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"Outsourcing Creates Supply Chain Visibility
Challenges Most manufacturers
today outsource some aspects of their manufacturing operations to third-party specialists. And, to realize
cost advantages and open new markets, manufacturers have increasingly outsourced on a global basis. "
Source : Kinaxis
Achieving Supply Chain Visibility: There Is More to It than Meets the Eye
Supply Chain Visibility is also known as :
Supply Chain Visibility,
Supply Chain Quality Management,
Supply Chain Compliance,
Supply Chain Optimization,
Supply Chain Analysis,
Supply Chain Management,
Experience Supply Chain Optimization,
Increasing Supply Chain Visibility,
Global Supply Chain,
Supply Chain Web Quality Management,
Supply Chain Analysis Tools,
Visibility Response Management,
Supply Chain Visibility Supply,
Chain Challenges ,
ERP Supply Chain ,
Outsourcing Supply Chain,
Integrating Supply Chain,
Supply Chain Trend ,
Supply Chain Metrics ,
Inventory Supply Chain.
TOP TRUTHS TO GAINING REAL BENEFITS
Consistently, industry research cites that one of the most
important challenges facing supply chain professionals today
is supply chain visibility. This could not be more true for
industries such as hi-tech electronics and consumer goods, where
brand owners and contract manufacturers are challenged by an
environment of distributed operations, high demand volatility,
and rapid product evolution ' all of which make the issue of
visibility all that more pressing and yet at the same time, all the
more dificult to achieve.
So as companies are clambering to adopt means to gaining better
visibility into their supply chain, they are quickly recognizing
there is more to visibility than what meets the eye. Among the
considerations described below, the biggest realization is that
achieving visibility is only a stepping stone towards solving the
fundamental problem - Response Management. Leaders are
recognizing that achieving the right type of visibility is the irst
step, and then being able to leverage it to take quick and effective
action is the real secret to success.
VISIBILITY MUST WORK IN A MULTI-ENTERPRISE
The widespread trend of establishing plants overseas or
outsourcing to specialists who can provide unique value and
drive down costs shows no signs of waning with good reason.
However, this business model is not without its challenges or
sacriices. For one, it increases the complexity of the enterprise
and moves management of critical operations outside of its four
walls, replacing the traditional single supply chain, with a complex
supply network comprised of a multitude of partners. Brand
owners, contract manufacturers, and suppliers now must manage
a "virtual enterprise" of interconnected players working in a
coordinated operation. Achieving visibility is no easy feat when
faced with various geographically-dispersed sites and/or partners
using disparate data systems.
For visibility to be truly insightful, it must be all inclusive. A
company must have the ability to easily consolidate data from
multiple sites (internal or external to the organization) for a
holistic view of the extended supply chain. Piece meal information
will only provide a look into a fraction of the business. For global
performance management, one needs global visibility. A multienterprise,
multi-tier view of operations is required to have a full
outlook of the business and to strategically manage operations as
NOT ALL "VISIBILITY" SOLUTIONS ARE CREATED
Many in the marketplace are heavily promoting "visibility"
solutions, but most focus on inite areas, addressing only a portion
of the problem while often creating others. Portals or exchanges,
for example, tend to provide limited access to a subset of data.
They typically only offer separate, ixed views of information that
can not be easily manipulated or integrated, and can be subject
to version control, cross-referencing problems or dificulties with
dissemination. Again, when you need visibility across multiple
sites, several static pieces of information do not make for a
complete picture or offer a "single version of the truth."
Many have come to rely on tools such as Excel as a way to
extract, consolidate and share data. The problem is that Excel
was not designed for this particular purpose. It cannot manage
the volume of data required and has dificulty in effectively and
simultaneously collaborating with supply chain participants. The
solution turns out to be quite time-consuming and cumbersome,
yet rarely yields ideal results given its propensity to human error
and inconsistent processes.
Without a single source of comprehensive data, people will adopt
their own processes for achieving the visibility they require,
making consistency across the organization a real problem. For
decisions to be effective, partners need to be on the same page,
working from the same set of data, in the same way.
