A View from Above

A View from Above: Global Supply Chain Visibility in a World Gone Flat

September 2007

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Executive Summary “With the intensive growth of our operations in the past 4 years, it has become extremely critical for us to be able to not just track the supply chain milestones but enable the cross-departmental visibility within the company. Our global supply chain has become very complex and we need to have the ability to analyze performance at different stages and get to the root of the problems. Our goal is to be able to use the visibility data to achieve strategic improvement in our global operations.”

~ Brad Burrows, Manager of Logistics at Woodgrain

Millwork Inc.

Many companies still do not have timely visibility into the critical processes involved in global supply chain management, despite the heightened attention to this area in recent years. This often prevents companies from accessing information quickly enough to be able to use it for decision making. Companies that do track enough milestones often suffer from poor data quality and factual inaccuracies in forecasts and reports. For those that track the key supply chain events and have advanced visibility strategies to support supply chain decision-making, it is critical not to overwhelm internal stakeholders with information but to instead provide them with the tools to extract the best possible intelligence from the data they have – while keeping the amounts of data manageable. Companies must move from merely tracking their supply chain events to performing advanced analysis in order to drive profound changes in their supply chains.

Best-in-Class Performance To determine the Best-in-Class (BIC) companies in this study, survey respondents were evaluated based on their performance in each of the following metrics:

1) Perfect orders delivered to international customers (91% complete and on-time)

2) Perfect orders received from international suppliers (88% complete and on-time)

3) Total landed costs (74% reported a decrease)

4) Lead time variability from international locations (66% reported a decrease)

Competitive Maturity Assessment Best-in-Class companies are 55% more likely than all others to be using some kind of automated visibility data analysis. Over the past two years, Best-in-Class firms (approximately 20% of the top performers) have been:

• 2.5-times as likely as Industry Average and 31-times as likely as Laggards to have reduced lead times from international locations

Fast Facts

Best in Class companies are twice as likely as Laggards to be currently using the following information technology systems to support global supply chain visibility:

√ Transportation carrier tracking system

√ Visibility system from a freight forwarder

√ Visibility system from a 3PL

√ Cargo portal

√ On-premise (license) commercial visibility system

• 1.6-times as likely as Industry Average and 2.4-times as likely as Laggards to have reduced inventory levels

• 2.4-times as likely as Industry Average and 6-times as likely as Laggards to have reduced inventory carrying

• 2-times as likely as Industry Average and 11-times as likely as Laggards to decrease the number of GTM documentation issues / discrepancies

• 2-times as likely to have increased global supply chain budget accuracy

Required Actions In addition to the specific recommendations in Chapter Three of this report, companies should use this report to evaluate the software tools that have helped Best-in-Class achieve significant benefits and then incorporate those tools and best practices into their short- and long-term visibility strategy for the global supply chain.

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© 2007 Aberdeen Group. Telephone: 617 723 7890 www.aberdeen.com Fax: 617 723 7897

Table of Contents Executive Summary .....................................................................................................................................2

Best-in-Class Performance ..................................................................................................................2 Competitive Maturity Assessment.....................................................................................................2 Required Actions ...................................................................................................................................2

Chapter One: Benchmarking the Best-in-Class ....................................................................................4 Key Drivers for Improving Visibility ..................................................................................................4 The Maturity Class Framework..........................................................................................................4 Best-in-Class Competitive Advantage: Benefits Achieved............................................................5 The Best-in-Class PACE Model ..........................................................................................................6 Benchmarking the Current Levels of Visibility................................................................................6 The Importance of Data Quality........................................................................................................7

Chapter Two: Benchmarking Requirements for Success ...................................................................9 Competitive Assessment .....................................................................................................................9 Using Visibility Data Analytics to Become Best-in-Class ............................................................11 Visibility Leaders Show Better Supply Chain Agility ....................................................................11 Technology Landscape........................................................................................................................12 Quantifying the Benefits of Visibility Technology.........................................................................14

Chapter Three: Required Actions ........................................................................................................15 Laggard Steps to Success ...................................................................................................................15 Industry Average Steps to Success ..................................................................................................15 Best-in-Class Steps to Success..........................................................................................................15

Appendix A: Research Methodology ...................................................................................................17 Appendix B: Types of Visibility Technology .......................................................................................18 Appendix C: Related Aberdeen Research ..........................................................................................20 Featured Underwriters.............................................................................................................................21

Figures Figure 1: Top Five Drivers for Improving Global Supply Chain Visibility .......................................4 Figure 2: Online Visibility into Four Critical Processes ......................................................................6 Figure 3: Global Supply Chain Events Currently Monitored..............................................................7 Figure 4: Data Accuracy for Monitored Events ....................................................................................8 Figure 5: Visibility Data Analysis Currently Performed and Planned .............................................11 Figure 6: Global (Physical) Supply Chain Agility..................................................................................12 Figure 7: Visibility Software Systems Used for the Global Supply Chain ......................................13 Figure 8: Available Software Functionality for Global Visibility.......................................................13 Figure 9: End-to-End Savings ...................................................................................................................14

