What is Supply Chain Visibility?
Supply chain visibility (SCV) refers to the transparency of tracking a product from initial shipment to final delivery. The goal is to make data available to everyone involved, even the customer, which can strengthen and improve the overall supply chain.
Complete visibility means that everyone involved in moving a product from A to B would have access to the same data and information at any point.
SCV is made possible through software platforms and solutions that allow users and companies to connect and access the same information.
Supply Chain Visibility Technology, Software & Models
RFID Tags & Technologies
Radio frequency identification (RFID) technology is used by most global apparel retailers (online and brick-and-mortar), as well as grocery stores and big box stores.
RFID tags must be encoded before they can be read. This identifies a specific item, not the product as identified by SKU, UPC, or EAN — but by a code called an Electronic Product Code (EPC). Companies use a proprietary RF-encoding model that stops you from reading nearby RFID codes, which ensures that inventory isn’t cross-read with other products.
The most common standard for global RFID is managed by GS1 (they also manage the Electronic Product Code Information Service, or EPCIS).
RFID technology allows you to track and trace down to the item level along its retail journey. This includes dates, times, physical locations, and event type (such as whether a product is shipped, received, moved, sold, returned, etc.). This also includes movements up the supply chain. For example, a returned item can be tracked from the point of sale to the backroom to another store or to a discount compartment where it can then be tracked to an outlet store.
In a recent Retail Info Systems article, the chairman of Nike said, “RFID gives us the most complete view of our inventory that we have ever had. It’s quickly becoming the most precise tool in our arsenal to meet an individual consumer’s specific need at the exact right moment.”
Many companies such as Macy’s, Victoria’s Secret, Adidas, and Under Armour have also started using RFID technology. Pharmaceutical companies have also long been using item-level supply chain tracking, which is essential in that industry since shrinkage (loss of inventory due to theft, errors, etc.) can result in illegal drugs falling into the black market.
Why is supply chain visibility important? According to a report from GS1, “inventory accuracy improved by over 50% with retailers reporting 93-99% accuracy with RFID.” The result? “This drove a sales uplift of between 1.5 and 5.5%.”
RFID technology can help businesses accurately and cost-effectively track inventory on a daily, weekly, or monthly basis.
Vertically Integrated Retail Model
Vertical integration refers to a company owning the entire process from manufacturing to sale. “Vertical integration benefits companies by allowing them to control the process, reduce costs, and improve efficiencies,” according to Investopedia. “However, vertical integration has its disadvantages, including the significant amounts of capital investment required.”
Open Supply Model
This is a traditional and common model in which multiple suppliers are involved and the RFID tags must be encoded per a standard (for example, GS1), which ensures that each supplier’s items can be differentiated from others.
For example, the GS1 Electronic Product Code Information Services (EPCIS) standard provides global, item-level uniqueness for track-and-trace capabilities through any retailer’s supply chain.
Adhering to a standard also ensure that all manufacturers, distributors, and retailers can interact with the supply chain effectively and securely. Many department stores, online retailers, and grocery stores follow this open supply model.
Is There Potential Difficulty with Achieving Full Visibility?
In order for total supply chain visibility, all involved partners must successfully use the SCV technology, model, or platform. That means that everyone needs to collaborate, plan, and communicate efficiently and effectively for the system to work.
Right now, adhering to the GS1 standard is a move that some businesses, especially retailers, haven’t made yet, especially since it isn’t required. “GS1 standards create a common foundation for businesses by uniquely identifying, accurately capturing and automatically sharing vital information about products, locations, assets and more,” according to the GS1 website.
10 Benefits of Supply Chain Visibility
Even though some retailers have been slow to implement supply chain visibility, there are numerous benefits, including:
- A positive effect on a company’s bottom line. Data that’s derived from RFID and EPCIS technology are essentially “breadcrumbs” that follow an item through the entire supply chain. This visibility can unveil a host of data and analytics, which can truly transform a business and result in a much more positive bottom line.
- Increase speed to market. A connected, transparent network often means a more efficient one, which means your products can hit the shelves faster.
- Reduce costs. Supply chain visibility often means less disruptive costs, especially when it comes to customer service and delivery options, which means businesses can often use their time more efficiently. You can also track defective products that are meant for outlet stores.
- Help manage risk. Since you can more easily track and trace products, you’ll have a better handle on inventory, which can help mitigate risk.
- Greater data access. With total visibility comes greater access to data, which allows you to develop more customer- and product-specific information. This can improve all facets of a company, including planning, reducing and avoiding costs, and increasing efficiency and customer service operations.
- Strategize more effectively. Visibility can enhance operations and the ability to strategize more effectively since every aspect, from manufacturing to shipping, is transparent.
- Increase customer satisfaction. Total supply chain visibility allows you to be proactive, see what’s working (and what isn’t), and possibly allow you to enhance or modify your delivery options based on data and analytics.
- Reduce shrink. Effective supply chain visibility allows retailers to gain better control of performance metrics, including the reduction of shrink.
- Provide a real-time picture of demands and supplier inventory levels. Instead of searching for information, you’re able to see in real time the supply and demand of your products and adjust accordingly.
- Be better equipped to negotiate. Visibility allows you to have more information so that you’re better equipped to negotiate about product costs, timing, and product placement.
Future of Supply Chain Visibility
While supply chain visibility isn’t a regulatory requirement for retailers, it’s a beneficial system worth considering, especially since the data, analytics, and machine learning derived from RFID technology and other solutions can provide valuable insight into customer patterns and behaviors. Retailers who aren’t committed to an RFID strategy or another solution may find themselves falling behind when it comes to maintaining accurate inventory or responding to customer needs.
Supply chain risk management is driven by supply chain visibility, and this can only occur when every item (and associated movement) is tracked along the supply chain.
With advancements in technology and customers embracing the digital world, it makes sense for retailers to implement a solution that not only provides valuable data and analytics, but also allows for a more comprehensive and efficient business operation.
Enhance & Improve with Hitachi Solutions
Effective supply chain visibility starts with a robust digital solution that incorporates every part of the retail operation. At Hitachi Solutions, we have been building custom solutions for retailers of all types and sizes who are looking transform their operations. To transform your supply chain visibility, contact our team today.