There is an unprecedented level of dichotomy in the way enterprises and manufacturers are experiencing the sea of changes around them today. On one end, there are disruptions such as artificial intelligence and bots with so much emphasis on predictive analytics. On the other hand, to most of the conventional problems of the industry, they still take a very reactive approach which is more often, than not, too late and too little.
The scope and context of the supply chain have changed over the years too. With the open marketplace model engulfing the entire retail side of the business and the growing emphasis on higher OTIFs etc., there is a tight dependency on the supply chain and its efficiency to keep all stakeholders well-equipped to deal with their KPIs and SLAs.
In this environment of changing dynamics between the supply chain, manufacturing and retail leg of businesses, the paradox of a reactive approach to handling real-time challenges and taking a proactive approach with predictive visibility can have a huge dent in the balance sheet. If a reactive approach is still prevalent in terms of handling logistics operations, is all the predictability story we hear time and again a farce? How is technology like artificial intelligence helping solve everyday challenges and putting a smile on the customer’s face? A reality check is most-needed at this point because after all, the predictability in supply chain that we constantly speak of elusive despite the leaps supply chain visibility software has equipped manufacturers with.
What is the impact of being stuck in this paradox?
There are three primary goals in supply chain efficiency where visibility could play a key role. The goals of an efficient supply chain are:
a. Risk mitigation
In a production environment, there are a lot of stakes in terms of managing continuity and keeping the production cycle up and running without any hiccups. Lack of proper planning of stocking at production time could not only lead to a chain reaction that ultimately affects the end customer but also causes undesirable disruptions in the everyday running of manufacturing plants. It also leads to unplanned activities which affect yard management, dock management and triggers a vicious cycle of contingencies which are difficult to handle. So, visibility into the procurement delivery scene can help a great deal to avoid these afore-mentioned scenarios which are counter-productive to the interests of the business.
b. Lead time improvement
Timely completion of handshakes, deliveries, returns and payment cycles is paramount in the supply chain. Delay in one step would cause a domino effect that puts the entire systemic balance on toss. This is not just undesirable from an operational standpoint, but also makes businesses lose competitive edge. This will as part of a chain reaction impact customer experience and that is detrimental to the interest of the brand. Visibility and predictability are the pillars of consistent lead times and eventually paves the way for improvement.
c. Addressing process quality issues
In logistics and supply chain, processes are increasingly becoming a non-linear and closed loop. On one hand, it can help maximize and amplify the efficiency of the system. On the other hand, before you know it, it can magnify the lapses too and blow up the flaws one degree for each loop and loom into something unfathomably big. KPIs and metrics that help keep a continuous watch on process efficiency at each step at both a micro and a macro level is the only way to let the dragon slip unnoticed and out of control.
5 Reasons Why The Paradox Exists
What causes lack of predictability in supply chains---poor visibility? Here are 5 reasons
1. Manual processes – Despite the advent of several technological advances to boost the performance and efficiency of supply chains, there are several legs of the process that are still done manually. These selected bits of manual processes can disrupt the entire flow not just in terms of execution but also mar overall KPIs, metrics and skew insights. This will hamper continuous improvement initiatives and lead to inefficiencies within the system continuing to exist.
2. Archaic documentation – Since there are multiple parties that are involved in a supply chain process and it involves large-scale commercial transactions across multiple parties, a lot of it is heavily dependent on documentation. Whether it is shipping labels or proofs of delivery, documentation at each stage is critical to completion of on-time payment cycle. In many setups, the documentation methodology is still not digital and quite archaic. So, this causes hurdles in making sure that steps are completed on-time and hampers overall visibility.
3. Siloed approach – Logistics and supply chain processes always cross paths across several other functions. There needs to be a seamless flow of information across these different functions in order to smoothly execute processes. When the connections across functions are broken, it causes delays in process execution and causes challenges in terms of visibility. The only predictable thing in such cases is instability.
4. Integration challenges – Implementing a supply chain visibility solution means, setting up a system that could talk to other IT systems that are already in place across organizations, functions and layers. The sweet spot is not easy to achieve in a lot of cases as this is technically complex. This poses visibility challenges to the overall system.
5. Lack of clearly defined KPIs – You cannot control what you cannot measure. However, you cannot measure if you don’t know what and how to measure. In several organizations, this is one of the major problems affecting visibility. One-size-fits-all approach does not apply to KPIs and benchmarks. Although there are industry-standard metrics for a lot of processes, every business is different from one another and to evolve the most-relevant KPIs is an org-specific activity that warrants dedicated effort in that direction. Failure to derive these may result in poor visibility.
With the dependencies and the overall supply chain getting increasingly broad and customers becoming unforgiving about consistency across multiple channels, organizations that are bent on retaining competitive edge must take their first step towards a predictable supply chain through visibility. For organizations that are already on their journey of getting more visibility into their supply chain, the emphasis should on ironing these creases and making it flawless so that it can be actionable and insightful.
Rising cross-border growth coupled with the advent of new-age technologies Artificial Intelligence, digitalisation and predictive analytics along with anticipatory logistics is making the logistics space exciting for 2018. We have summarised the way the Supply Chain and Logistics will shape up in 2018.
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