Improving Supply Chain Efficiency Through Convergence, Collaboration, and Visibility
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1 RESEARCH REPORT NOVEMBER 2014 Improving Supply Chain Efficiency Through Convergence, Collaboration, and Visibility Sponsored by Conducted by On behalf of
2 Improving Supply Chain Efficiency Through Convergence, Collaboration, and Visibility A As organizations strive to enhance supply chain efficiencies and gain greater control of related costs, the biggest obstacles standing in their way include a lack of visibility into all steps in the supply chain, poor synchronization of end-to-end business processes, and little or no access to accurate, time-sensitive information. Just one of these three barriers let alone all of them combined can prohibit shippers from achieving their long-term supply chain goals; having a significant financial impact along with wasting precious resources. In many instances, shippers supply chain woes can be traced back to a lack of integration among the systems that run their supply chain activities. In fact, the inability to synchronize end-to-end business processes is often cited as a major obstacle by shippers in their attempts to reach supply chain goals. Without solid harmonization among these systems, supply chains will suffer from information overload, inadequate visibility, and ineffective streamlining of both internal and external operations. The good news is that when logistics processes are orchestrated and when supply chain solutions are streamlined and synchronized the results can be significant. As many distributors, retailers, logistics service providers, and shippers have already discovered, achieving an optimal level of supply chain convergence not only helps breakdown the silos that exist within organizations today, but it also helps organizations become more predictive and proactive. Those very benefits produce a trickle-down effect across the entire supply chain and ultimately help shippers achieve higher levels of customer service and satisfaction the Holy Grail in today s competitive business environment. To assess how businesses are addressing critical supply chain issues such as data flow and information integrity, centralization of supply chain processes, and deficiencies in supply chain visibility, Peerless Research Group (PRG), on behalf of Supply Chain Management Review and Logistics Management, in conjunction with Kewill, a leading supply chain execution and logistics management software solutions provider, recently conducted a study to examine gaps in organizations supply chains and how business process may subsequently be affected. This research examined issues related to systems integration, the centralization of business and supply chain processes, and the problems that can arise in an organization due to a lack of cohesion. Other key topics explored include the value of expanding and improving visibility across the entire supply chain extending beyond the four walls of manufacturing and warehousing/distribution center activities and how lapses in transparency can impact a shipper s ability to fulfill customer demands in a timely and efficient manner. To better understand these issues, PRG surveyed 210 top supply chain and logistics managers across a range of manufacturing and warehousing functions representing all size businesses. All survey participants were pre-qualified for involvement in decisions as they relate to supply chain execution, platforms, applications, or logistics outsourcing services. For the survey, respondents shared their input on the key supply chain performance challenges that they are facing, operational areas that are in need of improvement, and the software solutions being used to overcome critical supply chain issues. 1
3 SUPPLY CHAIN PERFORMANCE, ISSUES AND CHALLENGES With an eye on improving data integration, systems convergence, and visibility beyond the four walls of their warehouses, survey respondents revealed the high and low points of their current supply chain processes. In the upcoming months and years, organizations will continue to launch initiatives that improve overall supply chain efficiencies, enable greater control over supply chain costs, and improve inventory management. Most acknowledge that their organizations supply chain activities and processes are lacking and are in need of improvement and attention. Additionally, supply chain operations will be focusing on solutions that: Provide current and accurate information enabling smarter transportation & logistics choices related to modes, routes, loads, etc. Improve customer service processes Enhance sourcing and provide better communication and collaboration with business partners Offer alerts on supply, demand, inventory, and better manage supply chain risks We need better information on supplier on-hand quantities of finished goods, in-transit tracking, assurance of in-transit security, assurance that in-transit handling does not cause damages--temperature, shocks and bumps, presence of water. Supply Chain Manager; Aerospace Industry; $50M - $100M Aspects of supply chain(s) that organizations are looking to improve Increasing supply chain efficiencies 67% Greater control over supply chain costs Inventory optimization and reduction of on-hand inventory Optimizing transportation logistics activities (mode, route, weight) 63% 61% 58% Greater customer satisfaction 56% Sourcing and supplier relationship management 47% Reducing waste 46% Risk management and continuity planning 44% Customer collaboration and sharing of data 32% Tracking and managing global shipments 32% Quality control with outsourced manufacturing 28% We need better accuracy of cargo and shipment information during the transit to POD. Our communication and solutions in managing the chain of cargo movement is currently not very effective. Operations Manager; Transportation and warehousing services industry: $1B+ in revenues 2
