Last week we put on a webinar on the topic of "Eliminating Supply Chain Complexity". Even before we presented the webinar we had feedback that the topic was misleading because "the global supply chain is inherently complex and it is not possible to eliminate the complexity from it". Well, that was quite a challenge.The global supply chain is inherently complex. Global supply chains are more complex than domestic supply chains because on top of all of the issues that exist domestically there are additional factors that must be addressed, such as, geopolitical issues, time zones, language, currencies, language, culture, and customs regimes. Any one of these factors affects complexity geometrically when layered on to of the normal domestic supply chain challenges. For organizations that participate in global trade managing and eliminating the complexity has potentially very large operational and financial rewards.Root Causes of ComplexityIn order to understand how complexity can be eliminated from the global supply chain, it is important to understand the root causes of that complexity. There are 7 root causes of global supply chain complexity:
- Lack of Holistic Global Supply Chain Perspective: The over-riding cause for global supply chain complexity is that it is not addressed from a holistic perspective. While organizations have embraced the idea finances must be managed at a global level and acquire ERP solutions to provide that capability, they have not understood the intrinsic value of a holistic approach to its global supply chain. Organizations are structured in functional silos. However, these silos are dependent on other silos for upstream and downstream information to support their specific processes.
- Volume: Global Supply Chains are complex structures. On any specific lane, there are up to 30 processes that need to be managed to move product from source to final delivery point. Of these 30 processes, 5 to 6 are critical tracking points, i.e. Ex Factory, ETD, ETA, Free Time Expiry, Entry Release time, Equipment Terminal Pickup, Equipment Terminal Return, that are important to ensure execution is being affected to plan. To put some perspective on the issue and impact of volume, we used the example of what it takes to execute proper track and trace. The sheer volume involved in managing track and trace on a global supply chain is expressed in person years. For a relatively modest importer/exporter that manages 3,000 international POs or SOs, 5000 shipments, 3000 customs entries, 5000 local deliveries, and 5,000 warehouse receipts it would require 35,500 transactions to track the shipments. If each tracking transaction takes 10 minutes it would require 355,000 minutes or 845 days, or 169 weeks, or 3+ person years of work. The bottom line is that if there are no systems in place to manage track and trace it just isn't going to be done effectively and proactively.
- Process Silos: Operations is divided into work silos based on the organization's requirements and objectives. In the global supply chain, the two basic operational functions are logistics and trade compliance. These two operational functions often have very different, and at times competing objectives. These lines of reporting often are very different, Trade compliance reports to operations and trade compliance often reports to legal or finance. To add to the complexity of the environment, there are many other disconnected functions that depend on information from these two functions - product development, sourcing, purchasing, replenishment, inventory planning, marketing, production, sales, and warehousing. Overcoming the communication barriers that silos create is a major challenge for most organizations, and it exacerbates the complexity in the area of global trade
- Information Silos. The siloing of information parallels the siloing of processes. However, because information is siloed, more often than not it is maintained on spreadsheets or in other unstructured documents, and the result is it is difficult to aggregate. Unstructured information by definition is very difficult to manage and labor intensive. This lack of strong processes and restricted information limits the ability to collaborate internally and communicate externally. Sub-optimal information control results in global supply chains, that while functioning, are sub-optimally managed and controlled.
- Visibility. Knowing the status of a product in the global supply chain is a critical component of managing inventory at both the local and global level. Visibility graphically provides the positioning of a product in real, or near real, time on a continuous basis. Visibility is a cornerstone for streamlining the logistics and trade compliance processes because it provides important information to the user quickly and on-demand. But, most organizations rely on 3rd party systems to provide the visibility capability and are not able to have a comprehensive organizational view of inventory across their supply networks. This depreciates the opportunity that visibility offers.
- Context: Closely aligned with visibility is visualization. Visualization provides the graphical context to the data received from the supply chain providers. Most companies have no visualization capabilities because visualization is built on visibility competence. The lack of visualization limits the decision-making capabilities of the logistics and trade compliance teams and affects their ability to influence and optimize activity in the global supply chain.
- Analysis. Reporting and analytics are key to developing long term supply chain strategies, and these elements are dependent on accurate and timely information. Too often reporting and business intelligence is outcomes from information that is aggregated manually from disparate systems and manipulated off-line in spreadsheets. The combination of aggregating disparate sources of information manually and managing the outcomes in spreadsheets is fraught with high levels of error which results in reports that often do not align with each other and reduces the validity of the information.
Eliminating Complexity from the Global Supply Chain - 2 stepsThere are two steps that need to be executed to eliminate complexity from the global supply chain.Process Review, Analysis, and Change The key to eliminating complexity is to have well understood and well-defined procedures and processes in place. While it is better to have these formalized, it is not essential. For organizations of any size documenting the procedures and related processes go a long way to ensuring that these can be aligned and duplication removed. The broader and more holistic the processes can be aligned across the organization's import/export activities the more effective the organization will be in eliminating complexity from its global supply chain. The importance of the breadth of analysis to the alignment of the procedures and processes should not be underestimated because of the interconnected nature of the global supply chain activities. And while streamlining processes will go a significant way to eliminating complexity in the global supply chain it alone can only achieve so much if information management is not streamlined and aligned with the processesAutomation Once procedures and processes have been identified and aligned the areas of the global supply chain can be automated effectively. For almost any global organization of any size, automating the import and export processes will have immediate and highly beneficial outcomes. The more holistic the implementation in dealing with the purchase-to-receipt (import) or sell-to deliver (export) the more effective the results.Each of the seven reasons for complexity is addressed with automation. However, the degree to which automation is effective in eliminating global supply chain complexity depends on the scope of the implementation. The more holistic the system and the implementation the greater the impact and the less the resulting complexity. The reason for this is - the supply chain is an integrated solution. Each component is directly affected by the other. While there are discrete activities, they are all systemically linked to the other, and the more the global supply chain solution can deal with the whole the more effective it is in eliminating complexity.Is Eliminating Global Supply Chain Complexity Possible? - The answer is a resounding YES!While the answer is Yes, it is not easy. The difficult part is that It takes understanding and commitment to begin the process. It is challenging to manage the process definition because it requires leadership, knowledge of the global supply chain, and understanding.However, once the processes are defined, there are automated solutions that can provide the holistic infrastructure and support to eliminate most complexity.About 3rdwave:3rdwave simplifies global trade through automation. 3rdwave is a GTM platform that delivers total global supply chain visibility, minimizes manual data entry, streamlines business process, and provides contextual information enabling its users to make informed decisions to reduce global supply chain risk. It's a cloud-based platform that requires minimal IT resources for quick implementation. 3rdwave ensures that companies meet the highest levels of GTM execution and Trade Compliance conformance.Ned Blinick is Chief Product Officer of 3rdwave.co. He has been involved in global trade for too many decades and he loves making the global supply chain simpler for everyone. If you would like to engage with Ned he would really enjoy the opportunity of communicating with you or your boss. He can be reached at (416) 510 8800 ext 234 or at firstname.lastname@example.org.