How to ensure supply chain transparency
Supply chain transparency is logistics firms’ priority in 2023. Among freight carriers, only 21% claim to have established sustainable logistics with sufficient visibility and flexibility. Without collecting data, specialists are not able to assess risks or resolve arising problems with minimal losses; that’s why managers are looking for solutions that will allow them to observe internal and external logistics processes. So how to achieve this transparency, and what advantages does it offer?
The global situation with supply chains
COVID-19 was a shattering experience for the whole world. In the logistics sector, the crisis led to a shortage of drivers, travel restrictions, and the need for high-qualified personnel. Nearly 40% of multinational corporations were overwhelmed by the consequences of the pandemic. Freight carriers strived to adapt so that customers received their orders.
Poor transparency of processes and the absence of analytics were the greatest problems of supply chains in 2020. In their report – Industry Research: Supply Chain Resiliency – the Sikich researchers stated that the pandemic had made the work of logistics firms more complicated. Orders were delayed, inventory was in short supply, and delivery times were extended.
The pandemic made logistics organizations realize the importance of innovation at all levels of the supply chain. Freight carriers started seeking solutions to problems they previously had no idea about. They realized that it’s crucial to receive real-time information about deliveries and see the whole process if you want to provide high-quality service to customers.
Organizations operating in the sector made ensuring transparency and visibility of logistics through information technology a top priority for digital transformation. Enterprises started turning to supply chain software development companies for solutions to the challenges they were facing.
Supply chain transparency: definition
There are many people, businesses, resources, and technologies involved in a supply chain. In this context, visibility means a logistics company’s capability to view, monitor, and collect information along the entire chain – from cargo loading to its delivery to the customer or purchaser – as well as process and transfer the received information to other process participants.
Supply chain segments are interconnected. Traditionally, managers mostly resolve occasional problems in a separate part of the chain: procurement, production, distribution, or logistics. Speaking about the complete overview of a chain, 60% of managers don’t have it.
A complete overview requires innovative mechanisms: improved Big Data analytics, advanced fleet management software, IoT sensors for vehicles, etc. Digitization can be done successfully if you cooperate with a supply chain software development company. Only then will a freight carrier enjoy full transparency of their logistics operations and have control over them.
The MIT Center for Transportation and Logistics has found what the two significant components of supply chain transparency are:
- Visibility – the capability to find, track and collect data across every part of the supply chain.
- Information disclosure – the possibility to transfer the collected data to internal and external participants in the process. For example, Nestlé saw fit to make the names of their raw material suppliers publicly available. As the corporation explained, this step had been taken because consumers wanted to be aware of what its products contained. This also accelerated Nestlé’s path to complete supply chain transparency.
A business decides on the amount of information to disclose to third parties. However, the disclosure of information can play both in favor of the organization and against it. Clean and eco-friendly products are so important to end-consumers that they don’t mind paying more money for goods with a transparent origin.
Advantages of supply chain visibility
Participants of Supply Chain Transparency: Creating Stakeholder Value, a 2020 survey, described supply chains as ‘very’ and ‘extremely’ complex. Lack of process transparency makes risks, failures, and uncertainty likelier:
- 57% of organizations found it difficult to comprehend the scale of risks for their business;
- 29% of companies stated they had no risk prediction processes;
- 56% of firms didn’t use tools for monitoring and generating online reports;
- it was difficult for companies to identify requirements and benefits when discussing supply chain transparency.
Visibility resolves the challenges of logistics process participants and enhances business value at all key value dimensions (see infographics below).
Businesses allocate budgets for supply chain transparency because this transparency provides a range of benefits:
1. Reduces costs.
Digitalization helps to gain an insight into each segment of the supply chain and evaluate its contribution to the overall process. This makes it easier to reveal vulnerabilities in the chain and fix them, thus improving the ecosystem.
As an example, let’s consider the experience of one of the chemical companies. The company used to only control the delivery process in its country. The European segment of logistics was not monitored and hence difficult to manage. After expanding visibility to the western region, the firm began to better control inventory and delay deliveries less frequently. As a result, its economic efficiency increased by 10-15%.
