of suppliers can be a challenge. Materials often flow from one tier to the next. An aluminum soda can, for example, starts from the mining supplier to the aluminum processor before it reaches the canner who supplies the soda firm. The challenge of firms sometimes is more in breaking the mind-set that supply chain visibility is limited between the direct suppliers and themselves. Some firms believe suppliers of their direct vendors shouldn’t be their problem. But recent highprofile incidences have shown that the need for visibility cuts across all tiers of the supply chain.
( These high- profile incidences include the outcry over food contamination in North America and Europe in which some packaged foods ingredients where discovered to be falsely labelled. Other examples are the discovery of below-poverty wages and stark working conditions at some Asian garment factories producing name-brand fashion-wear).
Firms are links in a supply chain ecosystem originating from raw materials to final consumers. Improving visibility across these networks of suppliers, manufacturers, distributors, and retailers will continue to be a key area in industrial competition. The firm is closer to consistent success when it achieves transparency not only within its internal supply chain but also with its partners in this greater network.
The author is a business consultant and regional speaker on supply chain management. He has directed and implemented supply chain management projects both local and international which have resulted to company-wide improvements in revenue, working capital, total cost, and service levels. Mr. Jader was formerly with Procter & Gamble Philippines and Coopers & Lybrand/PricewaterhouseCoopers. Should you have questions or comments, e- mail to: jjjader@prosultsconsulting.com.