4 A lack of end-to-end, real-time supply chain visibility, the inability to obtain actionable and up-to-date data, poor response from suppliers and collaboration with partners, and a lack of integration and seamless business process management are all critical hindrances that prevent supply chain executives from improving their supply chains and meeting related objectives. Greatest obstacles in achieving supply chain goals Lack of visibility into all steps in the supply chain process 49% Synchronizing end-to-end business processes 48% Access to accurate, time-sensitive information 46% Failure of suppliers to respond to requests fast enough 44% Unexpected events (natural or man-made) 44% Collaboration and integration between supply chain and product development partners 36% Ability to form strong relationships with supply chain partners 31% Keeping up with new technology capabilities and investments 30% Capacity issues on the supplier side 29% Other 7% The supply chain and logistics executives we surveyed suggest their supply chain operations are presently, to a certain degree, insubstantial. While fulfillment efficiency is considered the most robust facet of their supply chains, more than one out of four (28 percent) still rate functionality of their system on fulfillment efficiency to be fair or poor. Characteristics such as scalability and systems integration, and procedures enabling cross-functional collaboration and the capacity to easily transfer data are among the critical areas in need of upgrades. We need better real-time data sharing between suppliers and our users, and reduced Inventory from planning involving all A category suppliers. Supply Chain Manager; Food and beverage industry; Less than $50M We re looking for solutions to upgrade end-to-end data integrity and ease of gaining access to that data. Vice President; Building materials industry; $1B+ 3
5 Additionally, respondents believe end-to-end visibility (51 percent), systems integration (47 percent), and ease of data exchange, both internally as well as with partners, (46 percent) are sub-standard. Rating organization s supply chain(s) on its strengths/weaknesses Fulfillment efficiency 33% 39% 28% Cost management 30% 41% 29% Supply chain metrics 28% 35% 37% Agility/Flexibility 27% 40% 33% Quality and availability of data 25% 36% 39% Systems integration 20% 33% 47% Ease of data exchange (Internal and B2B) 20% 34% 46% Scalability of platforms 20% 40% 40% Cross functional collaboration 19% 43% 38% End-to-end visibility 19% 30% 51% Excellent/Very good Good Fair/Poor The manufacturing component appears to be one of the more vulnerable branches within supply chains. Roughly one-half of those we surveyed claim their supply chain is weakest at the supplier-to-manufacturing level and at the manufacturing-towarehouse/dc operation. Risks in transporting items to customers are also seen as a critical and potentially costly exposure in supply chains. Weakest link in supply chain visibility Supplier to manufacturing 33% Manufacturing to warehouse 21% Warehouse to transportation service provider 10% Transportation service provider to end-customer 29% Other 7% We need better cross functional collaboration! Chief Operational Excellence; Logistics and Distribution; Transportation and warehousing services industry; $100M - $250M 4
6 Problems may stem from how organizations are working with their partners. More than 57% of the respondents claim they currently have a formal supplier relationship management strategy in place. Among these operations, supply chain efficacy is largely satisfactory as approximately one-half (49 percent) say their management strategy is extremely or very effective. Organization employs a formal supplier relationship management strategy More collaboration is needed as we work with our key suppliers to leverage their strengths in improving our supply chain processes. Corporate Management; Retail industry; $1B+ Yes 57% No 43% However, those not employing a formal supplier relationship management strategy claim that the management methods they now use are largely ineffective; nine out of 10 assert that their current approach to supply chain operations management is, at best, somewhat successful (46 percent). Roughly the same number (45 percent) contends that how they are now operating is highly ineffective! Effectiveness of supply chain operations management strategy 0% 4% 9% 45% 46% We re establishing partner relationships with our biggest suppliers, developing best practice methods and then rolling out to the rest of supply chain. We audit our suppliers on the performance and actions that are most meaningful to us. Director, Inventory and Supply Chain; Fabricated metals industry; $250M - $500M Extremely effective Very effective Somewhat effective Not very effective Not at all effective 46% 5% 0% Have a formal supplier relationship management strategy 25% 20% Do not have a formal supplier relationship management strategy Highly/somewhat inneffective 91% Highly ineffective 45% We need clearly defined and mutually respected terms of execution, actionable agreed objectives, properly described procedures to be followed in case of failed service. Logistics Manager; Warehousing and transportation industry; $50M - $100M 5
