Supply chain visibility is consistently ranked as a top priority for managing global supply chains because it presents a massive opportunity to increase margins and revenue.
But, the failure of businesses to fully leverage supply chain visibility to their advantage is beginning to have a very tangible cost for all industry players, especially suppliers, as large retailers begin to fine suppliers that fail to deliver on time. And yet, despite its increasingly critical importance, a recent global study from Geodis found that only six percent of firms have achieved true supply chain visibility. The costs are enormous.
The cost for retailers. Retailers miss revenue opportunities when they don’t have enough product to meet demand (out-of-stocks). CNBC has reported that out-of-stocks and overstocks are costing retailers $1.1 trillion per year. What’s more, out-of-stock products cause customer defection. One study found that 81 percent of consumers will shop at a competitor if a product is backordered or out-of-stock.
The cost for suppliers. Retailers are also tightening delivery windows for their suppliers, adding significant monetary penalties for non-compliance. For example, Walmart recently announced a further tightening of the company’s on-time, in-full (OTIF) policy that went into effect in April 2018, requiring mandated larger suppliers to deliver within a one- or two-day window 75 percent of the time or be assessed a fine of three percent of the cost of the goods in the shipment. Smaller suppliers will see their compliance target rise from 33 percent to 50 percent. Other retailers, such as Target and Kroger, have similar policies in place. These new requirements can have an immediate and material impact on suppliers’ earnings.
Costs for all businesses that ship products. There’s also a cost in employing the staff necessary to manually manage supply chain visibility. Global freight coordination is still, in large part, a manual process. Many of the world’s largest shippers and 3PLs are managing freight movements and visibility over the phone and email. Tactical execution, including communicating with transportation providers for location and ETA, contributes significant costs to internal supply chain organizations and third-party logistics providers (3PLs), while undermining the ability to conduct strategic initiatives.
Those not managing manually are typically managing visibility through outdated technology systems that leave gaping blind spots of several hours or days that undermine a company’s ability to reliably make important day-to-day decisions and, overall, materially erode earnings potential.
Additionally, if transportation partner performance monitoring isn’t automated through a visibility system, it’s difficult to track and enforce service-level agreements. This often leads to lower carrier performance and, inevitably, to customer disappointment.
Automated real-time supply chain visibility: possible for the first time
Until recently, true real-time supply chain visibility simply wasn’t possible. Advanced GPS technology overlaid with artificial intelligence-enabled analytics now provides the ability to track the precise location and accurately predict the ETA of every shipment – and automatically deliver critical information to customers regarding those shipments.
One of the key enabling technologies of ubiquitous, real-time visibility is due to the Electronic Logging Device (ELD) mandate, which requires that truck drivers’ Hours of Service be tracked, and results in highly accurate, real-time location data being generated. As of December 2017, ELD data is flowing from virtually all semi-trailer trucks in North America.
Real-time supply chain visibility is not only now possible as a result of technological advancements, it’s becoming essential to operating effectively and more profitably.
Priya Rajagopalan is CPO of FourKites.