Reducing Supply Chain Costs Starts With Supply Chain Visibility
Everyone in the manufacturing industry wants to reduce inventory costs; easier said than done and there is no magic bullet. Simultaneously there is little appetite for inventory reduction solutions with a big price tag. The closest any manufacturer can get to the magic is supply chain visibility.
Recently, the Social Supply Chain website published “12 Ways Visibility Can Reduce Your Supply Chain Costs.” The article focused on the most common ways visibility can reduce supply chain costs. Before launching into the dozen methods suggested, definition of terms were required: specifically supply chain visibility. The authors suggested having accurate and timely data about the status and location of materials in the supply chain” was the central definition and to reduce supply chain costs using visibility, it recommended that visibility of parts “in-production, in-transit, or on-hand” was essential.
Supply chain visibility is needed to achieve manufacturers’ goal of saving money quickly and inexpensively.
Ultriva’s take on supply chain visibility
- Provide a single version of truth: All partners get access to data in real time. This does not mean supply chain partners get access to a manufacturer’s ERP or MRP systems. Instead, partners are permitted to view their piece of the supply chain puzzle; the company sees the whole completed picture. Visibility to all orders allows suppliers to proactively respond to abnormal fluctuations in demand, which will…
- End Stock outs: Poor visibility often results in parts shortages. Frustrated manufacturers report having no idea they were down to the last box of parts. The result is expensive, using faster shipping methods to get the part back on the shop floor. A real time view of parts on hand allows a supply chain manager to take action before there is a stock out, eliminating expedited fees.
- Reduce Inventory. Most supply chain professionals would say inventory reduction is a “no-brainer” to save money. They would also say reduce at your own peril. To stock out of a part, no matter how small, causes production to grind to a halt and resuming production a steep price. This fear-based reaction to the possibility of stocking out, causes many manufacturing companies to carry “safety stock.” Even the name implies safety from stock outs. Most companies have no idea how much of a buffer is in the warehouse and how much it costs in stock and expensive carrying costs. Utilizing an accurate inventory reports how quickly a manufacturer can resupply and reduce on hand stock.
- Reduce unnecessary labor. When supply chain planners rely on forecasts from a MRP system, the forecast often gets out of alignment, requiring augmented spreadsheets. The updated information must be communicated and verified with supply chain partners. All these unnecessary work processes are eliminated with a cloud-based portal that allows all partners to view in real time what shipments are needed, if they were shipped, and when they will arrive in the warehouse.
Real time visibility corroborates when orders are sent, received, and shipped, allowing a supply chain planner to see which suppliers are doing a good job, and which are not. Reports are easily run to measure supplier ship dates viewed and shared buyer and supplier. There is no reason to wait for a supplier review, both parties can see how a supplier is doing, and identify areas of improvement.
Companies can also reduce labor meeting compliance issues, as visibility allows for data to be collected and reported accurately.
Bottom-line: visibility into the supply chain is the magic bullet and when shared with supply chain partners, will result in cost savings.