Visibility Example #6: World as a Warehouse

Imagine a large supply chain, covering 15,000 workers operating in 12 languages and 24 countries. Every day, inventory in various stages of completeness and transit could be valued at over one billion US dollars. Losing even a fraction of those materials would represent enormous wastage. Even without outright loss, a delay or misdirection could cost valuable time during which customer demand slacks and may eventually disappear altogether. How can we control such diverse, decentralized, and partially synchronized operations? One approach is to use a visibility layer to approximate a planet-wide warehouse: Total control and traceability of materials at any physical point on the earth, using common language and processes.

The Background:

In long or interconnecting supply chain channels to market the materials tend to move through various independent locations, often at great distances apart, before reaching end customers. For example, consider a company which produces laptops, sells them direct to customers, and then delivers to the consumer’s home or office. The expensive and rapidly obsolete parts may be built in Taiwan and air freighted to Germany, and sent via truck to Poland. The more basic parts which are not at risk to become obsolete are produced in China and shipped via ocean freight to Rotterdam, then railed to Poland. Finally, the heavy and low-value packaging and instruction manuals are printed in Poland locally. As web orders come in, the polish assembly factory combines materials to create a custom laptop. The orders are bundled, then consolidated based on delivery region, and packed onto trucks by the end of the day. The transit to final delivery may be 2-3 days, during which time the boxed-up laptops get variously deconsolidated, sorted, reconsolidated, and trucked again. Finally the laptop is delivered. As discussed in other articles on this site, there was hopefully signature capture at delivery, which was only enabled when the delivery driver got close enough to the GPS coordinates of the order’s delivery address, and the various systems know exactly which serial number was being delivered to which customer. Hardly an unusual example, we see that even this basic supply chain involves:

  1. A lot of materials of various types, including finished and unfinished goods
  2. Many independent organizations who manage, conduct work with, or are exchanging ownership of the supply chain’s materials
  3. Timelines in various material streams which must be closely synchronized
  4. Goods which are valuable enough to track at the individual piece level
  5. Language, working time zone, and working culture barriers

Business Problem:

A supply chain manager in this situation needs to know that each site (factory, cross-dock DC, warehouse, assembly factory, and transport depot) and each transporter (airlines, trucking companies, railroad companies, shipping lines) is making a handover of materials as expected. Let me just point out here that the supply chain manager should not be thought of as sitting in some central organization (like the assembly factory in Poland). In reality, each organization in this supply chain will employ someone to do supply chain management, and unless their available information is the same they will tend to take conflicting actions. It’s in everyone’s interest that the status of the material flows are generally known, rather than only centrally known.

Business Problem Impact:

Of course there are more dimensions to the supply chain than just material flow, but it is a significant part of the supply chain management staff’s daily work load. The supply chain manager is constantly trying to capture, integrate, and disseminate material flow status out to key decision makers. This is how the optimal flow (or any flow, really) gets achieved.

To get specific, consider what happens when the coordinated flow of materials begins to deteriorate. There are classic case studies on companies that permanently lost market share or even ceased to survive as a result of these issues. Consider these examples:

 

  • HP losing against Dell due to consistently holding more inventories when a technology component (like a processor) become obsolete due to new, faster versions
  • Zara exploding in Europe via its incredibly powerful and agile supply chain, only to die on the shores of new markets when the supply chain could not deliver the same material flow in far-flung locations
  • Grocery stores losing revenue at Halloween when their candy supplier  Hershey’s misses key production and shipping timelines

 

The Visibility Solution:

For me, the defining aspect of this business problem also indicates the kind of solution the supply chain management team is looking for. The management team is usually talking about material flow, and the need to control and report on materials in terms of total quantity, status, location, and ownership. On smaller scales, these are the basis for a warehouse management system (WMS). For a WMS, the absolute minimum requirement is to track inventory of materials. Everything above the inventory tracking is a benefit, but without inventory control no WMS is viable.

Now take the WMS concept and push it outward so it covers more than one physical site. I’ve heard this called “the warehouse without walls”, “extended warehouse”, and several other variations. The idea is simply that the same basic controls we want in a DC are made to cover multiple sites. I call this the “World as a Warehouse” model of supply chain visibility. In descending order of importance, the top 3 expectations on the visibility solution would look like:

 

  1. Track all materials in the supply chain: in terms of quantity, ownership, availability status, and location
  2. Provide System Stand-In: so all participant organizations have access to a “minimum capabilities” application, where they can keep the material tracking intact even if their physical site doesn’t have its own system.
  3. Support Data Discovery:Users should be able to find data they need from various angles (location, material ID, material attributes, company involved, etc.)

 

 

Of the top 3 expected solution components, the only one that I think needs additional description is number two; the need for system stand-in. The reality is that many physical sites either lack comprehensive material control systems, or those systems will prove incompatible with the visibility needs. Here are two quick examples. First, consider a small hub where materials are deconsolidated for final delivery. This site may not have its own ERP or WMS. So, the visibility layer is expected to provide the hub with some minimal functionality to record material receipt, status updates, and outbound shipping. The “system stand-in” lets any site with web access (and even some without, if there is a untethered or batch processing option) still be covered in the world as a warehouse visibility solution. The second example would be a site, like a major airport, where systems exist but are so different from the visibility needs that they cannot be effectively integrated. In these situations most companies go back to having a user access a web portal and “key in” the data. Of course, many visibility solutions that cater to the world as a warehouse model will offer more than just the three functionality sets described above. They may also incorporate orders or sales, forecasts or plans, capacity or operating schedules, or invoice and reconciliation data. These are all great expansions on the tracking of material flow. But, as mentioned earlier, they come after the core needs covered by the three requirements of material tracking, system stand-in, and easy data discovery.

The Monday Morning Wrap-Up:

As with all my articles, I’m closing now with a quick summary on how this example of supply chain visibility can be used in your immediate business life. The example discussed here covers a great number of the typical visibility projects. In part, this is because it is such a fundamental aspect of supply chains: to manage material flows. In part it is also due to the predominance in our industry of staff with a logistics background, who will consider material flow before information or financial flow. Here are the most relevant points to remember:

  • Watch for business problems being described primarily in terms of material flow and the lack of knowledge or certainty that it is occurring as needed
  • Material flows tend to be more important (and difficult) to manage as they get longer, have more paths to market, must move faster, increase in value, increase in government oversight, or involve many other merging material flows
  • The “world as a warehouse” approach is a good fit for complex material flow management.
  • It’s also relatively simple to check if this idea matches the needs by imagining the improvements possible if all the supply chain occurred in one building, with one WMS running it all. If that idea doesn’t appear to relieve the problems, then the “world as a warehouse” model isn’t a good fit.
  • When considering solutions, look for options which provide at least these three things:
    • Tracking of materials in terms of ownership, quantity, status, and location
    • Easy to use, easy to learn, low-risk tools which can be engaged optionally as a system stand-in if a site in the supply chain can’t provide the necessary data via integration
    • Appropriate data discovery and escape paths for getting key data out of the visibility application and into another form needed for decisions.
  • If the three functionalities above are met, then consider additional options as needed. Visibility solutions can be expanded, while still serving its primary mission to manage material flow. But ensure the primary goal is solved well and is not risked by secondary goals.

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