Supply Chain Visibility

From Theory to Practice

Jonah Saint McIntire

• Publisher: Routledge
• Year: 2016
• Print ISBN:
  9781032837024
• eBook ISBN:
  9781317048305
• Topic: Commerce
• Subtopic: Commerce Général

Transparency and accurate management information are essential if you want to ensure that the supply chain is working for your business. Supply Chain Visibility is a critical primer for readers with backgrounds in supply chain management, system integration, strategy consulting, and enterprise software. Jonah McIntire sets the stage for a new framework that empowers business leaders to connect their projects, tasks or work streams back to the strategic message that it is worth applying organizational resources to supply chain visibility. Drawing on research findings, he reviews the prerequisites needed for a successful visibility solution and suggests a visibility fitness scorecard to compare the quality of widely varying approaches. The second section of the book reviews in detail the eight most common types of supply chain visibility and offers a set of indicators of potential fit for each one. The book also explains how to acquire visibility technology and the available options, and includes guidance on best practice for in-house designed systems. If you or your organization are moving into this area, Jonah's insights will place you in a far stronger position to decide exactly how to leverage the benefits of supply chain visibility solutions; they also walk you carefully through the minefields of ineffective approaches or technologies to give you the greatest chance of success.

PART 1
Supply Chain Visibility in Theory

1

The History and Definition of Supply Chain Visibility

The Origins of Supply Chain Visibility

Supply chain visibility has broad multidisciplinary roots, much like its parent field supply chain management. The theoretical basis and supporting academic research on supply chain visibility is therefore wider than it is deep. Supply chain visibility, at its earliest stage of usage, was simply the notion that information about the global supply chain would lead to better local supply chain decisions, a notion so basic it’s practically at the core of supply chain management itself (Storey and Emberson, 2001). Classic supply chain failures such as the Forrester (or “bullwhip”) effect derive directly from the lack of global information when making local decisions such as production or inventory level setting (Lee, Padmanabhan, and Whang, 1997).

Theoretical models from the 1990s, such as the A–R–A model (later called the IMP model after the “Industrial Marketing and Purchasing Group” which sponsored its development) of industrial networks research (Baig and Khan, 2001; Mathews and Shulman, 1999) also included access to global information on the supply chain as a major driver for improved outcomes. In the A–R–A model (so named because it treats the supply chain as a set of “Agents Resources and Activities”) there is an explicit link between game theory concepts of the agent (or firm’s) information set and its best strategy. Because each firm (or agent) in the supply chain has different information, even if they all behave fully rationally their behaviors will appear unaligned and perhaps contradictory. One strategy for improved performance of individual firms in this supply chain theoretical model is for them to acquire broader information, hence, to enact supply chain visibility. The figure on the following page is a representation of the IMP network model adapted from Mathews and Shulman (1999).

Figure 1.1. The IMP network model

The 1990s was also a period when two trends came together to focus the supply chain researcher community on the potential for visibility: EDI and the consumer internet. The overarching theme in these years was that supply chain information contained significant competitive advantages for those who could harness them. These were a mix of advantages in efficiency (lower inventory, lower transport costs, reduced labor, reduced wastage, etc.) as well as effectiveness (product design, pricing, and strategic supplier selection). In 1989 a well-regarded paper suggested that there was a direct and inverse correlation between informational resources needed to maintain a given service level and the enterprise-wide inventory level (Dudley and Lasserre, 1989). Hence in the 1990s the phrase “information instead of inventory” grew in popularity, appearing in formal journal articles, then working papers and presentations, and finally in practitioner journals (Bytheway, 1995). Likewise important improvements in barcoding and EDI lead to significant new potential for information exchange and coordination in the supply chains of apparel (Cooper, 2006) and food products (Hill and Scudder, 2001). This academic interest was paralleled by practitioner interest and actions. By 2003, EDI adoption rates among the most competitive companies (the Fortune 100) was over 90 percent while the rest of the companies surveyed were adopting at a dismal 3 percent rate (Shaw, 2003 as described by Salo and Karjaluoto, 2006).