2. Improves the quality of customer service.
When the delivery process is tracked, it is easier for managers to assess costs and risks. This enables them to prevent failures and prepare fallback options for promptly eliminating problems that can arise during the delivery of goods. Such measures help to ensure the client receives all products on time and remains satisfied.
Accenture thinks that firms are switching to a new business model – the business of experience. Customer experience is now the main indicator for brands. Among millennials, 95% of B2B purchasers want same-day delivery. For Generation X consumers, such a request is less common – 71%.
If a business doesn’t meet these expectations, it risks losing customers. This is also true for other stages of logistics management. Transparency of logistics and cooperation with a supply chain software development company – this is what helps to obtain good results.
3. Eliminates operational risks.
Logistics firms strive to cope with the risks and minimize losses associated with:
- overproduction, when a business produces more products than consumers demand;
- long lead time;
- non-optimized use of a track’s cargo capacity;
- inefficient management of warehouse stocks, when there is no place for demanded products while the space is overstocked with unnecessary ones;
- choice of inefficient routes for freight delivery, and so on.
Managers aspire to figure out if there is anything that leads to revenue losses in their supply chain. For instance, trucks often get on the road half-empty, which doesn’t benefit the carrier. In this case, it is worth becoming a member of a digital freight marketplace. This will enable managers to find temporary customers who need their orders to be delivered to the same destination point where a half-empty truck is going. The driver will deliver several orders at one go, with their truck always remaining fully loaded.
Visibility provides a means to reach other primary targets (see infographic below).
How to achieve supply chain visibility using innovation
Business leaders often find ensuring transparency of their logistics a labor-consuming and overwhelming task. Many of them don’t want to disclose information about their business activities to remain competitive and avoid being judged by others. Moreover, not everyone has the tools to analyze and manage data. It is difficult to calculate the return on investment in transparency, so managers are reluctant to implement innovations.
However, the market and user requirements that logistics firms face making them act promptly and introduce technology into their processes. For this purpose, it is necessary to:
1. Conduct a digital transformation of your supply chain.
McKinsey expects enterprises to modernize 70-90% of their supply chains by incorporating push technologies and supply chain visibility software – cloud technologies, mobile solutions, AI algorithms, IoT, etc. – into their processes.
Thanks to innovation, logistics companies will be able to:
- plan their supply chains;
- track cargo dispatch and delivery;
- optimize warehousing operations;
- monitor inventory movement;
- predict events affecting logistics, and enjoy other advantages of supply chain visibility.
2. Organize your business data.
A supply chain generates lots of data. According to IBM, in 2017 alone, the sector received 50 times more data than in 2012. Moreover, 80% of this data was unstructured. Enterprises are looking for effective ways to analyze information in real-time; that’s why they reach out to IT service providers to develop AI-driven supply chain visibility software processing structured and unstructured data and providing insights.
3. Optimize costs
Managers are seeking ways to cut expenses on inbound, outbound, and reverse logistics. If you want to better understand how assets move and how to save on processes, supply chain software development companies offer the following tracking technologies:
- IoT sensors for monitoring the condition, temperature, and real-time location of objects, vehicles, equipment, or goods;
- RFID and NFC tags for tracking the movement of products in the warehouse and other facilities and controlling stocks;
- GIS and GPS to improve routes and calculate the approximate time of cargo arrival.
The above data can be collected in centralized logistics management software. This greatly helps a logistics specialist to assess the situation and plan a cost-saving strategy.
Supply chain transparency allows you to assess the efficiency of a particular section of your supply chain. It gives the possibility to reveal previously neglected shortcomings, more accurately calculate the delivery time, and find the shortest and safest route. Moreover, it gives businesses an edge over competitors and the capability to conduct business wisely, making effective decisions.
If you want to introduce technology into your supply chain to make it transparent and efficient, check the website, the supply chain software development company Andersen is here to help. The vendor employs 101 specialists who possess experience in logistics projects. These experts know how to make logistics processes more flexible and transparent with apps for order management, inventory, and transport or warehouse management, as well as supply chain visibility software. Andersen’s developers will help you save money, improve the quality of service, and increase profits.
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