Supply Chain Visibility

Assignment by Golrou Abdollahi, Benjamin Mohler, Stephan Orth (2010)

1. Introduction
2. What is Supply Chain Visibility?
3. The Drivers
4. The Benefits
5. Importance of Visibility in Supply Chain
6. The Challenges and Issues
7. Supply Chain Constructs in Sense of Visibility
8. Role of IT in Supply Chain Visibility
9. Conclusion

Introduction
Industries such as the retail sector have long recognized the critical role of Supply Chain
management ( Ellram et al., 1989; Mentzer et al., 2000;Hill and Scudder, 2002; Barratt and
Oke, 2007). The organizations In the retail sector of the industry want to create external
linkages based on the sharing of information in order to gain increased visibility of their
customers and/or suppliers’ operations and activities (Mabert and Venkataramanan, 1998;
Shore and Venkatachalam, 2003; Fiala, 2005; Barratt and Oke,2007).

By achieving visibility the firms can improve their internal decision making and also
performance and act quickly to the internal and external causes which if exists can be a
competitive advantage.

What is Supply Chain Visibility?

Supply Chain Visibility can be described as the traceability of products in the transit from the
manufacturer to the consumer. In a broader sense, visibility is the increase of available data
that can be analyzed to make recommendations and determine strategies to improve and
strengthen a Supply Chain (Penfield, 2008). Barratt and Oke (2007) define Supply Chain
visibility as “the extent to which actors within a Supply Chain have access to or share
information which they consider as key or useful to their operations and which they consider
will be of mutual benefit”.

The concept of visibility has been sometimes used interchangeably with information sharing
(Swaminathan and Tayur, 2003). Barratt and Oke (2007) mentioned that information sharing
is an activity and visibility is the outcome of such activity which in turn may lead to a more
effective Supply Chain. Therefore they mentioned that the visibility has a range of levels
determined by the amount of useful information that is shared across the Supply Chain. They
also mentioned that a high level of visibility that is characterized by the quality of useful
information within a Supply Chain linkage is what makes the visibility distinctive.

According to Wei and Wang (2010) the informal procedures, appropriate behavioral patterns,
trust and commitment are needed to support the deployment of relevant resources in order to

Assignment by Golrou Abdollahi, Benjamin Mohler, Stephan Orth (2010) p. 1

provide a distinctivve visibility for a Supplly Chain linnkage. A loww level of innterdependeencies
betweenn the firms in
i the linkag ges causes tthe low leveel of visibiliity. Thus, a high level of
o inter-
dependeency is an antecedent
a of
o distinctivee visibility.

Thee Drivvers
Accordiing to a survvey conductted by Aberrdeen Group p (2007), th
he need to immprove on-time
deliveryy performannce is the top
p driver, folllowed by the
t need to reduce
r leadd times and lead
l
nt drivers arre the need to improve ability to m
time varriability. Allso importan make midcou urse
corrections, JiT andd lean progrrams to shoorter deliveryy windows and finally the need to o
proactivvely alert cuustomers of late shipmeents. Figuree 1 shows thhe top five ddrivers.

Figgure 1: Top Five

F drivers For improvinng Supply Chain
C Visibiliity (Aberdeeen Group, 2007)

Thee Beneefits
Johanssson & Melinn (2008) meentioned thaat the Supply Chain vissibility has aan impact on the
cost savvings in mosst departments of the coorporationss. It also can
n help to redduce the saffety
stocks aand reduce inventory
i leevels. The ppossibilities to stop runn
ning empty in customeer’s
shelves and alwayss having pro oducts to selll can be inccreased by reduced
r . Thhe shared
informaation makes it compreh hensible to thhe supplierss and reduces the risk ttowards the focal
organizaation.

Sterlingg Commercee (2007) add ded higher ccustomer saatisfaction due

d to date lloyalty, avaailability
of produucts, better ability to reesponse to ssupply disruuptions and a lower cosst of expeditting.
Harvey and Wolfe (2008) added lower traansportation n costs, reduuced order ccycle times and
automatted order-too-cash with customers. In addition the adversee impact of promotionss, the
Bullwhiip effect cann be alleviatted (Lee et al., 1997a, b;b Dejonckh heere et al., 2004). Hig gh
visibilitty is achievaable throughh sharing off useful info
ormation ammongst diffeerent players within
the Suppply Chain butb accordin ng to Barrat and Oke(20 007) translaating of visib
ibility to thee
strategyy is still unclear.

Assignmennt by Golrou Abdollahi,

A Benjaamin Mohler, S tephan Orth (20
010) p. 2
Importance of Visibility in Supply Chain
Considering the benefits that mentioned above gaining visibility has achieved a high attention
according to different authors. It is important from different aspects which are mentioned
briefly as follow:

 Being able to see ‘real’ demand ( Barratt and Oliveira, 2001; Aviv, 2002; Croson and
Donohue, 2003)
 Process visibility (Fawcett and Magnan, 2002; Van der Zee and Van der Vorst, 2005)
 Improved responsiveness (Armistead and Mapes, 1993; Berry et al., 1994; Patterson et
al., 2004)
 improved planning and replenishment capabilities (Armistead and Mapes, 1993;
Karkkainen, 2003; Mentzer et al., 2004);
 Improved decision making (Kent and Mentzer, 2003)
 Improved quality of products (Armistead and Mapes, 1993).

