A Clear Goal
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Getting product from Point A to Point B as quickly and cheaply as possible remains the principal goal of most logistics managers. But knowing what happens between those two points — achieving end-to-end visibility — has become the final frontier of supply chain management.
Strict new food safety laws that focus on traceability, global economic and social conflicts, labor disputes and fragmented consumer demand are just some of the factors that are making supply chain visibility a business imperative.
Meanwhile, visibility is no longer just about locating products at different points along the supply chain or tracking them from beginning to end. Instead, it’s about generating and analyzing high quality data that can minimize risks and disruptions impacting global supply networks.
In food, it is also about the condition of temperature-sensitive products at every point from farm to shelf. It’s about upstream and downstream traceability of individual products and ingredients, the ability to perform targeted recalls and, at the center of it all, improving data flow between trading partners.
To a degree, the need for greater visibility in the supply chain is a natural consequence of globalization. “We don’t compete as individual businesses anymore,” Martin Christopher, emeritus professor of marketing and logistics at Cranfield School of Management in England, wrote in a recent article for online research journal knowledge@wharton. “We compete as supply chains.”
The winners, he notes, aren’t necessarily the companies that have the best products and services, but the ones that have the most efficient supply chains.
Connecting the dots
“Everyone wants the nirvana of a single view of inventory across their extended network,” says Tom Kozenski, vice president of product strategy for RedPrairie. “But you need to connect the dots to get everything in one spot, and that requires collaboration and integration.”
Some new order fulfillment models focused on “omni” or all-channel retailing make it “essential to have inventory visibility across the entire network,” he says. “Also, we have a number of retailers sourcing product overseas and they have a keen interest in monitoring it as it moves forward to domestic sites. They also want to influence what their suppliers are making based on changes in consumer demand.
“You can’t do any of this without some understanding of what inventory you have positioned at every point in the supply chain,” Kozenski says.
Another major initiative may be taking place in the apparel industry where leading retailers, manufacturers’ trade associations and technology providers are collaborating to improve supply chain visibility through item-level RFID technology.
A number of high-level retailers have extolled the virtues of RFID for boosting inventory accuracy and reducing out of stocks. Cynthia DiPietrantonio, COO of The Jones Group, notes, “It’s all about speed-to-market today, especially in the apparel and footwear industry with its seasonality and trends. Having accurate, real-time inventory views means that suppliers and retailers can provide customers with the right products in the right stores and at the right time.”
Food chain visibility was highlighted in the FDA Food Safety Modernization Act, which became law in January. A major provision calls for an improved traceability system for both food and ingredients. Pilot projects are slated to begin by the fall, but private sector initiatives are already taking place: Santa Clara, Calif.-based Intelleflex uses RFID tags and scanners to trace pallets of food back to their source and to monitor the location and core temperatures of pallets used to transport perishables.
“If you look at the food industry from a global perspective, a lot of progress has been made in supply chain visibility over the last five years,” says Bjorn Weber, director of retail technology research for Planet Retail in Frankfurt, Germany. “In the E.U., traceability for imports has been in effect since 2005. It hasn’t been realized 100 percent but it has pushed the implementation of technology that enhanced visibility.”
Similar things have happened in North America: Retailers are increasingly demanding audits by the Global Food Safety Initiative, a non-profit organization established in 2000.
Another driver of increased visibility in the supply chain has been the expansion of fully automated distribution centers. Weber cites Kroger, Sobey’s in Canada and Mercadona in Spain, where relatively new facilities standardized labeling and EDI capture.
“We see automated warehouses as one of the major areas for additional investments by retailers,” he says. “It’s ready to be deployed even for smaller format [stores] …. These distribution centers don’t need RFID, but they need accurate information about which goods are on which pallets, and the latest information on when goods should arrive at the facility.”
‘One central system’
Collaborative efforts that can result in greater supply chain visibility are moving forward.
“We now see major retailers like Carrefour and Auchan doing what Wal-Mart has been doing for some time in terms of data sharing with suppliers,” Weber says. “We see more extranets offering POS data, as well as forecasting data to help suppliers better plan their production and logistics.”
Retailers continue to invest in technologies like RFID and GPS-based tracking systems. “Originally, this was a sustainability initiative driven by retailers to reduce road mileage,” Weber says. “But a by-product of optimizing truck routes has been greater visibility in the entire supply chain.”
Still, Weber believes that complete visibility won’t be achieved until a single network system prevails. “They are working on one central system for traceability of produce in the U.S.,” he says. “The food industry is still looking for solutions that combine either a central database or a network that can link existing databases that would hold all tracking information.
“There’s still a lot to do in cross-company visibility,” Weber says, “but almost all initiatives that help trace food from their source in order to locate problems also help companies plan better and reduce inventories.”
Another important factor: bringing small and medium-sized suppliers into labeling and data transmission compliance. “You don’t just deal with P&G, Unilever and General Mills, but maybe 2,000 other suppliers that have to be in compliance in EDI and labeling standards,” Weber says. “The issue is that Kroger doesn’t want Wal-Mart to see how many items it’s receiving from Unilever. But organizations like GS1 could easily set up databases that make track-and-trace 100 percent possible if companies are willing to share data with an industry wide organization or with another service provider.”