Daily Archives: June 16, 2017

What is Visibility?

This is a term that has been overused and abused by Supply Management vendors for years who like to claim that their tool will give you unprecedented visibility into your supply chain, but just what does that mean? If you look up the definition, the first (or second) definition you’ll find in many dictionaries is something along the lines of the state or fact of being visible, which isn’t very useful when visible is defined as that [which] can be seen. So what do we have to see?

Well, if you talk to many vendors, you have to see the data is. Specifically, the vendor might tell you that you need to see the data on where your order is in terms of production, shipment, or delivery. And this is good, but it’s not enough. While this will tell you that production on an order is three (3) days behind, it won’t tell you why. Is the plant recovering from a backlog, and about to put your order into overtime production tomorrow? Are they suffering from a worker shortage, or strike, and your order is delayed another week? Or have the components and/or raw materials not yet arrived? And if it’s the latter situation, why? Is it a transportation delay? A production delay? Or a raw material shortage that may take months to correct? So you need visibility into the status of your order and all of your supplier’s orders that impact your orders. But this isn’t always enough.

While it would be great to know as soon as a delay occurs that could potentially impact your supply chain, and give you more time to respond and potentially create and/or implement mitigations and counter-measures (such as finding an alternate source of supply or stepping in to help the supplier solve the problem), this still doesn’t give you any indication of problems that could be brewing.

That’s why other vendors try to sell you risk-focussed data solutions such as financial viability reports (from credit-based data) and activity reports (from import/export data). But these solutions only allow you to judge supplier viability, they don’t allow you to determine if an external event in the supplier’s locale (such as war breaking out or a likely natural disaster) could take the supplier out even if they are financially viable and low-risk from a business perspective.

So other solutions try to sell you country-based risk assessment solutions with data on each of the locales you are doing business with. And this is a type of visibility. As are sustainability tracking solutions which track sustainability data (with regards to environmental, legislative, and other types of compliance data) to try and predict current and future supplier health based upon a sustainability score that goes beyond pure financial data. And this is another type of visibility.

But then not only do you really need to understand your current costs, but your potential costs when doing a Sourcing event, based on current market rates and expected currency fluctuations and transportation costs over the contract term. It’s also important to know not only current tariffs and taxes, but any proposed changes and the rate of change associated with those tariffs and taxes. Some countries (like Brazil) will change import rates across categories almost weekly. Others will only change once a year or when new trade agreements are struck.

And you need to see usage. If you bought a solution for the entire sourcing department, is the entire team using it? How often? And how does that compare to how often they could be using it? If 30 categories should be put out to bid over the course of a year, but only 20 are, why? Is it because a couple of users are still giving contracts to incumbent vendors without proper bids? Is it because the old curmudgeon thinks his 3-bids-and-a-buy spreadsheet approach is superior? Is it because the tool makes it so damn difficult to create an RFX with all the necessary attachments (because your sourcing 100 line item bill of materials where each line needs its own specification attachments and the buyer has to upload them one by one) that the team only has time to do 20 categories? You need to know.

And if you had all these solutions, you could certainly argue that you had supply chain visibility, but the question is, how complete is it? The reality is that you only have data visibility, and while that’s a great start, supply chains don’t run on data alone. They also run on processes … processes used to plan the supply chains, manage the supply chains, and correct them when things go wrong. How much visibility do these solutions give you into your processes?

Think of your average sourcing, procurement, and even BoB Source-to-Pay platforms. How many of them have the ability to even design basic project management templates with workflows, milestones, approval chains, party, and counter-party obligation requirements that give you the ability to plan, track, and maintain visibility through the entire process? There’s the market research, the sourcing, the contract negotiation and lifecycle management, the supplier relationship management and development, the day to day procurement, the inventory management and replenishment, the MRO, and so on that needs to be done, process oriented, day to day. And you need visibility into that too!

And, even if you have all of the data and process visibility described above, is it enough? How much do you need to see to be confident that the chances of an unpredicted event are sufficiently low and/or the chances of you not knowing about an unpredictable event soon enough to implement mitigations are sufficiently low? It’s hard to say. It probably depends upon your operation, your risk exposure, and the strength of your supply chain and supplier relationships. But it is safe to say you need a significant amount of visibility, and that you should starting figuring out what that is today.