Why Visibility and Transparency are crucial for Supply Chains in 2024?

As we step into this new year, traditional well-wishes are somewhat altered by persistent recent geopolitical events in Europe and the Middle East. Beyond disasters affecting populations and the environment, our supply chains are directly impacted by these major events. Whether it's the challenges in gas supply following the halt of Nord Stream 2, the difficulties in transporting vital raw materials like wheat, or the shifts in trade routes in the Red Sea due to cease-fire issues, tensions, and ship attacks—transparency has become crucial among the various partners involved in global manufacturing and distribution.

However, to boost positivity and inspire your team, let's see how having clearer insights in our supply chains and businesses can lead to four positive outcomes.

Effect #1: Early Problem Detection

Early detection of issues in modern supply chains heavily relies on traceability, now essential for businesses. A notable case was Nestlé's recall of 38 boxes of Guigoz 1st age infant milk in 2018 due to suspected bacterial contamination. This event highlights the concrete impact of transparency in swift identification through batch numbers and problem resolution within supply chains. Traceability plays a crucial role in tracking product journeys at each stage, providing essential visibility. In the pharmaceutical industry, for instance, it enables precise tracing of ingredient origins and manufacturing processes, facilitating rapid identification of at-risk products and corrective measures. Besides Nestlé, other companies like Amazon have leveraged traceability to enhance their responsiveness, investing in end-to-end traceability technologies to monitor and efficiently manage product flows. This allowed them to swiftly detect and resolve potential issues, minimizing disruptions in large-scale product delivery and ensuring swift deliveries to customers with very high promise fulfillment rates.

Effect #2: Greater Flexibility

Renowned environmentally responsible companies like Patagonia and Interface stand out for their leadership in supply chain transparency, emphasizing the versatile nature of collaborations. Their commitment to sustainable practices goes beyond purely commercial aspects, becoming a manifesto advocating responsible sourcing and environmentally friendly practices. This transparency permeates every supply chain stage, creating ethical ties resonating with consumers. It fosters a collaborative environment where suppliers aren't just business partners but integrated actors in a shared mission. This collaborative ecosystem offers remarkable flexibility, allowing agile adjustments to market fluctuations while upholding global ethical standards. For example, companies like Patagonia have deployed smart sourcing strategies, using increased transparency in their supply chains. By using open communication and data exchange services, they can rapidly identify alternative suppliers for a product in case of unavailability or delays. This transparency-driven flexibility enables them to maintain operational continuity despite unforeseen market challenges.

Effect #3: Swift Decision-Making with AI

Making decisions efficiently is not just about doing things quickly even when plans are changing; it also involves being precise and adaptable, especially when dealing with problems in the supply chain. Big companies like H&M Group are changing the way they make decisions by using real-time data analysis. H&M is a huge fashion company, with sales over 20 billion USD, and it's the second-largest in the world. They operate in more than 70 countries and have over 5000 stores. To manage this, they have a complex system for moving products around the world. Even with all their success, H&M has been making big changes, especially in how they handle their supply chain. They used to mainly sell things in physical stores, but now they also sell online. This shift has led them to work on many projects to improve their logistics, meaning how they move and manage products. One project focuses on making it better when you order something and when it gets delivered to you. They want to make sure they have enough of the products people like, and they're working on better ways to predict what people will want to buy due to AI specific programs with more than 200 scientists in their teams to analyze trends and react to worst-case scenarios. So, H&M is using smart ways to make their supply chain work well and provide good products to customers, whether they shop in a store or online.

Effect #4: Improved Stock Management

Transparency's impact on stock management, especially in crisis situations where overstocking tends to be the natural trend, is crucial. Recent events, such as ship delays or deviations on long journeys between Asia and Europe or the US, highlight the critical importance of optimized stock management—especially before the Chinese New Year period, when Asian production will nearly halt. Transparency in supply chains allows for a more precise analysis of safety stocks and better anticipation of potential delays. Employing innovative methods like Demand Driven Material Requirements Planning (DDMRP) proves essential in managing stocks in transit. Companies like IKEA during the COVID-19 crisis of 2020 demonstrated excellent stock management strategies, adopting DDMRP approaches to maintain adequate stock levels despite major logistic disruptions. Transparency, facilitated by aggregating data from their various IT systems, enabled them to better respond to ship delays and dynamically adjust their stock levels to minimize interruptions in product availability. It also allowed for smarter reallocation of stocks meant for physical stores to the website during times when visiting stores wasn’t feasible. As a result, Ikea was one of the first companies to react on December 21st about the Red Sea disruption potential problems and their impact on missing items and empty shelves from February 2024.

Conclusion:

For every Supply Chain manager, it's about juggling hope for the best-case scenario and preparedness for the worst, as this is the essence of managing flows in contexts where certainty takes a back seat. It's no surprise that Supply Chain is a function gaining increasing strategic importance within companies and a near-permanent presence in executive committees and boards of directors. However, several statistics raise questions, notably from Deloitte's February 2023 study, revealing that only 13% of companies have already reaped the benefits of real-time end-to-end visibility within their operations—a striking reminder of the gap separating us from a world where transparency is a norm rather than an aspiration. How then can we expect Supply Chain directors to lead with precision without providing them with adequate tools? Faced with repeated global uncertainties, adopting transparency in supply chains becomes not only a necessity but an imperative for a more peaceful future. It is urgent for companies to react and start working on the topic, recognizing its critical role in ensuring resilience and agility in the face of evolving challenges.

#supplychain #endtoendvisibility #visibility #controltower #strategy