Supply chain visibility will continue to be a critical business need for many years to come—whether it involves internal visibility into an enterprise’s own processes; upstream visibility to suppliers and contract manufacturers; or downstream visibility all the way to consumers. This is because most companies are looking to achieve agility in order to take advantage of market opportunities, respond to competitive threats and deal with the myriad of challenges that natural disasters can introduce into a global supply chain.
Mergers, acquisitions and globalization also drive visibility challenges. These usually arise when trying to combine two different companies with different supply chains, business models and processes. Global companies require some degree of standardization to measure operational and financial performance around the world, yet need to balance this with regional differences that dictate different operating procedures from one country to another.
Course of action
To address these visibility challenges we’ve developed a concept called the “path to agility.”
The agile business is one that can adapt to changing customer demands and market pressures; take advantage of fleeting opportunities; and respond immediately to unplanned customer demands in a profitable manner. The path to agility is perhaps best represented as a continuum that starts with integration and moves through visibility, control and agility. But the best way to describe this process is to begin with the end in mind and work backwards. Outlined below are some of the necessary factors one needs to understand when implementing the path to agility.
- Agility: The majority of organizations are interested in developing agility in their business. We have already defined this as the ability to take advantage of opportunities in the marketplace, respond to competitive threats and deal with natural disasters that increasingly impact global supply chains.
- Control: It's difficult to be agile if you don't have any control. You may not know what lever to flip in your business or what the impact is of making a certain change. Control is a key factor to have in order to gain agility.
- Visibility: Control is a double-edged sword if you don’t have adequate visibility. If you can’t see the entire playing field, you may be making a decision that optimizes one part of your process, while pushing the problem either upstream or downstream because you can't see the whole picture.
- Integration: It’s tough to have visibility of the entire playing field if you don't have all the information integrated—you need to have all the pieces of the puzzle, i.e., a single view of a customer, an order and of a supplier. It is this integration capability that combines all the data needed for visibility—the visibility that gives you control and the control that gives you agility.
There are a number of ways that companies thus far already created value in their path to agility.
In one case, a multi-billion dollar global oil field services company wanted to obtain more visibility into its cash conversion cycle. The company added business process instrumentation into their supply chain by dropping in “listeners” to measure volume, velocity, quality, value and risk. In order to avoid the “silo effect” company leadership bought into the project and made sure employees knew what was in it for them. The final result of a combination of utilizing the right software tools, internal collaboration and a significant amount of work was the removal of two days of days sales outstanding (DSO), with each day being worth $50,000,000. This process was adopted throughout the year in all nine regions of the company.
In another example, a multi-billion dollar consumer packaged goods (CPG) and food company needed to better meet customer service level agreements (SLA) and reduce operating costs. They achieved this by monitoring the activity of their third-party transportation partners and their third-party warehouse operators and ultimately synchronizing the activity of their third-party vendors. Trucks no longer showed up on time, only to wait several hours to be loaded and have drivers run out of time, causing SLA’s to be missed and detention charges to accumulate. Conversely, warehouse workers no longer staged orders on the premise that a truck was showing up on time only to have to restock the order because valuable dock space was needed. The end result was a significant increase in customer satisfaction and millions of dollars of reduced third-party logistics (3PL) partner costs.
These examples fit within both companies’ overall strategy. The first decreased the amount of capital required to finance operations by shortening the cash-to-cash cycle. The second, to not only operate more efficiently but also to increase organic growth which was achieved as customers saw an immediate improvement in their service, which provided the sales team with a competitive advantage. By following the path to supply chain agility, both companies realized enterprise-wide benefits.
Dave Brooks, Senior Director of Strategic Business Solutions for Software AG, developed the “Path to Agility” concept. Sean Riley, Director of Strategic Business Solutions for Software AG, enabled some of the world’s largest companies to find innovative solutions for maximum supply chain visibility.