Tables Table 1: Firms with Top Performance Earn Best-in-Class Status .....................................................5 Table 2: The Best-in-Class PACE Framework ......................................................................................6 Table 3: The Competitive Framework .................................................................................................10 Table 4: The PACE Framework Key .....................................................................................................17 Table 5: The Competitive Framework Key.........................................................................................17 Table 6: The Relationship Between PACE and the Competitive Framework .............................17 Table 7: Profiles of the 10 Major Types of Visibility Technology ...................................................18



Chapter One: Benchmarking the Best-in-Class

Fast Facts

√ Best in Class companies are significantly more likely to have reduced lead times from international locations, inventory levels, and inventory carrying costs over the past two years

Despite the heightened attention in recent years, many companies still do not have timely visibility into the critical processes involved in global supply chain management. This often prevents companies from accessing information quickly enough to be able to use it for decision making. Companies that do track enough milestones, often suffer from poor data quality and factual inaccuracies in forecasts and reports. For those that track the key supply chain events and have advanced visibility strategies to support supply chain decision-making, it is critical not to overwhelm internal stakeholders with information but to provide them with the tools to extract the best possible intelligence from the data they have – while keeping the amounts of data manageable. Companies must move from merely tracking their supply chain events to performing advanced analysis in order to drive profound changes in their supply chains.

Key Drivers for Improving Visibility Improving on-time delivery performance remains the top driver for improving global supply chain visibility, compared to one year ago (Figure 1).

Figure 1: Top Five Drivers for Improving Global Supply Chain Visibility

38%

38%

41%

63%

72%

0% 10% 20% 30% 40% 50% 60% 70% 80%

The need to proactively alert customers of lateshipments

Just-in-Time and Lean programs causing shorterdelivery windows

The need to improve ability to make mid -coursecorrections

The need to reduce lead times and lead time

ively alert customers of lateshipments

Just-in-Time and Lean programs causing shorterdelivery windows

The need to improve ability to make mid -coursecorrections

The need to reduce lead times and lead timevariability

The need to improve on -time delivery performance

% of all respondents Source: Aberdeen Group, September 2007

The Maturity Class Framework To determine the Best-in-Class, Industry Average, and Laggard companies in this study, survey respondents were evaluated based on their performance in each of the following metrics:

• Perfect orders delivered to international customers (complete and on-time)

• Perfect orders received from international suppliers (complete and on-time)

• Total landed costs

• Lead time variability from international locations




The weighted cumulative score was assigned to each respondent and served as a basis for the maturity level classification. The average performance in these metrics used for the definition is presented in Table 1.

Table 1: Firms with Top Performance Earn Best-in-Class Status

Class Average Class Performance

Best-in-Class: Top 22% of

aggregate performance scorers

• Perfect orders delivered to international customers (complete and on-time) - 91% • Perfect orders received from international suppliers (complete and on-time) - 88% • Total landed costs over the past two years: decreased-74%; increased-6%; remained the same-20% • Lead time variability from international locations over the past two years: decreased - 66%; remained

the same - 34%

Industry Average: Middle 48% of


• Perfect orders delivered to international customers (complete and on-time) - 83% • Perfect orders received from international suppliers (complete and on-time) - 79% • Total landed costs over the past two years: decreased-17%; increased -53%; remained the same-30% • Lead time variability from international locations over the past two years: decreased 17%; increased -

24%; remained the same - 58%

Laggard: Bottom 30% of


• Perfect orders delivered to international customers (complete and on-time) - 69% • Perfect orders received from international suppliers (complete and on-time) - 65% • Total landed costs over the past two years: increased-68%; remained the same-3%; don't know-29% • Lead time variability from international locations over the past two years: increased-63%; remained the

same-15%; don't know–22%

Source: Aberdeen Group, September 2007

Best-in-Class Competitive Advantage: Benefits Achieved Best-in-Class firms have made more progress in improving several important metrics, which puts them at a competitive advantage compared to their lower-performing peers (Industry Average and Laggard companies).

Estimating improvements over the past 2 years, Best-in-Class firms have been:

• 2.5-times as likely as Average and 31-times as likely as Laggards to have reduced lead times from international locations (62% versus 25% among Industry Average and 2% among Laggards)

“[We use] improvement in supply chain inventory position and percent on-time shipment delivery (inbound and outbound) [to quantify the benefits of using global supply chain visibility tools].”

- Mid-Market CPG Company in Asia/Pacific

• 1.6-times as likely as Industry Average and 2.4-times as likely as Laggards to have reduced inventory levels (59% versus 37% among Industry Average and 25% among Laggards)

• 2.4-times as likely as Industry Average and 6-times as likely as Laggards to have reduced inventory carrying costs (47% versus 20% among Industry Average and 8% among Laggards)

• 2-times as likely as Industry Average and 11-times as likely as Laggards to decrease the number of GTM documentation issues / discrepancies (32% versus 15% among Industry Average and 3% among Laggards)

• 2-times as likely to have increased global supply chain budget accuracy (37% versus 18% among Industry Average and 16% among Laggards)




The Best-in-Class PACE Model Best-in-Class companies are characterized by a combination of strategic actions, organizational capabilities, and enabling technology (Table 2).