Supply chain theoretical models in the 2000s seem to take for granted that supply chains exist across organizational boundaries, i.e. that a supply chain is de facto made up of multiple independent companies (McAdam and McCormack, 2001), and that the inclusion and role of the individual companies was derived from their specializations (Picot, Reichwald, and Wigand, 2003). The research and practitioner shift was towards hybrid organizational structures (Picot, Reichwald, and Wigand, 2003), also called hollow enterprises (McIntire, 2010), where the supply chain members are dependent on each other for survival because their individual organization no longer has the resources to complete its market function alone. The models promulgated in the 2000s specifically included the sharing of information as a key driver for the creation and success of the supply chain network (Albani, Müssigman, and Zaha, 2007). The key difference between earlier works from the 1990s, such as the IMP network model, is that models from the 2000s tended to view supply chains as strategic enablers or hindrances rather than operational factors to be rendered more efficient. A core part of the strategic value of a supply chain was how it did or could handle information flows and increase the situational awareness and thus competitive power of the participating firms. This trend was occurring in supply chain research, but also in the context of globalization which was driving serious re-thinking about what the basis and boundaries of an organization should be. Pivotal articles such as “The core competence of the corporation (Prahalad and Hamel, 1990)” were focusing attention on the need to specialize in terms of capability, not just market position. Also of interest in the 2000s was the extent to which virtual markets, e-commerce portals, and similar arrangements could overtake physical supply chain value-adding steps (Rayport and Sviokla, 1995). Again, the assumption here was that greater information access and situational awareness would drive stronger supply chains.

So it’s safe to say that supply chain management theory has posited that improved information access is an important goal since at least the 1980s, effectively coincidental with the founding of the field itself. Although theoretical models used to understand and improve supply chains have changed, none have deviated in the belief that there exists a correlation between greater situational awareness and greater supply chain performance. Knowledge is power, so to speak. What this says is that supply chain management has always appreciated having visibility, i.e. having more information and greater situational awareness. That is subtly different from pursuing supply chain visibility as a concept, technique, process, or goal. When did the supply chain academic community begin talking about supply chain visibility as something to be done, rather than a measure of the quality of the supply chain itself? And why did the switch occur?

Unfortunately, it’s not clear when academics (or practitioners for that matter) started thinking of supply chain visibility in this way, i.e. as a solution rather than a quality. At least as far back as 1987 there was concern in academic research about how supply chain managers or logistics managers could increase their visibility in to international supply chains (Houlihan, 1987). But there doesn’t appear to be a specific agenda of techniques or solutions called “supply chain visibility” which was being proposed to meet that need. It’s a subtle difference to think of visibility as a quality vs. visibility as a solution. As an analogy, Henry Ford was supposed to have faced a market where his customers wanted better horses, not automobiles. Only later, when his efforts made the concept of transport synonymous with automobiles, did the consumer sentiment switch in terminology. Something similar happened with the term supply chain visibility, which began as something to measure (like costs) but evolved into a solution to improve overall supply chain or business performance. In the domain of supply chain visibility researchers clearly documented the need for greater visibility before that term came to be used as an agenda or toolset for improving information flow and situational awareness.

A series of industry journals, academic journals, and scholarly textbooks published from the year 2000 onward show discussions of supply chain visibility as a solution as opposed to a quality to be measured (Thompson, Manrodt, Holcomb, Allen, and Hoffman, 2000; Joshi, 2000; Reyes, Raisinghani, and Singh, 2002; Simchi-Levi, Kaminsky, and Simchi-Levi, 2003). Sometime before these articles and books came to publication, the supply chain research community had shifted to thinking of supply chain visibility as a solution to a problem. This makes intuitive sense given that off the shelf “solutions” combining consulting, software, and hardware were appearing in the market in the late 1990s under the banner of supply chain visibility. Notable early solution providers included Descartes, G-Log, Logility, and Viewlocity. All these visibility solutions came to market in the 1997 to 2000 time period. It seems reasonable to then talk about two phases of supply chain visibility as a term. The first phase starts at least in the 1980s and extends to the late 1990s, and where researchers and practitioners referred to supply chain visibility as a quality being measured, akin to the cost or asset intensiveness of the supply chain. Then in the 1997 to 2000 time frame, coincidental with the rise of standard (but competitive) offerings in the market place which combined software, hardware, and consulting services, researchers and practitioners began to talk about supply chain visibility as an activity to be undertaken; a specific agenda of actions which could improve supply chain performance.

Table 1.1. Selected timeline of research on supply chain visibility

It has not been possible to amend this table for suitable viewing on this device. Please see the following URL for a larger version http://www.ashgate.com/pdf/ebooks/9781317048305Tab1_1.pdf

Between the years 2000 and 2013 there has not been a second pivotal shift in the meaning of supply chain visibility. But there also has not been consistency among practitioners or researchers about its definition, which remains somewhat ambiguous in the literature. Despite the ambiguity of definition there has been continued interest in it as a solution to mediate specific supply chain problems. For example, in the IBM Chief Supply Chain Officer study of 2009, supply chain visibility was named as the top challenge to the supply chain organization, ahead of cost control and risk management (IBM, 2009).

