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Improving Supply Chain Visibility

Fri, Aug 12, 2016 @ 06:17 PM / by David McAlister

8444222488_10f9f7a45e_z.jpgPicture appears courtesy of mjaaaae.  This week's blog was written by Michael Barnhouse of McAna EDI, an Aurora EDI Alliance parnter.  Companies of all sizes are engaged in a renewed commitment to further improve their supply chain in the effort to deliver the highly elusive perfect order. An order that arrives on time, is complete, in full compliance with all vendor rules and covenants, damage free, with accurate shipment notification and invoicing. 

The number one asset for any organization is its customer base, and perfecting the ability to repeatedly deliver accurately and on-time is essential to maintaining and strengthening customer relationships.  According to a 2007 Aberdeen Group study, 79% of respondents cite the continued lack of supply chain visibility as a major concern.  The study goes on to share that only 36% of all respondents report that they have adequate staffing and only 6% report that they have highly automated end-to-end processes.  A 2016 MHI – Deloitte study cites the top challenge facing the supply chain industry is, with 58% of respondents citing, “...hiring and retaining a skilled supply chain workforce."  Furthermore, "...customer demand for faster response times...” and “...customer demand for lower delivery costs...," were both cited by 56% of respondents rank as additional key challenges to the industry.  After more than two decades of emphasis to improve efficiencies in the supply chain, only slightly more than 40% of respondents are indicating they have sufficient staffing and a much smaller percentage report having the highly automated processes essential to ensuring a positive impact on order accuracy and customer relationships.  Continuing reliance on existing manual processes limit a companies' ability to manage a volatile and imperfect supply chain, creating a serious risk of significant damage to customer relationships.

Everyone must face the facts.  The customer in the vast majority of business relations is continually asking for, in some cases demanding, efficiency improvements and cost reductions from the vendor, which is compressing margins and forcing many companies to transform how existing business processes are executed and managed.  Companies need to be smarter and more agile in the ways they seek to improve order performance.

The only way to achieve the perfect order in the face of a complex and inherently imperfect supply chain is by gaining control over events as they happen.  Every day supply chain disruptions, such as a raw material delay, a vendor losing an order, or a container not passing inspection, can have significant impact on the supply chain.  The sooner an event can be identified the faster a company can react to mitigate any potential negative impact.

Supply chain visibility and automation technologies will enable companies to transform supply chain processes by optimizing the collaboration and interaction with their suppliers.  Real-time visibility (or as close as you can get) helps resolve exceptions before they escalate into major problems improving the performance of suppliers and carriers and reducing the number of delays and order errors that occur.  This visibility will allow companies to: establish essential milestones in their workflows; establish alerts so that those who need to know about an exception are notified in real time; evaluate suppliers and vendors using fact based measurements to drive improvement; and improve agility in managing changes to the order process and workflow.  Implementation of these technologies will provide a company a significant ROI as well as helping to achieve operational improvements across both inbound and outbound workflows.

The benefits to inbound workflows come from…

  • Reduce lead times and stock levels by tracking orders against predefined milestones and alerting the right people to take corrective action when milestones are missed.
  • Reduce costs of expediting orders by identifying supply chain disruptions early in the chain.
  • Reduce manual order management costs by improving direct integration with vendors.

The benefits to outbound workflows result from…

  • Improve customer satisfaction through:
    • Proactive order status to customers.
    • Repeated perfect order deliveries.
  • Improve delivery performance by monitoring carrier performance and eliminating reoccurring issues.
  • Reduce costs by:
    • Eliminating vendor/customer non-compliance instances.
    • Eliminating order disputes.
    • Eliminating delivery disputes.

As an example of the ROI that can be achieved, consider a small manufacturer and distributor of approximately 400 products, that processes 500+ inbound containers, 800+ outbound shipments, equating to roughly 755,000 cartons handled annually.  The company was challenged with increasing warehousing costs as stocking levels increased in an effort to improve order shipment accuracy.  To reverse this trend, the company made additional improvements in supply chain visibility with the successful implementation of a Warehouse Management System that is fully integrated with existing Accounting and Order Management systems.  Several years prior to the warehouse visibility improvements, the company completed a series of projects that eliminated almost all manual order handling, tracking and data integration activities that were taking place outside the Order Management system improving the automation and visibility of all open orders company wide.  With the recent improvements, the company was able to increase perfect order performance to near 100%, realizing a 97% decrease in backorders and 32% increase in warehouse utilization efficiency through reduced lead times and reduced stocking levels.

As companies evaluate their priorities, they should examine the risks they and the industry are most concerned with and ensure they are making business and technology decisions that will positively impact these risks and their bottom line. With customer loss or damaged customer relationships an ever present risk, they should ask themselves if they are in the 64% of companies that feel they are not prepared to face a continually evolving supply chain landscape.  Anyone who answers "yes" to this question should consider what improvements to supply chain visibility and automation will positively transform the operational efficiency of the company.  Then formulate the strategy to achieve them.

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Topics: e-commerce, data integration, supply chain, technology, EDI ROI, EDI document, automation

David McAlister

Written by David McAlister

David is the owner and President of McAna EDI, Inc.

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