What is Supply Chain Visibility

Hands-down, the most asked question about supply chain visibility is also the simplest: what is supply chain visibility? This short post tries to provide the answer to that question by providing a simple definition and addressing some Frequently Asked Questions. For beginners in this area, I’d also suggest checking out the supply chain visibility effectiveness framework blog post.

The short definition: What is Supply Chain Visibility?

The practice of capturing and integrating data, creating intelligence, and altering decisions based on the three cross-organizational flows in the supply chain (materials, capital, and information) along with their relevant environmental details

 

Discussion Points:

Isn’t supply chain visibility just Business Intelligence?

These two areas share commonalities, but supply chain visibility merits specific attention apart of from business intelligence for a few reasons. First, business intelligence assumes there is BUSINESS. Supply chains are organizational arrangements that span commercial and non-commercial spaces (churches, drug dealers, humanitarian groups, and terrorists have supply chains). Second, supply chain visibility only deals with data or environmental meta-data relating to the three supply chain flows (capital, material, and information). Not all Business Intelligence is relevant to supply chain visibility, and not all supply chains would fit in to business paradigms. Where these two subjects overlap is in their need to sense environments, to integrate that data effectively, and to produce intelligence from the data. But their application and their strategic purpose are not always aligned.

Isn’t visibility an application, software, or technology?

No, not really. Low-tech visibility is the most common form, actually. Software, applications, and technology generally make capturing data, integrating it, or producing intelligence more effective. By more effective I mean these tasks are less costly, faster, more reliable, etc. But the task itself isn’t fundamentally impossible without software, applications, or technology.

Another point to make is that the definition given above is useful because it make supply chain visibility a process, i.e. something which can be measured for effectiveness. There is more on that in the Visibility Effectiveness Framework.

Isn’t visibility just about “where things are”… i.e. track and tracing of cargo

Well, maybe that’s what some people need to make a business decision and if so then visibility may indeed just need to be track & trace of cargo. For example, when I’m deciding if I need to have a new factory part express shipped to me I may first want to know if other copies of that part are expected to arrive soon. In this situation, the business decision is improved by having some kind of track and trace ability.

But supply chain visibility is mostly beyond this entry-level value add. For example, wouldn’t it have been more effective for the decision maker to have been interrupted while actually ordering the new part, and the application force them to review a computer screen which says the same part is arriving soon? Or perhaps the visibility application should bring in relevant environmental data, like expected weather or traffic conditions, to help them make the decision.

The crux of the question is usually about the other two supply chain flows: capital and information. It’s just not common for people to immediately think of “supply chain visibility” being about capital and information. But, under the surface, these flows are always part of the mix. For example, as I’m starting to make my spare-part decision I could be presented with average costs for the part based on service level, or based on supplier if more than one source is available. Likewise, once I place the order I’d like my visibility process to ensure the information has been conveyed. For example, I may want an alert if the factory doesn’t approve the order and another alert if my desired timeline isn’t achievable. These pieces of data and the services that are driving off them are not based on capital or material, but about informational-objects (intentions, commitments, estimates, etc.).

Is visibility the next big-thing in supply chain management?

Probably not, although some of us will spend a lot of time on it. The reason is that supply chain visibility is neither old nor young. It has been around in different forms since the late 1990s, so novelty won’t be a catalyst for it taking center stage. More importantly, supply chain visibility is a support function. Remember, supply chains have primary strategies or goals and visibility simply isn’t one of them. Visibility is at the service of other areas, and as a result it’s unlikely to ever be the most important part of supply chain leader’s lives.

Who usually owns supply chain visibility?

This depends on the supply chain, of course. In another post I address the effect of supply chain governance on visibility initiatives. But, usually this question is about which corporate department takes responsibility for supply chain visibility. Here is what I have seen…

Supply chain visibility leverages broad data access, data management tools (software usually), analytical tools, and the authority to interrupt business decisions. So, these tasks usually end up with technical staff and centralized departments. Common practice might be for visibility tasks to be roughly divided by data source (logistics, transport, warehousing, suppliers, sales, etc). Better practice tends towards centralized teams with a mandate to support and review various departments which are consumers of visibility. In other words, an immature visibility model has dispersed creation and consumption of visibility. More mature models centralize visibility practices, so that high-quality visibility services are provided by a technical and independent center of excellence in the company. Consumers of those services are then monitored, with expectations that the business decisions being supported are not “private” and there will be transparency and accountability for what the visibility services did or did not accomplish. As of 2014, the organizational paradigm is moving towards “control towers”. These are special, centralized teams who leverage supply chain visibility and have decision making or decision interrupting authority across several regions, product lines, or business units.

Isn’t Supply Chain Visibility too soft? What’s the Real Return on Investment (ROI)?

Flat-out, supply chain visibility has Return on Investment (ROI). In purely financial terms, most visibility initiatives in commercial supply chains have to be guided by a strong payback time window. The initiatives I’ve seen are in the 9-24 month range for break-even (including cost of capital). Visibility projects are like any other business project where favoritism, pet projects, poor planning, poor leadership, changing business conditions, or a bad partner can turn a good idea into a sea-anchor dragging down fiscal health. Visibility isn’t any more susceptible than other projects in the supply chain to cause these kind of crashes.

All that said, it is true that supply chain professionals have a hard time of generalizing what is good supply chain visibility. In other words, there isn’t a commonly used framework for measuring visibility effectiveness. I’ve taken this task on and have proposed a framework in another blog post, and expanded on it in detail in my textbook on the subject. It’s not perfect, but I’m hoping that it can act as a starting point for the supply chain community.

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