The Challenges and Issues

According to an article of Harvey and Wolfe (2008) there are some challenges that help the
company boost their business. These are mentioned as follows:

1. Supply Chain visibility requires cross- functional support across various departments
within the organization. It is important to identify who will be involved and who is
responsible for improvement metrics. Everybody should be on board and support the
project.
2. Information from all internal and external trading partners involved shall be gathered.
This is possible by using a transportation network or portal connecting carriers and
shippers. Web services and service-oriented architecture make it easier.
3. Filtering data can let the users to manage the data in order to prevent too much
information overwhelm.
4. To drive strategic business improvement from visibility information, companies need
to move past basic shipment tracking to event management, performance trending, and
root cause analyses, etc.
5. Escalation policies and resolution workflows can ensure that the corrective action is
taken.
6. A list of key metrics of on-time delivery performance, safety stock levels, expediting
costs, productivity, etc. is helpful.
7. How improvements will be tracked and measured can be determined by a visibility
strategy.
8. An on-demand solution that comes with pre-connections can speed implementation
time. Inbound orders, advance shipment notices, and inventory status can be tracked
via a supplier portal or B2B collaboration hub.
9. The visibility program should be done in a series of small steps, starting with the
biggest problem area or by concentrating on a specific region, key customer or
transportation mode only.
10. Spending time and money on training materials and user training help the companies
to get the value and improvements it needs.

Assignment by Golrou Abdollahi, Benjamin Mohler, Stephan Orth (2010) p. 3

Supply Ch
hain Constr
C ructs in
n Sensse of V
Visibiliity
In figure 2, four im
mportant con
nstructs thatt make Supp
ply Chain visibility is sshown.The
explanaation to them
m is based on
o the work of Wei and d Wang in 2010 :

Visibility for sensiing represen nts the extennt to which

h a firm can acquire reaal-time exterrnal
informaation like market intelliigence abouut the custommers and qu uickly recoggnize changes in the
environnment. In ordder to do so
o the compaany should be b able to seense both, innformation about
externall sensed eveents and infformation abbout Supply y Chain changes. E.g. ccustomer deemand,
market ddemand, cuustomer need, economicc trends.

Visibility for learnning represeents the exteent to which

h a firm can
n learn and ggain new
informaation and knnowledge fro om its Suppply Chain paartners and it is criticall for understanding
market signals and innovation. Accordingg to Zollo & Winter (20 002) there aare three im mportant
learningg mechanism ms: experien nce accumuulation, knowledge articulation, annd knowledg ge
codificaation. E.g. events
e that can
c help impproving Sup pply Chain decisions byy identifyin ng the
causes aand taking and
a monitorring approprriate measu ures.

Visibility for coorrdinating is central for the decision-making in n Supply Chhains (Sahin n&
Robinsoon, 2002). More
M compllete informaation to supp port Supplyy Chain deciision makin ng can
better allign the deccisions for accomplishin
a ng global sy
ystem objecctives and pprovide the required
r
visibilitty for coordiinating the product
p flowws in the Su
upply Chain n (Simatupaang et al., 20004). It
is also mmentioned that the visib bility for cooordinating should prov vide criticall informatio
on for
managinng differentt kinds of deependency iin Supply ChainC relatio
onships. E.gg. prices of
competiitors, planniing/forecastt data, statu s informatio on on the flo
ow of goodds.

Visibility for integgrating emp phasizes onn the information that caan provide aagreement to t arrive
collaborrative goalss and build up
u collectivve identity foor a Supply Chain. Thee integration n of
externall activities and
a technolo ogies is impportant for creating
c straategic advanntage (Teecce et al.,
1997). A strategic mind-set
m wiith regard too partners and a collecttive identityy of a Supplly Chain
are impoortant charaacteristics fo
or integratioon.

Figgure 2: Supplly Chain Dynnamic Capab

bilities (Wei and
a Wang, 22010)

Assignmennt by Golrou Abdollahi,

A Benjaamin Mohler, S tephan Orth (20
010) p. 4
Role of IT in Supply Chain Visibility
IT can help the companies to share their information in a proper way and therefore it will help
them to reach to a higher visibility for example using Radio Frequency Identification (RFID)
data provides visibility of products as they move through the Supply Chain (Karkkainen,
2003; Prater et al., 2005).Although using software has some challenges and problems as well.
According to Krizner (2010) most of the manufacturer use EDI systems but the point is that if
they want to have a best of breed (choose a specific software program or a package for each
specific application) or a fully integrated system. EDI systems are useful for supply chain
partners to overcome the distortion and exaggeration in supply and demand information by
improving technologies to facilitate real time sharing of actual demand and supply
information (Mishra, 2006). If the system is not fully integrated then the information should
be manually entered. An example of fully integrated software is enterprise resource planning
(ERP). An ERP system helps in capturing the data and reduce the manual activities and task
associated with processing financial, inventory and customer order information and helps to
achieve a high level of integration by utilizing a single data model, developing a common
understanding of what the shared data represents and establishing a set of rules for accessing
data (Mishra,2006). The challenge to that is even if a company uses a fully integrated system,
in most of the cases its partners don’t use the same system and there for the exchange of data
need an external mean.

Conclusion
It is maintained that Supply Chain visibility can not only enhance Supply Chain re-
configurability but also improve Supply Chain strategic performance directly. The benefits of
visibility is reducing the bullwhip effect, Supply Chain cost, and cycle time which all results
in a better performance and customer satisfaction. The use of IT infrastructure can help the
exchange of data happen very easily and more proper which can lead to a higher visibility in
the whole supply chain. This happens through different ways such as:

1. Quick process to information.

2. Better customer service.
3. Reduced paper work.
4. Increased productivity.
5. Improved tracing and expediting.
6. Cost efficiency.
7. Competitive advantage.
8. Improved billing.

Assignment by Golrou Abdollahi, Benjamin Mohler, Stephan Orth (2010) p. 5

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