7 CONVERGENCE Inefficiencies along the supply chain may also link to how organizations structure and execute their supply systems. Two-thirds of those we surveyed suggested there s a lack of cohesion when making supply chain process decisions in their organizations. While some fully lack a formal decision-making policy, in other companies that responsibility is left up to the various business units. Only one-third of shippers rely on a supply chain manager to centrally manage their supply chains. How organizations manage and execute their supply chain All supply chain activities are centralized under a supply chain officer 35% We need a single supply chain management strategy across the enterprise, rather than separate strategies by business unit. Director, Global Transportation & Logistics; Aerospace industry; $1B+ Each business unit controls their own supply chain decisions 27% Centralized management but decisionmaking is on a local business unit level 24% No formal structure 11% Other 3% This scattered approach is seen as an obstruction to achieving practical supply chain efficiency. Among those organizations who make supply chain decisions on a business unit level, roughly one half (52 percent) are already undertaking initiatives to mitigate these silos. VISIBILITY Just one out of three organizations surveyed claim to have supply chain transparency extending beyond their manufacturing and warehousing/dc operations. And, more than one-third (39 percent) are planning to broaden workflow visibility outside the four walls. However, the proficiency of supply chain visibility, as we ve already heard, is insufficient. While roughly one fourth (24 percent) of these supply chain managers rated end-to-end visibility within their supply chain as favorable (excellent or very good), three-fourths contend their supply chain needs to improve its transparency, and among these managers, 42 percent say it s fair or poor! This lack of end-to-end visibility can negatively impact all points along the supply chain and generate a high level of inefficiency for shippers. There are unreasonable expectations for production turnaround time. Silos need to be broken down for collaboration to thrive. Division Director; Aerospace industry; $500M - $1B Rating organization s supply chain on end-to-end visibility Excellent 2% Very good 22% Good 34% Fair 31% Poor 11% 6
8 Many operations have visibility over shipping status, track and trace, and real-time inventory management within their supply chains, but fewer than half (43 percent) share their supply chain data with suppliers and sourcing partners. Areas into which operations have visibility Shipment status information Inventory at any moment/inventory levels Shipment trace and tracking 59% 64% 64% Upcoming shipment and handling activities Suppliers/Sourcing partners 44% 43% Customer/Market demand 32% Labor management Yard 21% 25% As visibility ranks high among users as an area needing improvement, a fully robust supply chain framework would require transparency into capabilities such as data integration, track and trace functionality, partner collaboration, dashboards, alert features, and analytic elements. Combined, such capabilities would enable proactive resolution of issues (versus a reactive approach to solving problems). Features in a solution important in providing supply chain visibility Data integration Track and trace capabilities Partner/Supplier collaboration Business intelligence Dashboards Alerts Analytics 40% 36% 34% 29% 29% 28% 27% Events 15% All of the above 37% Reporting. We have lots of data, but need to convert it to useful information and easier for users to access. Vice President; Agricultural goods industry; $1B+ 7
9 Efforts to attain full visibility do not come without complications. Systems integration and a lack of supply chain partner interaction and traceability are the main hurdles encountered by organizations on the path to optimal supply chain visibility. Problems in attaining better supply chain visibility Existing systems are not (well) integrated 58% Loss of visibility/traceability when handing over items to our supply chain partners Customers are asking us to provide more self-service, traceability and visibility functions to them Disparate systems across different geographic locations/time zones restrict visibility Customer-specific SLA s limit us in getting a single overall view of our supply chain 29% Becoming compliant with global visibility initiatives 29% 38% 35% 46% We need better endto-end integration and data sharing between key stakeholders in the supply chain. Vice President, Supply Chain Management; Electrical equipment manufacturing industry; $1B+ Having tighter integration to carrier portals 26% As previously suggested, many of the problems in reaching greater supply chain visibility may relate