Table 2: The Best-in-Class PACE Framework

Pressures Actions Capabilities Enablers

• The need to improve on-time delivery performance

• Collaboration initiatives with suppliers to gain better visibility into supplier-side processes

• Streamline processes for easier monitoring

• Online visibility into in-transit shipment status

• Centralized global supply chain management organization

• Online visibility into international order and supplier event status

• The ability to find (within reasonable time) and access global supply chain data needed for decision making

• In-house developed software • Transportation carrier tracking system • Visibility system from a freight forwarder • Visibility system from a 3PL • Visibility system from an electronic messaging

vendor (e.g. EDI VAN) • Cargo portal • On-premise (license) commercial visibility system


Benchmarking the Current Levels of Visibility When asked about whether they actually had the ability to find and access the needed global supply chain data to support the decision making process, study participants gave an alarming response: only 13% were fully satisfied with how efficient they were in finding the needed supply chain data.

After analyzing this problem, it became apparent that very few companies actually had the needed timely visibility into the critical processes involved in global supply chain management, which prevented them from accessing information in a timely manner (Figure 2).

Figure 2: Online Visibility into Four Critical Processes

18%

19%

9%

16%

39%

41%

36%

26%

37%

33%

44%

42%

0% 20% 40% 60% 80% 100%

Online visibility into international order andsupplier event status

Online visibility into in-transit shipment status

Online (real-time) visibility into supplychain issues/ disruptions

Online visibility into the trade document flow

Currently exists and no plans to enhanceExists & plan to enhance within 12 monthsDon't have but plan to adopt


Figure 3 deconstructs the supply chain process by showing how many companies are monitoring particular supply chain events – either manually or with the help of technology tools.




Figure 3: Global Supply Chain Events Currently Monitored

Progression of supply chain events

Automation gap #3

Automation gap #4

Automation gap #1

Automation gap #2

37%

40%

52%

53%

56%

44%

45%

49%

36%

39%

48%

51%

45%

53%

50%

52%

48%

41%

23%

30%

25%

27%

34%

30%

40%

43%

28%

16%

30%

16%

38%

39%

0% 20% 40% 60% 80% 100%

Invoice status

Warehousing events

Trucking (haulage) events

Proof of delivery

Customs clearance events

In-transit status events at order line level

In-transit status events at shipment level

Carrier pickup of goods

Advance shipment notice matches purchase order

Advance shipment notice created

Quality control passed

Supplier production in-process events

Projected production plans

Raw material arrival at supplier

Order acknowledgement matches purchase order

Order acknowledgment

Monitor manually (e.g. via phone/fax/email) Monitor with our global visibility technology

% of all respondents


The top four categories of supply chain events that are being frequently monitored manually but where the automated monitoring is only emerging include: raw material arrival at supplier, supplier production in-process events, trucking (haulage) events, and customs clearance events. In each of these categories, over 50% of respondents report manual tracking while only 25% (or less) report having a tool to help them track the event.

The Importance of Data Quality For the events monitored (indicated in Figure 3), how often are the data received accurate? Figure 4 (next page) shows that most of the companies face at least some data quality issues, which poses an impediment to efficient supply chain management. Best in Class companies in this study are 1.5-times as likely as Industry Average and almost 3-times as likely as Laggards to report that data received during their event monitoring process are accurate more than 80% of the time.

When trying to get to the root of how Best in Class companies achieve higher levels of data quality, Aberdeen investigated the collaboration initiatives under way and the enabling tools that help in data collection and event monitoring. Although about two-thirds of all companies engage in collaborative visibility initiatives with their partners and almost half of all companies have collaborative alert management and resolution initiatives, the real differences were uncovered in the kinds of software tools / services used to collect the data:




Figure 4: Data Accuracy for Monitored Events

% of respondents reporting a specific level of data accuracy

4%

6%

11%

12%

24%

27%

16%

0% 5% 10% 15% 20% 25% 30%

<40%

40-50%

51-60%

61-70%

71-80%

81-90%

91-100%

% of time the data received during the monitoring of supply chain events are accurate


• Companies that reported that their visibility software had the event tracking capability are 70% more likely to report data quality of 80% or more

• Companies that reported that their visibility software had a data management service available are 60% more likely to report data accuracy of 80% or more and 3-times as likely to report data accuracy of more than 90%

• Companies that reported that their visibility software enabled collaboration / relationship management are 50% more likely to report data quality of 80% or more

Information technology plays an important role in enabling supply chain visibility and helping companies cope with data challenges and perform analyses of the collected data. Chapter Two covers the types of software used for these purposes and the technology strategies for the next 12 months.

Aberdeen Insights – Strategy

Developing a strategy for global supply chain visibility should be a key component of the long-term strategy for the global supply chain. Although tracking supply chain events is essential, the long-term goal should be to turn the visibility information into a competitive asset by analyzing it to uncover trends, root causes of the problems, understand how the costs accrue along the supply chain, and be able to timely respond to supply chain disruptions. In doing this, it is critical to ensure that the data used for analysis are accurate and complete and that the appropriate analytical tools have been put in place.

