Using IT to Gain Visibility into the Supply Chain

As mentioned in “A Different Game” published in The Economist, businesses are moving towards “analyzing real-time information flows.” By being able to track each individual piece of inventory through IT systems that allow for increased visibility into the supply chain, businesses are better able to quickly respond to changes in the business environment. In a 2004 interview with the New York Times, Bob Stoffel, Senior Vice President of the UPS Supply Chain group, discusses the benefits of utilizing information technology to gather real-time data in order to gain visibility into the supply chain – a practice which he believes can yield a number of benefits.

Specifically, Stoffel mentions that increased visibility into the supply chain allows businesses to mitigate risks that are related to uncertainty in order to best meet the customer’s needs. He speaks to the benefits that information technology can have in making an organization more proactive rather than reactive. In a situation where a Long Beach port was backlogged around Christmas due to labor and truck shortages, UPS was able to divert the transportation of their goods through alternate channels because they already had a contingency plan in place to deal with this disruption. By being able to know what is in each container and the timeline of each customer, UPS is better able to make decisions that allow them to provide a certain level of customer service. In addition to being able to use real time data to understand and manage various suppliers, transportation partners, and trade partners, Stoffel mentions that the real time data has helped UPS to avoid international shipping delays that can occur in U.S. Customs. By sharing data with U.S. Customs via an electronic data exchange, UPS is able to alert Customs of shipments before they even arrive. This allows UPS to minimize the time that shipments spend in Customs. Overall, it seems that increased visibility allows organizations to make better sense of processes. Ultimately, this allows the organizations to make changes to problematic processes, allowing them to become more efficient and meet customer need.

In reading about how organizations utilize information technology to better understand processes I was reminded of some of the concepts involved in Lean methodology and the Toyota Production System. Harnessing the power of information technology may be a means of looking into the supply chain process, identifying bottlenecks or other efficiency issues, and solving these problems in an informed manner. Is it possible that information technology lends itself to quality improvement initiatives such as Lean and TPS? Taking the idea even further - could IT systems be created to specifically meet the data collection needs of organizations seeking to incorporate Lean and TPS into their organizations?

Sources:

A Different Game. (2010). The Economist.

Holstein, W. (2004) Guarding the Flow of Global Production. The New York Times. Retrieved from http://www.nytimes.com/2004/12/05/business/yourmoney/05advi.html?_r=0