The Key to Supply Chain ROI -- Improving Visibility To Drive Out Inefficiencies In Your Supply Chain

Manufacturers are more focused than ever on the supply chain and delivering the perfect order, orders that arrive on time, complete, damage free and have the correct invoices. A company's number one asset is its customer base, and finding ways to deliver the right product on-time is essential to maintaining strong customer relationships. In fact, a recent independent survey of manufacturing and logistics executives found that their key focus was on reducing risks that affect customer relationships. Yet only 24% of respondents had already implemented highly automated processes for "visibility of order and shipment status," with less than 15% of respondents indicating they had implemented highly automated processes for other areas of collaboration that are essential to maintaining a positive customer relationships. A continued reliance on manual processes for both customer and supply chain collaboration hampers companies' ability to manage volatile demand and gain real-time demand signals, creating a greater potential for risk of damage to customer relationships.

Power has shifted to the customer, which is compressing margins and forcing companies to transform their approach to commerce. In this new era, manufacturers need to conduct smarter commerce by adapting sourcing and procurement of goods and services based on customer demand by optimizing supplier interactions across extended value chains. Companies seek to reduce supply chain risks as a way to improve perfect order performance. But even minor supply chain disruptions, such as a port delay, a vendor losing an order, or a container not passing inspection, can have significant impact on the supply chain.

The only way to achieve perfect orders in the face of complex and inherently imperfect supply chains is by gaining control over supply chain events as they happen. Supply chain visibility technology can play an important role in gaining that control by giving companies an end-to-end view of the order lifecycle across the supply chain, together with the ability to quickly identify and resolve problems in real time. It does this by:

Collecting order status information from all sources, regardless of format and system, across the supply chain.
Tracking that information against pre-defined milestones and key performance indicators (KPIs).
Employing role-based alerts so that managers in every department (procurement, transportation, supply chain management, warehousing, etc.) can successfully manage by exception.

Supply chain visibility technology can enable manufacturers to transform supply chain processes by optimizing supplier interactions. Supply chain visibility technology helps resolve supply chain exceptions before they escalate into major problems to improve the performance of suppliers and carriers and reduce the number of delays and order errors that occur in the first place. It allows companies to: define key milestones in their order flow; define custom alerts so that those who need to know about an exception are notified in real time; build supplier and carrier scorecards from accumulative data to improve performance over time; and quickly accommodate changes such as new suppliers, new alerts and changes to the order flow. These capabilities can provide companies with a significant ROI as well as achieve operational improvements across both inbound and outbound processes.

The benefits to inbound scenarios come from the ability to:

Reduce stock outs by tracking critical inbound orders.
Reduce lead time variability by tracking orders against predefined milestones and alerting the right person to take corrective action when orders are delayed between milestones.
Reduce expediting costs by enabling buyers to respond immediately to supply chain disruptions so that an order doesn't need to be expedited.
Reduce manual order tracking costs by receiving electronic status updates.

The benefits to outbound scenarios result from the ability to:

Improve customer satisfaction through more perfect orders and proactive notification of potential delays.
Reroute or reallocate product in-transit to meet customer needs.
Improve delivery performance by monitoring carrier performance and identifying reoccurring issues.
Reduce costs by limiting non-compliant customer events.
Reduce time and costs associated with disputes.
Improve delivery performance and reliability.

As an example of the ROI that can be achieved, consider a hardware cooperative that processes 64,000 inbound loads and over 600 million pounds of freight, importing 3500 containers through 40 different ports. With the help of a service-based visibility solution, the cooperative was able to increase perfect order performance, realizing a 57% reduction in lead times, a 10% increase in fill rates, and an 85% reduction in backorders.

As manufacturers evaluate their priorities in 2011, they should examine the risks they are most concerned about and ensure they are making software decisions that will positively impact their business and their bottom line. With customer loss or damaged customer relationships obviously a key concern for all manufacturers, they need to ask if they are part of the 76 percent of manufacturers without an automated process for "visibility of order and shipment status"? Anyone who answers "yes" should consider how supply chain visibility can transform the supply chain to be as efficient as possible.

Pete Wharton is manager of Product Marketing for Sterling Commerce, an IBM Company.