Is the Quest for Supply Chain Visibility Unrealistic?

When I think of supply chain management applications, I am often reminded of the ad that ends with the statement: "there's an app for that." The same can be said for the staggering number of supply chain visibility solutions available to manufacturers.

Whether your company is an OEM, components supplier, contracts manufacturer, or logistics and other third-party services provider, it seems you can readily find a supply chain visibility software tool that can be easily customized for your enterprise needs.

This should be a good situation, right? It's not. Strangely, as supply chain visibility applications and providers have proliferated, so have the challenges manufacturers face in gaining a deep enough insight into events within their operations and those of their core suppliers.

In fact, very few manufacturers today can claim to have a good handle on likely demand for their products just three months out, which means they are themselves limited as to the amount of information about supply needs they can offer suppliers and other contractors.

Could we be shooting for the stars, and as a result, letting ourselves down by setting and aiming for unrealistic goals? In some ways, I think we are, and that may be dangerous enough.

However, I believe the greater problem arising from the tendency to believe we can know everything about what's happening and what may happen to a company's operation is that we lose the flexibility and agility necessary for optimal performance and excellence. In other words, by searching for the magical supply chain visibility software, we ignore the need to focus on continuous performance monitoring, unceasing customer evaluation and information updates.

I've come to the conclusion that there's no magical bullet for supply chain visibility. Software vendors in the sector may disagree, but many of them -- at least the reputable ones -- won't make promises they can't deliver or vouch their software can provide end-to-end insight into future demand and supply patterns. Leaders in this industry segment include companies like IBM Corp. (NYSE: IBM) and Kinaxis, and a review of their products can help industry players determine how to set realistic goals, and benchmark these against best-practices in their industry segments.

The best supply chain visibility applications developers emphasize their products' focus on the need for operational transparency -- "you have to know what's happening now" is how IBM puts it in a report. Kinaxis adds the following in a separate comment on its website:

While the need for supply chain visibility is clear, it is not enough. Coordinating the activities of a virtual supply network is not a passive responsibility. Demand managers and customer service representatives, manufacturing and supply chain staff and financial analysts must be actively engaged in the process, working side-by-side with their partners to develop plans and course correct around unplanned events that threaten the achievement of operations performance objectives.

This leads me to the next attribute best-in-class supply chain visibility software must have: the ability to alert stakeholders and prod them to initiate pre-determined "quick response" actions.

Often, the emergency responders may be confronted by situations nobody anticipated -- such as the unprecedented earthquake and tsunami that crippled parts of Japan in 2010 -- but by getting an early alert, they may be able to limit damages to the enterprise.

How does this work in reality? It starts with constant and accurate communications between all partners in the supply chain. Again, this is where visibility can get corrupted, fast. In order not to have impaired visibility throughout an extended supply chain, all players in the system -- both internal and external -- must have shared goals and believe in the sanctity of the system. Once even a single player determines that its interests are better served by not sharing all information critical to decision-making, visibility becomes instantly compromised.

In my opinion, this is the greatest danger to the creation of a total visibility environment in the electronics and high-tech supply chain. Due to competitive reasons, companies cannot disclose to everyone information about their operations, inventory levels, order patterns, etc. Therefore, at an industry level, the quest for total visibility is probably unattainable. It is possible, though, among companies sharing common goals, and whose individual success depends on the success of other partners.

In coming posts, I will examine steps companies can take to reduce volatility in their operations, despite constrains from not seeing deeply enough into a specific industry segment.