HOW IS SUPPLY CHAIN VISIBILITY DEFINED?

Definitions of supply chain visibility are hard to come by in academic sources. As a construct, it is often intermixed with terminology such as traceability and connectivity (Hoffman and Hellström, 2008). Even when a researcher has published a clear definition of visibility, it is often not picked up by subsequent researchers. One definition that has been reused is as follows:

Supply chain visibility is the capability of a supply chain player to have access to or to provide the required timely information/knowledge about the entities involved in the supply chain from/to relevant supply chain partners for better decision support (Goh et al., 2009; Adielsson and Gustavsson, 2010).

Among practitioners the term is also poorly defined, as one of the interviewees noted:

If you put twenty people in a room and ask them to define supply chain you get a wide variety of answers. The same thing happens with the term supply chain visibility (Wilkie, Appendix A).

The ambiguity around the term definition is not helpful. As another practitioner put it:

People tend to get latched on to their personal definition of supply chain visibility, and they have trouble accepting other definitions. People tend to be hardwired on this subject (Wilcox, Appendix A).

As mentioned in the history of the term, early uses of supply chain visibility were informal and denoted a quality of the supply chain under consideration, similar to the supply chain’s cost or resilience. Since the late 1990s, the usage has been more purposeful and has indicated a (loosely defined) agenda or solution which, when deployed, improves the performance of the supply chain. For example, there was an early formal model of supply chain visibility as a solution which relied on three layers of business processes (Joshi, 2000):

• A mechanism to locate an object.

• A mechanism to gather relevant data on the object.

• A mechanism to interface the relevant data with other IT applications.

To get closer to a research definition of supply chain visibility, let’s enumerate five common axioms which seem to have given it a shared meaning among users of the term since the late 1990s:

1. Visibility means increased awareness of the states of the supply chain activities and related events.

2. Visibility is inward looking: it is not focused on becoming more aware about competitor supply chains, for example.

3. Visibility offers the power to convene facts but not to control actions, it provides awareness but not execution.

4. Visibility is in service of both tactical decisions and strategic decisions.

5. Visibility is achieved through a combination of process and technical means.

HOW DOES SUPPLY CHAIN VISIBILITY WORK?

Beyond definition statements, considerable research has gone into the “how” of supply chain visibility. This research looks for the mechanisms underlying supply chain visibility and why it appears to improve supply chain management. Supply chain visibility is supposed to operate as a decision-support for those individuals or teams managing the supply chain operations. It improves the decision making by simplifying it, accelerating it, reducing the chances of failure, or improving the completeness of the group involved. Reducing complexity, for example, is one commonly cited expectation behind how visibility brings value to the supply chain management team (Aberdeen group, 2012). An early summary of this view states that supply chain visibility is largely doing two things (Balakrishnan, Kumara, and Sundaresan, 1999):

• Faster and more complete data to support decision making.

• Access and involvement by more stakeholders in the decision-making processes.

The mechanics of supply chain visibility tend to rely on a view of supply chains as a series of known sequential steps spread out in geography and time. This view focuses the solution’s attention and resources on succedent interdependencies, coordination by planning, and a constrained view of likely alternative outcomes (Baig and Khan, 2001). In other words, most approaches to supply chain visibility as a solution take as a founding principle the fact that the supply chain is a series of events or states occurring over time, and that these states and events are almost entirely deterministically linked, such that if a supply chain manager knows enough facts about the current state of events they can predict outcomes into the near future based on deterministic rules. This is the Newtonian view of the universe applied to supply chains: mechanically deterministic without much room for true stochastic variations. It’s likely that less deterministic solution approaches will emerge in the future, particularly into supply chain contexts where the probabilistic effects outweigh the deterministic.

To the extent that supply chains really are this deterministic and knowable, supply chain visibility’s primary output is to illuminate the mechanics at play and help run the deterministic rules forward so as to predict future supply chain states of interest. Drawing on Baig and Khan (2001), these would generally be three distinct mechanisms:

1. Chronological dependencies between events or states. Once supply chain visibility identifies these, or leverages known dependencies to ...

Table of contents

• Cover Page
• Half Title page
• Dedication
• Title Page
• Copyright Page
• Contents
• List of Figures
• List of Tables
• About the Author
• Preface
• List of Acronyms
• Part 1 Supply Chain Visibility in Theory
• Part 2 Supply Chain Visibility in Practice
• Appendix A Transcripts from Interviews with Practitioners
• Appendix B The Supply Chain Visibility Scorecard Evaluation Instrument
• Works Cited
• Index