directly to a lack of centralized management. This is further evidenced in that almost two out of three (60 percent) shippers neither presently operate a control tower to achieve fuller visibility nor do they have plans to implement a control tower strategy in the near future. Yet, curiously, while many organizations have been slow to adopt systems to better coordinate execution, management and visibility of the supply chain process, the vast majority (80 percent) see centralization across supply chains as highly important. Importance in centralizing supply chain visibility management Very important 51% Extremely important 29% Somewhat important 18% Not very/not at all important 2% We want more visibility into capacity constraints with our overseas sources, overall improvement in response times on communications, particularly when quality issues arise, detailed breakdowns when submitting requests for cost increases, particularly for contracted items. Purchasing Manager; Distribution industry; Less than $50M 8
10 ADOPTION AND USAGE OF TECHNOLOGY Organizations are mixed on the type of supply chain execution (SCE) platform that is best suited for their operations. There does not appear to be a clear preference, whether it s a best-of-breed solution, a hybrid consisting of a single vendor s solution used in conjunction with a cloud-based best-of-breed application, or an integrated suite of applications offered by one vendor. Supply chain execution (SCE) strategy currently using/planning to employ Using a best-of-breed approach 33% Running a hybrid; single supplier for internal along with best-of-breed over the Internet 30% Using a single SCE vendor s applications 27% Other 10% Supply chain visibility systems, WMS, and TMS solutions are the modules organizations are mostly integrating or planning to incorporate into their SCE platform. Most (33%) plan to use a best-of-breed approach when employing this technology, while 27% want to use a single SCE vendor s application. Another 30% of shippers are either using or plan to use a hybrid approach comprised of a single supplier for internal operations and a best-of-breed option for Internet-based activities. Applications integrated as components in organizations' SCE platform Supply chain visibility systems Warehouse management systems Transportation management systems 56% 60% 60% Billing systems 42% Decision support systems 34% Global trade management (GTM) systems 23% Other None of these 2% 5% 9
11 Supply chain execution technology is seen as a way of addressing many of these critical supply chain vulnerabilities. The key benefits realized or anticipated of a SCE solution include: Improved visibility of information Enhanced end-to-end supply chain visibility Better inventory management Upgraded customer service Improvements in supplier collaboration Seamless synchronization across business processes At present time, about one out of five (21 percent) are running cloud-based or SaaS supply chain management and execution software solutions. The demand for web-based applications is expected to pick up over the next few years as over onehalf (54 percent) plan to deliver their solutions via the Cloud. As evidenced by the growth of the Cloud over the last few years, using such services generates the types of economies of scale and sharing of resources that can reduce costs and increase choices of technologies. Attracted by the low startup fees and faster startup times, and driven by a desire to digitally connect with outside trading partners, shippers appetites for web-based applications continue to grow predictably year over year. LSPs AND OUTSOURCING Organizations are split on their usage of logistics service providers (LSPs). Roughly one out of three companies (35 percent) currently outsources their logistics assignments to LSPs while another 14 percent plan to outsource sometime over the next two years. Conversely, about one half (51 percent) will continue to manage their logistics operations in-house. Among those now outsourcing or planning to outsource their logistics operations, two-thirds of the supply chain and logistics managers surveyed will assign all or most of their logistics services to an LSP. Of those using LSPs, most (72 percent) rely on more than one provider to handle their logistics tasks. Functions commonly outsourced include outbound logistics, reverse logistics and returns processing, decision support systems management, cross-docking, and product customization processes. One-half of shippers surveyed (50 percent) have KPI provisions with their suppliers. These measures are largely based on individual performance (77 percent) or network-based goals (34 percent). Top tasks operations are outsourcing/planning to outsource to an LSP Outbound logistics management Reverse logistics and returns management Decision support systems Cross docking Packaging and product customization Global trade management (GTM) systems Manufacturing 40% 34% 34% 30% 28% 23% 20% 10
