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
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.
Top Logistics News
- Get the latest logistics and supply chain news and analysis via an email newsletter. Sign up here.
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.
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.’
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 firstname.lastname@example.org. Fredrik Eng Larsson is a postdoctoral associate at the MIT CTL. Reach him at email@example.com.