A critical success factor in making these advanced strategies work is not to overwhelm internal stakeholders with information but give them the tools to extract the best possible intelligence from the data they have – while keeping the amounts of data manageable.




Chapter Two: Benchmarking Requirements for Success

Best-in-Class companies are 30% more likely to have the ability to find and access global supply chain data in time for them to be useful in making current supply chain decisions. This is just one of the differentiating capabilitites that help them maintain market advantage in a time when competition is no longer about individual firms but is about the efficiency and collaborative nature of their whole supply chain.

Large North-American Retailer Improves Operations with Better Supply Chain Visibility

Three years ago the company realized that it had insufficient visibility into supply chain processes, which was making it difficult to manage operations and analyze performance. The company embarked on a project to enhance the visibility of its store and replenishment operations and other supply chain activities:

Problem: Company’s growth mandated the need to get better control of supply chain processes. The retailer wanted to become more proactive in managing the events that occurred when supplying products to its end consumers, the retail stores. The amount of data used to manage operations was daunting, and manual processes caused unnecessary delays and inefficient use of resources (in some cases, it took days to create reports that were obsolete as soon as they became available).

Solution: The retailer implemented a web-based supply chain dashboard application from a third-party software provider. The system allowed to them configure a set of gauges and alerts, which helped identify areas of the operation that needed improvement.

Rollout strategy: The company took a balanced approach to implementing the system. It started by selecting 20 most important gauges and alerts: “we knew that if we could track these milestones, it would definitely improve our operations,” says the senior manager of supply chain systems. Today (two years later) the company tracks about 100 supply chain milestones. The visibility system ‘sits on top’ of the other supply chain systems, including the company’s transportation and warehouse management suites. “The best thing about having this new visibility is really about focusing on the person that is making the decision” - he explains that having role-based views for all managers and floor supervisors has had a strong positive impact on the effectiveness of day-to-day supply chain operations.

Results:

• Improved efficiency of daily operations: “Our visibility dashboard has become a mission-critical application on the floor of our warehouses, improving our operational decisions and the timing of these decisions” – summarizes the senior manager of supply chain systems.

• Improved customer service: “Our visibility tool helps us minimize warehouse shortages and improve on-time delivery to our stores.”

• Significant time savings: “Our Visibility dashboard gives us a single-point view, saving time without having to reference the data from several systems.”

Competitive Assessment Fast Facts

√ Best in Class companies are twice as likely as Laggards to be currently using several information technology systems to support global supply chain visibility

Best-in-Class, Industry Average, and Laggard companies have been analyzed to determine the points of differentiation between the groups across these categories: (1) process (the ability to timely respond to changing market conditions and customer demand, and the ability to organize the firm internally to enable the most efficient processes in global supply chain management); (2) organization and performance measurement practices; (3) knowledge management (contextualizing data and exposing it to key internal and external stakeholders); (4) technology tools used to enable global visibility from tracking events to advanced analytics. These characteristics (identified in Table 3) serve as a guideline for achieving Best-in-Class performance in enabling global supply chain visibility.




Table 3: The Competitive Framework

Best-in-Class Average Laggards

Ability to find and access global supply chain data needed for decision making

71% 56% 56%

Ability to make mid-course changes to international shipments (e.g. reallocate or reroute in-transit shipments)

58% 44% 38%

Ability to track actual total landed cost as shipment / order progresses

46% 32% 23%

Ability to conduct performance trending and root cause analysis

41% 19% 19%

Ability to perform trade lane analysis (e.g., lead time variability)

37% 21% 18%

Ability to perform traceability / genealogy analysis at item level

Process

50% 17% 8%

Centralized global supply chain management organization Organization

76% 55% 51%

Online visibility into in-transit shipment status

83% 56% 47%

Automated visibility data analysis (with the help of a software tool)

66% 44% 41%

Online visibility into the trade document flow

Knowledge

51% 43% 33%

Supporting technologies in use

Technology

• 49% transportation carrier tracking system

• 48% visibility system from a freight forwarder

• 38% visibility system from a 3PL

• 36% cargo portal • 35%on-premise (license)

commercial visibility system











Frequency of performance measurement for global supply chain management Performance Once in 47 days,

0% never Once in 61 days,

16% never Once in 77 days,

13% never




Using Visibility Data Analytics to Become Best-in-Class Best-in-Class companies are much more likely to perform various kinds of data analysis in support of supply chain decisions which ensures that the visibility data they collect are used to help them achieve the market advantage. Overall, 63% of all companies still use spreadsheets to help them analyze the visibility data obtained through their tracking and monitoring systems (or manually). However, the Best in Class are 55% more likely than all others to be using some kind of automated visibility data analysis.