VISIBILITY MUST BE PUT IN THE HANDS OF
THOSE THAT NEED IT MOST
Surprisingly, it does little good to obtain key supply chain
information for the purposes of historical monitoring or longerterm
planning, which is executed by a select few within the
organization. Visibility is most powerful when it is put into the
hands of the people that are working the front-lines and who rely
on the visibility to make decisions and take action on a daily basis.
When an issue arises (demand change, order drop-in, supply
disruption etc.) as they always will, it is neither the time for ERP
reports or queries, nor the time to "dig for data" or perform adhoc
analysis using spreadsheets. It is a time for rapid decisions
and action, requiring easily accessible, real-time information from
across the extended supply chain.
VISIBILITY ALONE WILL NOT SOLVE YOUR
This is the most important truth to understand, and likely the
biggest misconception in the market.
Without question, visibility is important ' an absolute must-have,
but it's not enough. As alluded to earlier, achieving visibility is
only part of the need. It is a pre-requisite to the end-goal, not the
goal itself. What companies really need is the ability to leverage
visibility to take action.
Many will promote "visibility" solutions and will tie that to
statements like "sense and respond." The problem is few, if any,
are actually providing tools to enable the response process. They
provide a limited level of visibility and leave users to determine
how to beneit from it. Information only has value when you know
what to do with it. You can give someone all the song sheets you
want, but if they do not know how to effectively translate that into
music, then it's just noise.
Visibility without the tools to drive action gives only minor
advantages to the organization. In demand management and
manufacturing operations, where there tend to be hundreds of
decisions throughout the day that must be made at the moment,
information alone is not enough. The problems are complex
and require one to interact with data in a collaborative way,
performing real-time ERP calculations and data modeling etc.
One needs to be able to alter and analyze the information, not just
So in effect, visibility is really a feature that when combined with
other capabilities, can help an organization respond to change '
an ever-present reality of the volatile electronics marketplace.
Response Management solutions provide tools and technology
to not only achieve visibility, but to leverage that visibility in
responding to change across the extended supply network.
Response Management can empower a broad-base of front-line
staff - these are the customer service reps, the planners, the
buyers, the contract manufacturers, the suppliers: all of the people
that can impact or are impacted by supply chain changes - to take
quick and effective action when faced with constant volatility
in demand, supply, capacity and product, ultimately driving
breakthroughs in customer service and operating performance.
WHEN COMBINED WITH RESPONSE
MANAGEMENT TOOLS, VISIBILITY CAN LEAD TO
SIGNIFICANT BUSINESS BENEFITS
In today's business environment, which is characterized by
increasingly outsourced manufacturing operations, growing
global competition, constant demand volatility, staggeringly short
product lifecycles, and stringent regulation requirements, a strong
competency in Response Management becomes a key competitive
Consumers are clearly in charge and have companies scrambling
to meet their aggressive and ever-changing needs. The success
of an organization can now often be dictated by the success of
their supply network. Whomever can deliver what a customer
wants, when, where and how they want it will win ' this requires
an excessively responsive supply chain based on multi-enterprise
visibility and coordination.
In an outsourced environment a balance is required, where
manufacturing operations are managed by contract manufacturers
(CMs) and suppliers. However, brand owners actively coordinate
activities across the virtual enterprise to ensure the desired
outcome. This is necessary because despite transferring the
manufacturing of a product, brand owners ultimately remain
accountable for the company's brand, quality, compliance,
and every other aspect of performance. And with constant
demand changes, new product introductions, and engineering
revisions, the brand owner must continue to play an active role in
orchestrating certain supply chain activities.
Greater visibility and collaboration with brand owner customers
beneits CMs as well, counteracting the "bullwhip effect" that
many CMs face when frequent changes are propagated through
the system. CMs are better at providing a responsive and eficient
supply network when more information is shared.
In the end, having quick and easy access to actionable supply
chain information can set the stage for more meaningful and
effective interactions between partners based on informed
decisions whereby the impact of changes are understood and
action plans are clearly deined.
