SUPPLY CHAIN VISIBILITY

Supply chain visibility--technology is process enabler so real issue may be about the supply chain process--

Guest Voices: Seeking the Value in Supply Chain Visibility

Companies say they want a better window on their supply chains, but they need to find a way to provide a better accounting of the return on investment

ENLARGE

MIT’s Jarrod Goentzel and Fredrik Eng Larsson write that the challenge for companies seeking greater supply-chain visibility is identifying the gaps in their business and quantifying the projected benefits of real-time visibility. Photo: Getty Images

By

Jarrod Goentzel and

Fredrik Eng Larsson

June 14, 2016 3:39 p.m. ET

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About 90% of world trade is carried by sea, so you might imagine that being able to track the status of ocean shipments accurately and in real time would be a critical goal for companies looking to improve the management of their supply chains. Yet this operational Holy Grail remains elusive, despite advances in information technology.
The complexity of modern supply chains and the challenge of getting shippers, ocean carriers, and intermediaries to agree on common technologies and data standards have proved to be significant barriers to gaining true visibility across supply chains.
But there is another hurdle to looking into supply chains that individual companies can address: the inability of companies to measure the value of visibility to their own operations and to make a clear case for the return on investment.
In early 2015, we surveyed 160 logistics professionals about supply chain practices and we were struck by results that suggested that advances in technology have yielded little progress in helping companies see where their goods are moving in their supply chains. Less than 20% of those surveyed were satisfied with current visibility. Companies complained about black holes in information flows, especially when goods are transshipped in Asia and South America.

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When information does flow it is rarely real-time: two-thirds of those surveyed said it took 12 hours or longer to get updates.
It’s not that they are not getting information, however. In fact, participants in a round-table discussion that followed the survey said they often are overloaded with great volumes of data. But the information, they said, can be confusing and can come with conflicting updates for the same shipment across different data feeds. These problems make it difficult for companies to act on the information they receive.

More detailed interviews with 13 companies, including shippers, carriers, and technology firms, suggested several key hurdles toward greater visibility into global supply chains.
First, shippers and carriers alike can struggle to quantify the value that real-time visibility would bring to their operations. Several shippers had a very fuzzy business case for gaining more “high quality data” and the need for consistent data across business units to prevent “multiple versions of the truth.”
The tangible value companies said they could measure was often limited to reducing head count as the collection and management of data was automated. Those interviewed didn't attribute any true operating improvements, such as reducing reliance on costly expedited services or improving their selection of carriers, to better and more timely information.
Second, companies said that real-time information didn’t necessarily deliver real value.

‘Shippers and carriers alike can struggle to quantify the value that real-time visibility would bring to their operations.’

This is surprising since one benefit of timely information is supposedly that companies can make quick decisions to redirect shipments when problems arise. But the enterprises we spoke with said they gained more value from using such data strategically to improve supply chain policies or management approaches over time.
For instance, one retailer had been making adjustments to inventories only when a significant event or variation occurred. Using better visibility data to measure supply chain performance led the company to implement quarterly adjustments, which increased the percentage of on-time arrivals from 45% to 55% to around 97%.
As one company commented, “For supply chains that are working 99.5% of the time, paying $500,000 for a system that would email exception alerts on the final 0.5% might be cost prohibitive.”
The lesson here was that improving the performance of the 99.5% of shipments that don’t generate exceptions can deliver much more value for your technological dollar.
The challenge for individual companies is finding ways to quantify gaps in their supply chains and the potential benefits over time. To make a clear case for investment in visibility systems, companies must focus on the tools that transform data into structural improvements.
A new generation of tracking technology alone won't deliver the Holy Grail of perfect visibility into ocean shipments. However, companies can achieve significant improvements if they adopt a more strategic view of investments in the technology.

Jarrod Goentzel is director of the Humanitarian Response Lab at the Massachusetts Institute of Technology’s Center for Transportation Logistics. Reach him at goentzel@mit.edu. Fredrik Eng Larsson is a postdoctoral associate at the MIT CTL. Reach him at frengl@mit.edu.