Figure 5: Visibility Data Analysis Currently Performed and Planned

33%

25%

24%

23%

19%

19%

18%

25%

31%

29%

28%

41%

27%

22%

33%

36%

40%

34%

30%

36%

29%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Tracking actual total landed cost as shipment/orderprogresses

Performance trending and root cause analysis

Trade lane analysis (e.g., lead time variability)

Traceability/genealogy at item level

Supplier/carrier scorecards using visibility information

Inventory liability analysis

Six sigma analysis

Currently performPlan to start doing within 12 months Would like to perform but do not have adequate software tools

33%

25%

24%

23%

19%

19%

18%

25%

31%

29%

28%

41%

27%

22%

33%

36%

40%

34%

30%

36%

29%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%

Tracking actual total landed cost as shipment/orderprogresses

Performance trending and root cause analysis

Trade lane analysis (e.g., lead time variability)

Traceability/genealogy at item level

Supplier/carrier scorecards using visibility information

Inventory liability analysis

Six sigma analysis

Currently performPlan to start doing within 12 months Would like to perform but do not have adequate software tools % of all respondents


Among those that currently perform visibility data analysis, Best-in-Class companies are:

• 44% more likely than Industry Average and twice as likely as Laggards to be tracking actual total landed cost as shipment / order progresses

• 2.4-times as likely as both Industry Average and Laggards to use supplier / carrier scorecards using visibility information

• 2-times as likely as both Industry Average and Laggards to conduct performance trending and root cause analysis

• 76% more likely than Industry Average and twice as likely as Laggards to perform trade lane analysis (e.g., lead time variability)

• 3-times as likely as Industry Average and 6-times as likely as Laggards to be performing traceability / genealogy analysis at item level

Visibility Leaders Show Better Supply Chain Agility Best-in-Class companies are leveraging their enhanced visibility into supply chain processes to make their supply chains more agile: if the market demands, they are able to change the direction of their shipment not just during the scheduling process, but at later points in the supply chain – after the cargo has been shipped (Figure 6).




Figure 6: Global (Physical) Supply Chain Agility

36%

47%

32%

25%

31%

48%

39%

21%

20%

0% 20% 40% 60% 80% 100%

Laggards

Average

Best in Class

Able to make changes to shipment routes after a shipment has beenscheduled but before it has been shippedAble to make changes to shipment routes after a shipment has beenshippedUnable to make changes to shipment routes after a shipment hasbeen scheduled

“The financial impact of having product in the right place, and reducing the time it spends there, are the biggest benefits [of enhanced global supply chain visibility].”

- Large Global North American Retailer


The fact that Best-in-Class firms are 60% more likely to have online visibility into in-transit shipment status and 30% more likely to have online visibility into the trade document flow helps them ensure that the shipment schedules and projected routes can be adjusted more quickly and effectively.

Centralized global supply chain management organization helps Best-in-Class companies maintain their logistics agility by having a holistic view of the global supply chain and related planning and fulfillment activities. The Best-in-Class also measure supply chain performance more often and are more frequent users of the supporting internal dashboards or external scorecards. When asked how often they used internal dashboards to make global supply chain decisions, 82% of the Best-in-Class said three or more times a week (41% said more than once a day), compared to 60% of Industry Average and 56% of Laggards. For external scorecards, 44% of the Best-in-Class indicated using them three (or more) times a week, compared to 39% of Industry Average and 19% of Laggards.

Technology Landscape Enabling supply chain visibility is a difficult task for companies with extended global supply chains. Historically, manually-managed global trade processes have been difficult to control and difficult to accurately forecast. Information technology developments over the past decade have enabled companies to make a quantum leap in their visibility strategies. New, more reliable infrastructure for tracking and monitoring supply chain events has been put in place. Today, companies are looking beyond just monitoring. The Best-in-Class are already actively leveraging the visibility data and tools to conduct in-depth analysis to support both day-to-day activities and long-term strategic planning.

Compared to a year ago, the number of companies not using software tools for global supply chain visibility has decreased from 37% to 28%. This study reveals that, compared to all others, Best-in-Class companies are using more software tools to enable global supply chain visibility, ranging from in-house developed applications to advanced packaged commercial solutions. Figure 7 shows the overall current use of different visibility solutions (see Appendix B for a detailed description of each of these solutions).




Figure 7: Visibility Software Systems Used for the Global Supply Chain

8%

12%

14%

21%

24%

25%

27%

34%

35%

37%

44%

13%

16%

20%

14%

14%

20%

18%

19%

20%

16%

7%

0% 10% 20% 30% 40% 50% 60%

Automatic vehicle location (AVL) systemfor fleets with GPS tracking

On-demand (hosted) commercial visibility system

Commercial transportation management system (TMS)

Cargo portal

On-premise (license) commercial visibility system

Visibility system from a 3PL

Supplier collaboration portal or hub

Transportation carrier tracking system

Visibility system from a freight forwarder

Visibility system from an electronic messagingvendor (e.g. EDI VAN)

In-house developed software

Currently using Plan to start using within 12 months Source: Aberdeen Group, September 2007

Among the applications listed in Figure 7, Best-in-Class companies have shown most difference in the use of the following tools:

• 90% as likely as the Industry Average and 2.4-times as likely as Laggards to be using a cargo portal

Figure 8: Available Software Functionality for Global Visibility

• 70% as likely as the Industry Average and Laggards combined to be using a transportation carrier tracking system

22%

24%

24%

28%

30%

33%

30%

33%

44%

55%

36%

36%

36%

43%

45%

46%

49%

57%

69%

74%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Exception management

Collaboration(relationship management)

External scorecards

Data management service

Financial settlementor financing triggers

Alerts

Internal dashboards

Event tracking

Statistics

Reports

Best in ClassAll Others

• 30% more likely than the Industry Average and twice as likely as Laggards to be using a visibility system from a freight forwarder

• 70% more likely than the Industry Average and twice as likely as Laggards to be using a visibility system from a 3PL

• 60% more likely than the Industry Average and twice as likely as Laggards to be using an on-premise (license) commercial visibility system


Figure 8 highlights the features currently available to Best-in-Class, Industry Average, and Laggards as part of their global supply chain visibility technology.




