Supply chain needs its very own x-ray visibility tool. I call it the N-Tier visibility tool.
An analogy from the investment industry may help. Heeding the advice: “diversify your investment portfolio to minimize risk”, people began owning dozens of mutual funds to—you guessed it—diversify their investments. Yet when the market downturn happened, everyone realized that the multitude of their mutual funds were owning the same underlying stocks.
Fortunately, there’s a tool called Instant X-Ray created by MorningStar. This allowed visibility into the underlying stocks of mutual funds, truly diversifying people’s portfolios.
Well, what if we had something similar for supply chains?
N-tier visibility for supply chains
Visibility in the supply chain is a problem. Most companies only have visibility up to their Tier 1 suppliers—and getting to this point in itself is hard. Why? Because supply chain data is fragmented across multiple systems, geographies, and business groups. Piercing beyond the veil of Tier 1 suppliers is even more of a challenge. For companies that do manage to map part of their multi-tier supply chain, it’s a one-time exercise that quickly gets obsolete as suppliers go through acquisitions and divestitures, add or subtract products, open or close manufacturing sites, and so on.
The good news is that with new technology and systems, it’s possible to map a multi-tier supply chain—along with its associated data of locations, suppliers, products, and transportation lanes. This new multi-tier supply chain network ensures that the data is in sync on a continual basis.
What new insights would this “N-tier visibility” tool provide?
- It would let you know if there’s a critical supplier buried in the supply chain that multiple Tier 1s are buying from, avoiding a false sense of diversification.
It would identify trends or patterns based on N-tier visibility. (e.g., Are all suppliers of a specific component located on a coast in Indonesia or Japan?)
It would help you model the cost structure and drivers for Tier 1 suppliers, and negotiate a better agreement for both parties.
It would analyze your Tier 1 delivery performance correlation to its supply base structure.
It would allow you to see if your end-to-end supply chain responds quickly enough to disruptions or changes in demand.
N-tier visibility is a game changer in supply chain management, providing a new level of insight that was simply not possible before. Companies that have this N-tier visibility will gain a significant competitive advantage in terms of cost structure, responsiveness, and operational execution.
In simpler words, supply chain needs N-tier visibility.
It’s good to see supply chain management getting more attention in higher education. Supply chains are both more complex and more important than ever before. We will see a major shift towards supply chain management as a core competency for senior executives at Fortune 1000 companies. Here are recommendations for students and new grads looking to get their careers off to the right start. In Part 2, I’ll be sharing recommendations for employers.