Supply Chain Event Management: Proactive Supply Chain Visibility

White Paper
SUPPLY CHAIN EVENT MANAGEMENT Proactive supply chain visibility
hen companies - first in manufacturing, particularly automakers, and then in other sectors - adopted Just-In-Time (JIT) tactics, they did so primarily to reduce inventory costs. For the most part, this strategy worked. Reducing stocks of raw Wmaterials, parts, assemblies and finished goods reduces carrying costs, allowing companies to invest the freed-up funds in more productive assets and projects. In turn, the reduction in inventories decreases the likelihood of being stuck with obsolete parts and finished goods.
The benefits of JIT are considerable, but by eliminating Just-In-Case (JIC) inventories it shifts considerable responsibility for a company's success to others, namely supply chain partners. When you eliminate JIC inventories, even a small hiccup in the supply chain can halt operations as you no longer have sufficient supplies to tide you over. In the past, it was disconcerting when a shipment was delayed a few hours or even a few days, but it probably was not catastrophic. In contrast, for companies using JIT techniques, it can be crippling. Consequently, organizations now have a critical need for a high degree of visibility into the supply chain processes so they can spot problems and quickly take corrective or compensating action when required.
How important is supply chain visibility? If your operations and competitive advantage depend on timely shipments, it's essential. Consider this finding from a survey conducted in April and July of 2006 by AberdeenGroup: "Study participants that track more than 80% of their shipments are twice as likely as their peers to have an on-time delivery rate of 95% or higher."
The amount of visibility is not the only critical issue. The nature of that visibility can be even more important. The numbers may not be exactly right, but supply chain management is subject to a variant of the Pareto principle, namely, 80% of the problems result from 20% of the shipments. Supply chain visibility that provides information only reactively - i.e. you have to ask the right questions before you get necessary information - forces you to adopt one of two tactics. You can continually monitor 100% of outstanding orders even though only, say, 20% or less of them are likely to cause problems. This approach is highly unproductive and, therefore, very costly. The alternative is to wait until a problem becomes physically apparent before asking questions, which may be too late to take the necessary actions to prevent disruptions to your operations.
Another approach is to install supply chain software that regularly or continuously reports all unfiltered supply chain transaction data. In this case, rather than depending on the user to ask the "where is my shipment" question, every time a supply chain event occurs the software sends information about the event to the appropriate people or includes it in a periodic report. This is little better than a system that provides no information as it leads to information overload, with critical information being unconsciously tuned out. An everyday analogy is spam. When people are inundated by it, they often miss important emails that are lost amongst the junk or mistakenly shunted off by spam filters.
- 1 - ŠINOVIS, INC., 2006
A better approach to supply chain visibility is to have the system monitor the flow of orders and fulfillments as they pass through the supply chain processes. At each step, the system then notifies the appropriate person only when an error or delay is detected. This ensures that attention is focused on problems as quickly as possible, without any effort being wasted on the vast majority of orders and fulfillments that proceed through the supply chain exactly as they should. This automated, proactive approach to supply chain visibility is the role of Supply Chain Event Management systems and the subject of this white paper.
Implementing Supply Chain Event Management is not a simple, one-off task. It requires the involvement of many functional areas within a company as well as other participants up and down the supply chain. Because of this complexity, Supply Chain Event Management implementation projects should be prioritized to gain the necessary buy-in and to increase the probability of achieving the greatest success.
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