Quantifying the Benefits of Visibility Technology

Figure 9: End-to-End Savings Seventeen percent (17%) of respondents report that they have already conducted analysis to identify the total financial benefits of implementing their visibility technology (additionally, 30% said they were currently in the process of evaluating the benefits). Companies that have already completed this exercise reported significant end-to-end savings (Figure 9).

Less than USD $50,000

5%USD $50,001-

$100,00013%

USD $100,001-$250,000

13%

USD $250,001-$500,000

16%

USD $500,001-$1 million29%

USD $1 million -$3 million

8%

More than USD $3 million16%

“It is very important to quantify the benefits [as] it is not easy to convince top management [of] the need of technology in supply chain”

- Large European Manufacturer of Telecommunication Devices


Aberdeen Insights — Technology

Companies with global supply chains must look to implement at least some information technology tools to help enable visibility, as their processes are often very complex (Appendix B provides a detailed overview of the 10 main types of visibility systems available for companies to select from).

Historically, certain internal barriers have hindered companies from proceeding with their global visibility enhancement plans: it is difficult to decide who within the company should bear the brunt of paying for a visibility system as the benefits are shared by many stakeholders. In addition, the IT department often finds it a daunting task to establish and maintain the numerous interfaces required to collect good visibility data. However, advances in third-party technology and systems offered by freight forwarders, carriers, 3PLs, other partners, as well as the growing realization that global trade cannot be managed without having adequate visibility, are now compelling companies to take quick action.

To become a leader in global supply chain visibility, companies should start moving from tracking their supply chain events to using the advanced analytical tools to drive profound changes in their supply chains.




Chapter Three: Required Actions

Most companies begin addressing their supply chain visibility by using a combination of in-house developed applications, carrier / forwarder / 3PL tracking systems, as well as some on-premise or on-demand third-party solutions. Custom-developed software is still widely used but it is now shifting from being the main system to being a supporting element to one of the third-party systems mentioned. The following actions should be considered by companies that are looking for ways to improve their global supply chain visibility:

Laggard Steps to Success • Move from the internal discussion stage to implementing at least

the basic visibility tools. It is important to establish visibility into at least the most critical supply chain milestones. Select a set of metrics targeted for improvement and assign responsibility for each metric to a specific person / unit in the company. Build a business case by citing the benefits achieved by the early adopters.

• Automate the main types of visibility data analysis. Begin using dashboards and scorecards built into the software as part of your everyday discussions with the team to support tactical decisions.

• Increase use of forwarder / carrier, and 3PL-provided visibility systems. Some of these may be free of charge. Identify the biggest automation gaps between the events monitored manually and those monitored with the help of technology. This will help pinpoint the areas that automation efforts should target first.

Industry Average Steps to Success • Focus on data quality. If internal means have been explored (e.g.

collaboration initiatives with suppliers and customers to improve the quality of data feeds, on-boarding more partners to use the visibility system), consider the feasibility of using a third-party service to check data quality. Only 17% of respondents have reported using this; however, Best-in-Class companies in this study are 56% more likely than Industry Average and twice as likely as Laggards to be currently using such a service.

• Ramp up the use of global supply chain visibility analytics tools. Best-in-Class are more than twice as likely as Industry Average companies to be performing various analyses, including tracking total landed costs, conducting root cause and trade lane analysis, and traceability / genealogy analysis at item level.

• Increase the use of visibility systems provided by the 3PLs / cargo portals. These and other systems help Best-in-Class organizations achieve noticeably better performance results (see the Competitive Framework in Chapter Two).

Best-in-Class Steps to Success • Expand the use of advanced tools for analyzing global supply

chain visibility data. Analyze the visibility data and run optimization



models to identify potential areas of improvement in the global supply chain. Using visibility data analytics has shown to be a key competitive differentiator for Best-in-Class firms in this study.

• Improve data quality. Evaluate the most common data issues and the potential value of third-party data checking to increase the level of data accuracy to 95% to 100%. Currently, only 29% of the Best-in-Class report that data received are accurate more than 90% of the time.

