Reducing Supply Chain Costs Starts with Supply Chain Visibility

Manufacturing executives around the globe are constantly searching for ways to reduce inventory, while maintaining optimal customer-facing performance metrics; easier said than done and there is no magic bullet. Simultaneously, there is little appetite for complex inventory reduction solutions with a big price tag, long implementations, and little “proof positive” information on results and ROI. A first-step in reducing inventory and improving customer on-time delivery performance is through enabling 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, a further definition of the term “supply chain visibility” is required. The author suggested having accurate and timely data about the status and location of materials in the supply chain was central to reducing supply chain costs. It recommended that visibility of parts “in-production, in-transit, or on-hand” was essential.

Ultriva’s Take on Supply Chain Visibility 

  • Provide a single version of the truth to buyers and suppliers:All partners get access to supply chain data in real-time through a private cloud-based supplier portal. As demand changes with each MRP Forecast run, suppliers are presented with a complete picture of what has changed. As individual order status changes, buyers and suppliers receive automated alerts with supporting detail. Providing buyers and suppliers with visibility into the status of all orders enables improved collaboration and execution by both parties.
  • End stock-outs: Lack of visibility into demand and supply often results in parts shortages. Frustrated manufacturers report having no idea they were down to the last box of parts. Buyers are faced with expensive part expediting to avoid a stock-out situation. The best supplier portal solutions integrate seamlessly with manufacturers’ ERP systems, and they provide real-time visibility into the status of all material to include on-hand, on-order, in-process, in-transit, at receiving docks, awaiting inspection and staged for put-away. Having readily available access to accurate inventory reports, along with up-to-the-minute status on all orders, provides supply chain managers with the actionable business intelligence they require to avoid stock-outs.
  • 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 on a part, no matter how small, causes production to grind to a halt. Unplanned production shut-downs due to material shortages can cause a ripple-effect that often impacts customers, while also adding unnecessary cost and unwanted NVA activities. This fear-based reaction to the possibility of stocking-out causes many material planners to artificially inflate safety stock levels. As safety stock buffers grow, the value of inventory on the shelf increases, as do associated inventory carrying costs. Providing supply chain managers with on-line, real-time visibility into historical consumption and replenishment patterns by supplier item, accurate inventory reports, and analytical tools that help assess the potential impact of forecasted increases or decreases in customer demand, are essential inputs into the process of calculating optimal inventory levels.
  • Close the Loop on Day-to-Day Supply Chain Processes: Many supply chain organizations still rely on email messages with attachments to communicate MRP Forecast data, to place individual orders and to communicate changes in demand. These open-loop processes generate a tremendous amount of NVA work for both buyers and suppliers due to the lack of visibility into order status. Private cloud-based supplier portal solutions 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. The elimination of NVA work will also free-up buyers and suppliers to focus on improving their performance

Bottom-line: providing visibility into the supply chain is the magic bullet and when shared with supply chain partners, it will result in cost savings and cost avoidance.

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