For many organizations, the supply chain is their very lifeblood. Its impact is massive, affecting business processes at every level -- from manufacturing to packaging, distribution, and customer relations. As companies grow larger and more global, their supply chains become more complex. Greater complexity leads to vulnerability.
The key to reducing risk and mastering supply chain management is visibility. It’s a complex, yet critical component that helps to reduce costs and improve efficiencies across the organization. The technologies to gain supply chain visibility are out there, but they must be chosen with great care.
The case for visibility
With today’s technology and ease of communication, the world certainly seems like a much smaller place. But for businesses, adapting their supply chains to a global marketplace can lead to sprawling networks where disruptions are common, along with waste, inventory build-ups and shortages. If you don’t know where critical sets of supplies are at any given point in the chain, it directly affects your ability to deliver products and serve customers.
It’s likely that most organizations already have some hardware or software in place to manage their supply chains, such as inventory management and barcoding systems. All are typically part of an overall enterprise resource planning (ERP) application suite. But why do so many of these IT solutions fall short of expectations?
The likely culprit is not the technology itself, but poor planning. When supply chain systems become too complex, it’s easy to lose focus. In an attempt to fix a problem or implement a new solution, organizations may implement too many point solutions and technologies without regard to how they fit together.
Any successful supply chain management solution today requires a holistic approach. It must be as simple as possible, taking into consideration all of the various systems that both you and your trading partners are using.
Look first at integrating your technologies. For a retail organization, that involves the order system, the warehouse management/inventory system, and the ERP system. Next comes the technology around scanning, such as barcodes and radio frequency identification device (RFID) chips.
RFID is an emerging technology that uses passive or active chips to tell you, at any given point in time, where pieces, parts, inventory components might be and how many you have. For a retail organization, it shows which items are moving the fastest and when you need to reorder or restock. A passive RFID chip is read by independent scanners and is often found in high-end retail items, computer components and drug supplies. This type of scanning is limited by distance, accessibility, and lighting.
An active chip, on the other hand, can send out radio signals which enable you to track items from a greater distance, even hundreds of feet away. This gives you good visibility into inventory without having close-up scanning capabilities. Consider the advantage from a warehouse perspective, particularly when these functions are automated and integrated. Someone unloading a truck can quickly find, offload, and ship a particular set of products. Improving efficiency this way reduces your inventory carrying charges, thereby driving up revenues.
RFID is a very strategic tool in terms of your ability to manage. Because of its relatively high cost, it is currently used on larger, higher value added items. But as the technology progresses, the cost per tag is coming down, which will soon make it a more universal technology.
When these systems all fit together, they help you develop a single book of truth which gives you insights into your inventory, cost structure, manufacturing and product availability. Many of today’s platforms promise a single solution for these functions, but they cannot deliver on that promise unless they are properly implemented and maintained. That includes the human element -- having the right people assigned to various projects and aspects of the supply chain to ensure success.
Collaborating with partners
An often overlooked aspect of a fully integrated supply chain management system is collaboration. Some organizations become so blinded by their own technology and so insular in their approaches that they neglect the critical aspect of sharing information and processes with supply chain partners.
Remember that partner suppliers may not own all of the supply chain, so some of their components may come from other sources. By working closely with supply chain partners you can access up-to-the-minute information such as when products, pieces, or components are shipping. You can also automate and accelerate invoicing and payments. Having access into your partners’ systems and allowing access to yours is a critical success factor for streamlining processes and minimizing risk and waste.
As you look to improve your supply chain management, remember that anything this complex and potentially rewarding is worth the investment in good planning, thinking and execution. As you review and select hardware and software, stay focused on the goal of improved visibility through integration and collaboration.
Mike Gorsage is a Partner and Leader of the Business Operations and Technology Practice for Tatum LLC. Tatum is the nation’s largest executive services firm, providing financial and technology leadership nationwide.