Aberdeen Insights – Summary

At a high level, strategies to address visibility in the next 12 months center on enhancing collaboration, streamlining supply chain processes, and implementing new technology. The key strategies identified by the participants of this research study include: • Collaboration initiative with suppliers to gain better visibility into

supplier-side processes - 62% • Streamline processes for easier monitoring - 57% • Collaboration initiative with customers to gain better visibility into

customer-side processes - 42% • Implement new information technology from a software vendor /

services provider - 42%

Companies are planning the following actions to improve their global visibility platforms: • Improve data quality and timeliness of status messages - 73% • Incorporate additional status events - 63% • Add warning alerts if actual events deviate from plan - 61% • Enhance analytics capabilities - 61% • Increase the number of trading partners providing status information -

49% • Add escalation policies to help manage alerts - 45% • Incorporate resolution advice or workflow (e.g., expediting advice,

automatic RFP for spot rates on transport) - 34% • Add RFID-enabled visibility - 31% • Add financial settlement or financing triggers - 25%





Appendix A: Research Methodology

In August-September 2007 Aberdeen Group conducted a survey of 225 corporations with global supply chains to benchmark their practices in enabling global supply chain visibility and using the visibility data obtained to help make better decisions about their global supply chains.

The demographics of survey respondents include the following:

• Company size: Small (< $50 mil. in annual revenue) - 17%; mid-size ($50 mil. - $1 bil.) - 42%; large (>$1 bil.) - 41%

• Geography: 58% - North America, 25% - EMEA, 15% Asia/Pacific, 2% South/Central America and Caribbean

• Using the following modes of transportation: 88% - Ocean; 27% - Rail; 54% - Trucks; 80% - Air; 5% - Other

• Key industries: CPG, automotive, retail / distribution, aerospace / defense, industrial equipment manufacturing

The online survey effort was supplemented with telephone interviews with select survey respondents, gathering additional information on visibility strategies, experiences, and results.

Table 4: The PACE Framework Key

Overview Aberdeen applies a methodology to benchmark research that evaluates the business pressures, actions, capabilities, and enablers (PACE) that indicate corporate behavior in specific business processes. These terms are defined as follows: Pressures — external forces that impact an organization’s market position, competitiveness, or business operations (e.g., economic, political and regulatory, technology, changing customer preferences, competitive) Actions — the strategic approaches that an organization takes in response to industry pressures (e.g., align the corporate business model to leverage industry opportunities, such as product/service strategy, target markets, financial strategy, go-to-market, and sales strategy) Capabilities — the business process competencies required to execute corporate strategy (e.g., skilled people, brand, market positioning, viable products/services, ecosystem partners, financing) Enablers — the key functionality of technology solutions required to support the organization’s enabling business practices (e.g., development platform, applications, network connectivity, user interface, training and support, partner interfaces, data cleansing, and management)


Table 5: The Competitive Framework Key

Overview The Aberdeen Competitive Framework defines enterprises as falling into one of the following three levels of practices and performance Best-in-Class (20%) — Practices that are the best currently being employed and significantly superior to the Industry Average, and result in the top industry performance. Industry Average (50%) — Practices that represent the average or norm, and result in average industry performance. Laggards (30%) — Practices that are significantly behind the average of the industry, and result in below average performance

In the following categories: Process — What is the scope of process standardization? What is the efficiency and effectiveness of this process? Organization — How is your company currently organized to manage and optimize this particular process? Knowledge — What visibility do you have into key data and intelligence required to manage this process? Technology — What level of automation have you used to support this process? How is this automation integrated and aligned? Performance — What do you measure? How frequently? What’s your actual performance?


Table 6: The Relationship Between PACE and the Competitive Framework

PACE and Competitive Framework How They Interact

Aberdeen research indicates that companies that identify the most impactful pressures and take the most transformational and effective actions are most likely to achieve superior performance. The level of competitive performance that a company achieves is strongly determined by the PACE choices that they make and how well they execute.





Appendix B: Types of Visibility Technology

Table 7 (first printed in The Supply Chain Visibility Roadmap, November 2006) describes 10 styles of visibility technology, which can be classified into three categories: (1) internally developed systems, (2) systems provided by logistics providers / freight forwarders, and (3) systems from commercial technology vendors.

Table 7: Profiles of the 10 Major Types of Visibility Technology

Category Description Most Appropriate For:

Internally Developed Visibility Technology

1. Homegrown Visibility System

System built internally or custom developed by your enterprise

Companies needing rudimentary tracking and having sufficient IT and logistics resources to build and maintain solution; building more complex visibility systems in-house has often led to large cost overruns and delays

Visibility System Provided by Logistics Provider or Portal

2. Carrier or Forwarder Tracking System

Web browser access to “where’s my stuff” using the shipment tracking number More advanced solutions support tracking by other reference numbers (e.g., PO #, SKU #) and alerts

Companies seeking low-cost (often free) system to track shipment events (versus supplier in-process milestones or network inventories) Companies that don’t mind having users go to multiple carrier sites to track goods

3. Cargo Portal Hub that provides booking and tracking across multiple ocean carriers Statuses for shipments booked with member carriers are typically free

Companies that rely on multiple carriers for international shipments and seek a single, low-cost system to track shipment events

4. Visibility System from 3PL

Visibility system implementation and maintenance is handled by the third-party logistics (3PL) vendor Often deliver functionally rich solutions that provide similar features to commercial visibility solutions. They bring the added benefit of on-ground logistics and vendor management capabilities. Some 3PLs have built their own systems while others “white label” a commercial solution.