Improving supply chain response through enhanced visibility and
coordination can lead to numerous business beneits, improving
customer service and reducing operating expenses in due course
for both parties. Speciic beneits include:
- reduction in inventory, increased inventory turns, and
reduced carrying costs
- increased factory throughput
- lead time reduction
- coordinated introduction of new products
- more reliable quote processes and promise dates
- better forecasts
In addition, with the onset of strict regulations, operational
transparency and reporting is a key driver behind the need for
added visibility. In particular, the issue of calculating inventory
liability is of speciic priority within an outsourcing relationship.
Response Management tools can offer visibility into current
and projected liability status, but also proactive inventory
management capabilities to avoid liability in the irst place.
Overall, achieving and maintaining customer conidence and
satisfaction will not only reduce risks of customer erosion, but
also can in fact lead to opportunities to earn new business. While
perhaps for most, this is not their original or express intent
behind achieving visibility, it should be - the end business beneits
should drive the deinition of the need and articulation of the
fundamental technology requirements.
- Compress Time to Action
- Respond Faster and More Accurately by Quickly Engaging
the Right People
- Reduce Supply Chain Risk/costs and increase customer
As companies embark or continue to pursue strategic initiatives
to achieving supply chain visibility, a stringent list of criteria
must be applied to the solutions considered to ensure the right
expectations are met and the real root need is fulilled.
THE BOTTOM LINE:
- Visibility is thought to be the most important challenge facing supply chain professionals, thanks to
distributed/outsourced operations, volatile demand and rapid product evolution.
- Many in the marketplace are heavily promoting "visibility" solutions, but most focus on inite areas, addressing
only a portion of the problem. In the end, visibility alone is not enough. It must be combined with Response
Management tools that enable a broad base of users to leverage the visibility to take action ' empowering frontline
staff to easily consolidate, modify and analyze information to quickly respond to change.
- While outsourcing can provide solid advantages for companies, it can also complicate the supply chain.
Traditional, single supply chains become multifaceted supply networks made up a multitude of partners
who must work in concert to share data and coordinate activities across the extended supply chain. This
requires new tools and technologies as existing solutions were not designed for this type of multi-enterprise,
- Brand owners are accountable for their brand ' and despite outsourcing manufacturing operations, they
must continue to play an active role in managing the supply chain. Supply networks are most eficient and
effective when more information is shared between partners. Consumers today are presented with many
choices ' and are more inclined to explore alternative options when suppliers aren't able to meet their needs.
Accordingly, the success of an organization can directly depend on the effectiveness and responsiveness of its
- Improving supply chain response through enhanced visibility and coordination can lead to numerous
business beneits ultimately improving customer service and reducing operating expenses.
Randy Littleson, Vice President, Marketing
700 Silver Seven Rd.
K2V 1C3 CANADA
Randy Littleson assumed the role of Vice President, Marketing for
Kinaxis in July 2003. Randy's strengths in building winning marketing
strategies that translate end user requirements and market demand into
the inal product, have enabled him to create successful
marketing teams throughout his more than 20 years in the industry.
Prior to joining Kinaxis, Randy served as Vice President, Marketing and
Business Development at Interface Software, where he led the
company's product marketing strategies, as well as all marketing
communications and business development initiatives. Previously,
Randy was Executive Vice President and General Manager for Spyglass,
Inc., a provider of strategic Internet consulting, software,
and services for the information appliance market. He played a critical
role in repositioning Spyglass from the PC technology space to
the embedded software market. During his tenure at Spyglass, Randy
helped build growth revenues from $0M to $50M/yr. run rate in
embedded software and services in less than four years. At Spyglass
Randy led product development, professional services, business
development and strategic marketing, as well as the integration efforts
with OpenTV Corp., who subsequently acquired the company.
He has also held various management positions at Palindrome
Corporation, a Seagate Software company, Novell, Inc., and Unisys
Randy earned an M.B.A. from the Keller Graduate School of Management and a Bachelor of Computer Sciences and Communications
from the University of Michigan, Ann Arbor.
Learn more about Response Management at the Kinaxis blog authored by Randy.