12 CONCLUSIONS Even in today s competitive business environment, many supply chain players are still not operating on inter-connected systems, or using a common set of endto-end processes to connect all of their partners. For example, it s not unusual for the TMS and WMS to not be fully integrated, or for a degree of manual processing or re-processing to be necessary to process customer orders. This gap limits the opportunities to achieve excellent order fulfilment and negatively impacts the bottom line. Supply chain convergence fills these gaps by standardizing across functional domains (such as transportation and warehousing) and by integrating processes and systems both internally and externally to break down functional silos, going beyond collaboration to drive informed decision-making. For most shippers, delivering a truly demand driven supply network will require visibility and candid collaboration from end-to-end. To achieve true supply chain convergence and therefore complete collaboration and visibility, both internal and external convergence of systems is required, both of which are infinitely easier to achieve using a Cloud-based model. And while it may seem somewhat counterintuitive, as enterprise class systems are elevated onto the Cloud, the barrier to entry (mainly upfront cost and IT support) for the small to mediumsize organizations), is significantly lower. As these supply chain trading partners increasingly adopt Cloud-based IT, a new path to connecting those previously disparate supply chain links is opening up. To extend the supply chain convergence benefits across an entire network of suppliers, larger players are going to have to help their smaller trading partners better understand the benefits of connected systems and processes. They may even need to go as far as implementing systems that enable the smallest of their partners to easily connect with a minimum of cost and effort. This is where Cloud-based systems and devices offer real opportunities to make the supply chain initiatives we have been talking about for a decade collaboration and end-to-end visibility a reality. The integration of data from all supply chain execution functions is core to attaining visibility and collaboration with trading partners. End-to-end visibility is essential for shippers, LSPs and multimodal transportation partners alike in meeting key performance indicators. By connecting these systems and sharing data you increase business agility giving all links (and players) in the supply chain the opportunity to create a competitive advantage. Legacy IT systems and corporate structures weren t designed with easy collaboration in mind both internally, let alone integrating with third-parties hence the prevalence of silos that hinder the ability to see and act on the big picture. Modern, flexible supply chain technology is designed to assist businesses in creating new workflows and modern business processes that span their existing IT systems and extend to their partners, breaking down the silos. As Cloudbased supply chain execution systems such as those from Kewill, Kewill MOVE on the Cloud for LSPs, Shippers and Retailers become commonplace and as players in the supply chain become connected and manage their processes electronically, supply chain convergence, and faster, more efficient order fulfillment will follow. 11
13 RESEARCH METHODOLOGY This study was conducted by Peerless Research Group on behalf of Supply Chain Management Review (SCMR) and Logistics Management (LM) magazines for Kewill. The research was fielded in September 2014, and administered over the Internet among subscribers to SCMR and LM. All respondents were pre-qualified for being involved in decisions regarding the evaluation and purchase of supply chain execution platforms, applications, or logistics outsourcing services for their organization or for clients. The findings are based on information collected among 210 top supply chain and logistics professionals. Respondents are predominantly vice presidents (24 percent), top level executive management (12 percent), high ranking supply chain executives and directors (22 percent), logistics, distribution or operations directors and managers (16 percent), and operations management (7 percent). More than one-half (58 percent) work at manufacturing facilities while others (42 percent) are employed in wholesale or retail distribution, and consulting services. Businesses of all sizes (under $50M = 37 percent; $50M - $500M = 36 percent; $500M+ = 27 percent) are well represented from around the globe. Responding companies use, on average, 538 domestic and global suppliers (with a median number of 85 suppliers being used). About Kewill, Inc. Kewill, a Francisco Partners portfolio company, is a global leader in multimodal transportation management software, providing organizations with a comprehensive end-to-end platform for managing the complexities of transportation, logistics and trade compliance. The Kewill MOVE platform helps companies reduce costs, manage volatility and gain greater visibility across the logistics value chain. Trade, Transport, Store, Comply, Manage and Integrate the Kewill transportation management platform gives you the insight, agility and tools you need to deliver better customer service and streamline global supply chain execution for strategic advantage. The Kewill platform supports supply chain execution activities for over 7,500 companies in more than 100 countries. Contact Information: Learn more about how Kewill can help you achieve greater innovation in your transportation management and logistics functions by visiting us online at Conducted by
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