Companies with significant logistics outsourcing to a single 3PL vendor and that are willing to be tightly tied to that provider

Visibility System from Commercial Technology Vendor

5. On-Premise Commercial Visibility System

Visibility application implemented at your company System typically contains flexible line-item tracking, alerts, escalation workflow, role-based dashboards, and analytics

Companies seeking comprehensive visibility into order, shipment, and inventory statuses across all aspects of their business and that wish to move up the value curve around shipment resolution and supply chain improvement Companies with sufficient internal IT and trading partner enablement resources to implement and maintain system

http://www.aberdeen.com/summary/report/benchmark/RA_Visibility_BE_3609.asp



Category Description Most Appropriate For: 6. On-Demand Commercial Visibility System

Visibility application hosted by the software vendor and typically paid for on a subscription basis; sometimes part of a larger global trade management suite Often comes with pre-connections to carriers to speed implementation time or enablement programs to hook up suppliers System typically contains flexible line-item tracking, alerts, escalation workflow, role-based dashboards, and analytics

Companies wishing to leverage the vendor’s IT resources and carrier and supplier enablement experts for faster implementation, easier ongoing maintenance, and lower up-front costs Companies seeking comprehensive visibility into order, shipment, and inventory statuses across all aspects of their business and that wish to move up the value curve around shipment resolution and supply chain improvement

7. Commercial Transportation Mgmt System (TMS)

Tracking capabilities that are an extension of a TMS; typically support transportation-related resolution workflow; may also support tracking of logistics assets Some systems also support tracking of shipments not managed via the TMS (e.g., inbound from supplier). On-demand TMSs may come with carrier enablement and pre-connection services

Companies seeking to leverage their TMS to track shipment events (vs. supplier in-process milestones or network inventories), trigger routing changes, and analyze shipment lead times, lead time variability, and on-time performance May need to work with TMS vendor to build out role-based views or leverage web services to distribute information to other departments

8. Visibility System from Electronic Messaging Vendor (e.g., EDI VAN)

Leverages your existing messaging connections with trading partners to feed relevant data into an on-demand or on-premise visibility system provided by the messaging vendor

Companies with significant purchase order and status message volume being handled by a single messaging vendor

9. AVL/GPS System for Fleets

Automatic vehicle location (AVL) system with GPS tracks the location of vehicles and display them as “breadcrumb trails” on a digital map; typically includes reporting capabilities Can be a stand-alone system or part of a fleet routing application

Companies with private/dedicated fleet operations

10. Supplier Collaboration Portal or Hub

Inbound orders, advance shipment notices, and inventory status are tracked via a supplier portal or B2B collaboration hub Typically have strong supplier in-process monitoring and resolution functionality but limited in-transit monitoring and analysis capabilities

Companies whose major tracking and reliability problems are supplier-related versus logistics related




Appendix C: Related Aberdeen Research

Related Aberdeen research that forms a companion or reference to this report includes:

• Global Trade Management: Surviving Growing Complexity in 2007, May 2007

• Supply Chain On Demand: Enable Flexible Business Processes, August 2007

• The Responsive Supply Chain: Managing Market Events in the Consumer Goods Industry, July 2007

• Integrated Transportation Management—How Best-in-Class Companies View the World Differently, June 2007

Information on these and any other Aberdeen publications can be found at www.Aberdeen.com.

Author: Viktoriya Sadlovska, Research Analyst, Supply Chain Finance/Global Trade ([email protected])

Aberdeen is a leading provider of fact-based research and market intelligence that delivers demonstrable results. Having benchmarked more than 30,000 companies in the past two years, Aberdeen is uniquely positioned to educate users to action: driving market awareness, creating demand, enabling sales, and delivering meaningful return-on-investment analysis. As the trusted advisor to the global technology markets, corporations turn to Aberdeen for insights that drive decisions. As a Harte-Hanks Company, Aberdeen plays a key role of putting content in context for the global direct and targeted marketing company. Aberdeen's analytical and independent view of the "customer optimization" process of Harte-Hanks (Information – Opportunity – Insight – Engagement – Interaction) extends the client value and accentuates the strategic role Harte-Hanks brings to the market. For additional information, visit Aberdeen http://www.aberdeen.com or call (617) 723-7890, or to learn more about Harte-Hanks, call (800) 456-9748 or go to http://www.harte-hanks.com

http://www.aberdeen.com/summary/report/benchmark/3995-RA-Global-Trade.asp

http://www.aberdeen.com/summary/report/benchmark/4142-RA-supply-chain-demand.asp

http://www.aberdeen.com/summary/report/benchmark/4123-RA-market-events-edge.asp

http://www.aberdeen.com/summary/report/benchmark/4123-RA-market-events-edge.asp

http://www.aberdeen.com/summary/report/benchmark/4017-RA-best-companies.asp

http://www.aberdeen.com/summary/report/benchmark/4017-RA-best-companies.asp

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Featured Underwriters This research report was made possible, in part, with the financial support of our underwriters. These individuals and organizations share Aberdeen’s vision of bringing fact based research to corporations worldwide at little or no cost. Underwriters have no editorial or research rights and the facts and analysis of this report remain an exclusive production and product of Aberdeen Group.

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