This author had the opportunity to recently speak with Michael Schmitt, Chief Marketing Officer for E2open, Inc. Our discussion reflected on clarification of the different levels of visibility within today’s global supply chain networks.
At first blush, the term “visibility” can trigger different definitions for supply chain management teams and the term is often over utilized and somewhat abused in communicating supply chain business process needs and requirements. Today, supply chains need to respond and calibrate on a daily basis as opposed to weekly or monthly. Michael Schmitt often articulates such response from the notion of four separate stages of visibility capabilities.
The goal of our interview was to communicate to our Supply Chain Matters reading audience a definition for each of these levels and to provide a basis for helping teams to be able to seek clarity in such definitions as they map out where process and technology capabilities need to be developed.
Level One- Static Visibility
According to Michael, Level One visibility equates to how much inventory you have on-hand internally or externally, based on future customer fulfillment needs and requirements. An initial viewpoint would conclude that this level of visibility should not be that difficult to achieve, yet the reality for today’s predominantly global, multi-tier supply chain networks add a far different reality to this challenge for many teams. Add in a new urgency for industry supply chains to be able to respond to requirements for supporting online and Omni-channel commerce business initiatives, and this level of visibility is even more complex.
Manufacturers with different versions of existing ERP or legacy systems or retailers with both outsourced store and online inventories that were implemented prior to major movements toward outsourcing often struggle with this Level One challenge. Add in today’s realities for outsourced logistics, customer fulfillment and transportation coupled with just-in-time strategies that postpone fulfillment to a different process stage, such as individual logistics providers and the task becomes rather frustrating. Different versions of ERP or legacy systems or supply chain planning systems that are not integrated to the external network add more complexity in achievement of this goal. Add hundreds of locations to the mix along with constant business changes including acquisitions, and basic visibility takes on a unique challenge that forces organizations to revert back to spreadsheets and other labor-intensive means as a basis of gaining forms of Level One visibility.
As Michael explains, Level One visibility transcends beyond batch Electronic Data Interchange (EDI) transactional activity because of the need for additional context as to existing product demand or alternate part numbers that need to be fulfilled along with challenges for integrating multiple master data requirements. There is the further need to be able to synchronize the data and propagate product demand signals across the Business Network. Thus, Level One visibility requires additional logic and context to the network and to fulfillment requirements across an extended timeframe. As an example, an organization may be short 10 units today, but that requirement extends to well over 10 units in the context of multiple added days and changing order flows over a lead time window. The result often leads to a swelling of inventories to maintain customer service requirements for key customers.
Some large organizations with large-scale supply chain networks can achieve significant cost and customer service benefits at this level of visibility, particularly when the business and the Business Network are in a state of continuous change.
Level Two- Assets in Motion
Michael articulates Level Two visibility as the looking forward stage of capabilities when dealing with the realities of constant inventory in movement across the value-chain. Where is either work-in-process and finished goods inventory headed and when is going to arrive? It is a process for verifying information across the network in the context of revenue, profitability or service objectives. In includes the Level One capability with the added dimensions of assets and resource movements.
If an organization strives to perform what-if planning, information has to be in context of projecting inventory with constant movements, one-two- three weeks from now. Nothing is static in today’s industry supply chains. Michael further pointed out the reality that the value of the projection rises exponentially the closer you get to the end of the shipping quarter when business goal fulfillment becomes a prime consideration or when key customers call with unplanned requirements. This is especially valuable to an S&OP process that is more ways than not, scrambling during the final weeks of a quarter to achieve business objectives. In some industry supply chains, the bulk of profitability may be achieved in the immediate weeks prior to quarter end.
Level Three- Predictive Multi-Tier Inventory and Capacity Planning
This is a capability that is weighted more toward predictive or projected visibility. Michael indicates that some organizations describe this stage as “state management” while others use the term “concurrent computation.” For fulfillment execution to be synchronized, context is critically important. For example, a specific order change involving a key customer cannot wait for multiple batch re-runs of the MRP process. Today’s reality for network based supply chains is that planning and execution must morph into a continuous, collaborative based planning and execution based process that is synchronized to specific objectives. Traditional supply chain business process provides different steps for demand commitments, network supply allocations, and production scheduling, forcing additional planning steps which increase response time and efforts while reducing demand-supply matching efficiency.
Level Three is the routing and time-slicing of projected ins and outs of inventory or capacity among specific time periods in the context of the end-to-end network. It pegs an end-item through bill-of-material and where-used context across the entire network and provides alerting to when exception management needs to occur and when. It is synchronization of the network across its multiple tiers and provides visibility to a future projected problem, affording the organization more up-front time to address any potential problem. Michael is quick to point out that only a small handful of current Business Network network technology providers can support this Level Three capability.
Level Four- Prescriptive Inventory and Capacity Planning
Schmitt describes the biggest benefit of today’s industry supply chains as the ability to transition into Level Four visibility, the marriage of predictive and prescriptive planning capabilities across the end-to-end Business Network network. It is a response to the most complex challenge of most S&OP processes, namely a near-term integrated business planning capability that leverages information across tiers of the supply chain network. What-if simulation and scenario management capabilities are married to defined business rules so that various scenarios can be compared to their effect on revenue, profitability of key customer service goals. Advanced visualization tools provide the ability to spot exceptions and to drill-down to various tiers or nodes to determine where corrective activities need to take place.
In the specific case of E2open, the prior acquisition of icon-scm and the subsequent release of the newly announced E2 Planning and Response 11.2 Data Hub capability form the core of this Level Four visibility.
We would like to thank Michael for sharing these definitions of visibility and we trust they can help our readers to differentiate what capabilities are needed in their process and technology initiatives related to supply and value-chain networks.
Supply Chain Matters encourages reader feedback to these articulated levels of visibility which can be shared in the Comments area associated with this posting.
Disclosure: E2open is a current sponsor of the Supply Chain Matters blog.