Visibility in today’s logistics is an issue on the agenda of every supply chain manager. The awareness of the importance and future relevance of the subject is given, but in reality the approach still turns out to be a complex project. As part of our supply chain visibility blog post series, the following use case is intended to illustrate a practical approach and specificity of supply chain visibility with the value it brings to logistics.
Exception handling with supply chain visibility
Supply chain visibility (SCV) provides manufacturers and retailers with an overview of the physical location of their goods, allowing them to flexibly control and route their supply chain. In standardized and automated supply chains, it is often assumed that an increase in visibility doesn’t significantly improve the logistics processes. But the value of SCV in terms of real-time track and trace is evident when unforeseen incidents force supply chains to be realigned.
Finished vehicle logistics
A fictive major car manufacturer produces its vehicles in its European plants for the global market. Transport to the sales markets is carried out by land, rail and sea, including distribution centers, storage yards, ports and border controls. Several business partners are involved in these processes. Vehicle tracking is realized item-based and event-triggered, so that the car manufacturer receives a trace notification in its system when a vehicle leaves or arrives on a physical location. Between these steps, the manufacturer is blind in its own supply chain and can only calculate with estimates. In the daily business a manageable deviation of approx. 5% occurs where the system-shown location does not meet the actual physical location of a car. These deviations can be caused by missing system inputs, wrong data interpretation or miscommunication and are normally straightened automatically during the further course of the supply chain.
A “Stop Shipment” in the automotive industry
Have you ever wondered why you hear so few about mistakes happening in complex productions such as the automotive industry? You might say, the productions are highly automated, technically precise and routine. This is true, of course, but mistakes still occur frequently though they are not communicated in public. To withhold potential problems from the customer, there are so-called “Stop Shipment notifications”. Vehicles from faulty batches are already stopped in the supply chain and repaired where they are physically located at that moment. Thereby the customer in the end gets delivered a perfect car.
Faulty batches can affect a few to thousands of vehicles and occur several times a year. At the moment of a Stop Shipment notification the manufacturer’s logistics team needs to locate all vehicles via the system. The corresponding business partners are informed to stop the vehicles from continuing their shipment. A technical team will arrive at the affected sites to inspect the vehicles, repair them in case of a defect and then release them. Only released vehicles are allowed to be transported onward. The manufacturer relies thereon to locate all vehicles via the system, that each business partner has an overview and control over its stock and that information on stopped, repaired and released vehicles is shared quickly and correctly.
When automated processes need to be controlled manually…
It is hard to believe that processes on a sensitive topic such as a Stop Shipment are run manually with lists and emails. Also, it is hard to believe that a product like a vehicle if reported as untraceable. But those are incredible and also expensive facts for manufacturers. The further a vehicle has moved on its supply chain, the more expensive gets the handling during a Stop Shipment. Any deviations from the normal process prolong the execution and increase the workload for the manufacturer and the business partners. In the worst case, single vehicles are even transported to the car dealership despite a Stop Shipment notification, and the end customer gets affected directly. The large number of participants in a Stop Shipment handling and their relationship to each other in the manual exchange of information leads to complexity and a high susceptibility to errors, as following figure demonstrates.
Fig. 1. Manually managed processes increase complexity and error-proneness
Due to the high impact every single car movement can have in this case, it is clear that the usual 5% deviation between system data and physical locations of the vehicles is no longer acceptable.
Small steps to visibility
The manufacturer in our fictive example decided to equip a part of its production, namely the models of its luxury lines, with GPS trackers. The investment costs can be passed on to the customer as an additional service of anti-theft protection after the sale. The GPS data is saved in a cloud solution and complements the existing system data. Through a mass search the position of each car can be visualized based on the vehicle identification number. The measurable improved results and the high profit margin of the products justified the visibility investment already with the first Stop Shipment after introduction. The reduction in effort and costs for all parties involved at the completion of the stop shipment could be estimated at almost 15%. Thereby also the time of the release of the last vehicles was reduced by more than two weeks, which massively counteracted potential customer complaints. Apart from Stop Shipment expenses, the increased visibility brings an advantage in the operational business. System-side differences can be resolved effectively and quickly, which results in an increased precedent of the supply chain.
This fictive example shows how SCV provides a lucrative strategy in dealing with exceptional states and additional work and expenses. These advantages also benefit the operational business. Triggers for the need for SCV can also arise in highly automated processes. It is advisable to illuminate a supply chain also with regard to contingencies, to not be exclusively dependent on automated processes working. This allows your supply chain to flow smoothly even in the event of incidents.