This article was written in pre-covid times with the intention to device strategies against the major Supply Chain disruptions happened internationally. Ironically when you will go through the same, you will find it so relevant and perhaps this is the best prescriptive strategy to contain Covid19 disruption as well. Let’s check it out.
In 2011, four major hurricanes made way across the Atlantic, causing disruption to supply chains. In Egypt’s Alexandria and Damietta ports, cargo operations came to a virtual standstill during a period of civil unrest that forced their president out of power. Japan’s historic 2011 earthquake and subsequent tsunami caused a major ripple effect in supply chains that transported approximately 22% of the world’s silicon wafer supply and 60% of the world’s critical auto parts.
Supply chain disruptions are inevitable after large-scale disasters and political unrest. While they’re unavoidable, the more companies can do to improve their supply chain visibility and agility, the better prepared they are to mitigate the impact of the disaster as well as navigate around the daily disruptions, such as market fluctuations in capacity and pricing.
Below are a few key steps to prepare your company for events that disrupt the chain:
Change the mindset from Supply Chain Management to Exceptions-Based Management
In the world of logistics where supply chain visibility reigns, it’s important to ask yourself why you need visibility. It’s not enough to know that data is being integrated up and down the supply chain; what’s valuable is how the data is used. Supply chain visibility gives companies access to data that can be used for tracking key performance indicators and other metrics. If there’s an unexpected event that takes place along the supply chain, it’s going to show in the numbers. Exceptions-based management takes advantage of the visible supply chain and uses the data to identify a problem and make fast, accurate decisions based on this data.
Determine Visibility Levels
Another key step to event preparedness is to identify the key players or partners in the supply chain that need visibility and what level of visibility is needed. A nimble supply chain is reflective of the ease at which data is accessible. For a supply chain with many partners and ERP systems, this can be very complex. For example, the accounting department might require access to data that is used to determine the value of the perpetual inventory — or the inventory that is currently being transported. Or, suppliers at the point of origin might need access to the TMS in order to input the original booking data that follows that shipment all the way through the supply chain. By analyzing all the departments, partners, and ERP systems that can be integrated across the supply chain and by providing the various levels of access needed, these companies have fast access to data when needed in order to react quickly to supply chain disruptions.
Work with a provider with Strong Technology Integration Expertise
A supply chain is only as strong as the information pipeline that serves as its foundation. A robust transportation management system that is integrated with multiple data repositories is going to have more information that can be accessed and shared throughout the system. For this reason, it’s important to think of logistics partners as technology partners first, as it takes skill and knowledge to integrate with multiple ERP systems across multiple borders.
Integration of ERP and purchase order systems into a global TMS system to give clients visibility all the way down to their purchase order and SKU levels. By having access to this depth of information, companies are able to rate their suppliers’ performance regarding on-time shipping or categorize purchase orders and shipments based on inventory needs. This dynamic environment for data management is only possible if the logistics company has the technological expertise and a transportation management system that is scalable to the complexity of the integration.
Incorporate Compliance Intelligence and Proactive Notifications into the System
A key to exception-based management is defining those exceptions and building the logic into the global transportation management system that can flag the data and build intelligence to proactively manage this information. There’s a tremendous amount of power in the ability to get notifications on exceptions. If, for example, you’re moving a significant amount of volume and experience a disruption, you don’t have to sift through data to find the issue and manage the volume. The data is being pushed to you via proactive notifications. Proactive notifications should also define the trigger or response to specific types of exceptions, whether it’s a late departure or a compliance issue for an export. The contingency should be built into the logic, so some of the decision-making has been pre-determined prior to the exception taking place.
This proactive intelligence emphasizes the power of the data, which is much more dynamic than a simple track-and-trace mentality that is often defined by visibility.
Use timely and accurate data as Upstream as possible
Another way to mitigate disruption or risk is to promote access to data that provides real upstream visibility. View the beginning point of the supply chain at the point of the purchase order issuance, which takes place long before the actual shipment. For example, ask customers to give access to their purchase orders long before shipments embark. This data is used to communicate to shipping lines the expected capacity needed three to five months down the road. This data is important for managing allocation plans, volume, and origins.
By accessing data sooner in the supply chain, such as booking details, volume, and origins, you can pre-plan to avoid some of the disruptive events that can happen in the marketplace related to capacity and pricing. Supply chain visibility is something that most companies can achieve, but what makes a supply chain resilient is real, upstream visibility of highly accurate data.
Identify important Key Metrics for Score Carding and Analysis
Score carding and tracking of key performance indicators are also important in identifying exceptions and circumventing disruption. For example, a comparison of actual shipping dates to planned shipping dates can be used to analyze performance levels of origin suppliers. Measuring carrier accuracy and carrier performance are also crucial to determining capacity and timeliness. The challenge in looking at these metrics is being able to access repositories of data when working with multiple carriers, especially with international shipments that can cross multiple countries through a variety of modes.
It’s important to ask logistics providers about relationships they have with organizations like INTTRA, which provides a web-based portal and data warehouse for shipping carriers. Some additional key metrics to consider are the landed cost of the product, down to the SKU, versus the standing cost of the product. This helps to identify the purchase price variance. To access this granular level requires integration with the company’s accounting systems and understanding the accounting practices. Measuring transit times is also critical to supply chain best practices. Transit time is dependent on multiple factors, like the rate agreement based on capacity, level of standing with the carrier, speed of the transit, and comparisons to current price indexes. By managing a multitude of metrics, when an exception or severe disruption occurs, this data gives companies the agility to make alternate choices as needed.
Access to the right data gives companies the ability to make fast, accurate decisions based on evidence that can be used not only to manage events but to also circumvent disruptions on a daily basis that can be very costly to a company. The key success factor is having a mindset about supply chain management that is designed to identify the exceptions.
Real-time, upstream view of data, as well as access to historical data and forecasts, are an important combination in using supply chain visibility to proactively manage events that can quickly interrupt the supply chain.