The potential impact of supply chain visibility: Battistella Business Case

The supply chain is a set of three or more entities, directly involved in the flows of products, services, finances, and information, from the point of origin to the point of destination. Today’s supply chains are becoming more and more complex, hence an efficient supply chain management is essential to integrate partners in order to produce and distribute goods, at the right time, in the right quantity, and to the right location.
In the past, supply chain was sometimes mistaken with logistics, which is merely a branch of the overall network. Only in the late 1990s a new notion of “Logistics” was established, known as Supply Chain Management. Supply Chain Management includes the planning and management of all activities involved in logistics research, supply, and management. Furthermore, coordination, integration, and collaboration among supply chain partners, such as suppliers, intermediaries, service providers, and customers, are also included. Briefly, the Supply Chain Management integrates and coordinates the supply chain, as well as the management of relationships between the various supply chain players.
When it comes to the Italian corporate industry and, in particular, Small and Medium Enterprises, which represent the heart of the Italian economy, it is sometimes claimed, that supply chain is not viewed as a competitive and strategic instrument. Of course, Italy is a conservative country, and the most used SCM model is old, conventional, and disaggregated. Even though the term “supply chain management” is used in the organization, although frequently misinterpreted, since the company's functions are not properly connected, and the entire system is fragmented.
In a disaggregated supply chain, it is difficult, for the company to have visibility of stocks, available production capacities, and progress status of suppliers, and, as a result, it rarely shares the sales trend or the stocks availability with suppliers. This manifests itself, for example, in the inability of a reciprocal exchange of information between the firm and the supplier.

A collaborative connection between supply chain participants is not formed, despite the fact that, it would be desirable and advantageous to all parties. It should be fascinating to connect all supply chain stakeholders, as part of a major inter-company system. Generally, Italian businesses prefer to operate independently from one another, even if collaboration and sharing of information are critical not just for cost savings, but also for increasing profitability and creating value for customers.
A new related concept to have this efficient management refers to supply chain visibility, that is defined as “the extent to which actors, within a supply chain, have access to, or share information, which they consider as key or useful to their operations and which they consider will be of mutual benefit”. Supply chain visibility is nowadays important for accurate and fast exchange of information, in order to improve the cooperation across organizational entities, and, therefore, the market performance.
Supply chain visibility is essential to have clear and crucial information about supply chain activities and is related to transparency: the more accurate the information, the higher the transparency, but the more the information deteriorates, the higher the obscurity. These two influences contribute to the dilemma of corporate vulnerability, due to obscurity in information access, causing a lack of transparency. The leveraging of an internet-based platform, to facilitate the exchange of information between supply chain partners, has shown itself to be a powerful approach, requiring collaborative investment from all parties.
Furthermore, the concept of visibility is linked to that of traceability: thanks to visibility along the supply chain, it is possible to track all products from upstream to downstream, using technological tools. Consequently, the presence of issues or bottlenecks along the chain can be promptly solved, allowing an efficient flow of product and information. Traceability, as well as Transparency together combine the Supply Chain Visibility.
To better understand the distinction among Visibility, Traceability and Transparency, the following table defines and compares these three concepts.
Furthermore, confirming their significance, the main benefits and drawbacks of each, are examined and reported in the tables below. For each concept: first the benefits and then the drawbacks are fully detailed.

• Reduced risks. The entire supply chain system is characterized by risks, which, if they occur, can have detrimental effects on company's health. Supply chain visibility fulfills the risks mitigation, identifying them, before they become a potential threat. For example, inventory shortages, due to defaulting or lagging suppliers, can be avoided with supply chain visibility, by taking corrective action, before such shortages impact business operations.
• Cost effectiveness. A clear and immediate benefit of improved supply chain visibility is the availability of real-time information, on where a product or component is, during the transit phase. This can speed up logistics operations, reduce operating costs, and minimize risks or problems, as they arise. Therefore, better visibility of the supply chain translates into a higher return for the company.
• Effective decision making. The ability to make effective decisions is essential for any business. With supply chain visibility, you can make better decisions based on accurate information. You can see what works and what doesn't and make changes accordingly. This leads to smarter decisions and a more successful business.
• Lack of control. Lack of visibility and standard controls can lead to negligence in entire industries, such as child labor. Several companies may not be aware of unethical or illegal activities occurring along their chain, however, they continued to work in this way, to ensure production at the lowest possible price.
• Old IT systems. The key to manage risks and avoid compliance problems, in the supply chain, is to make the infrastructure more transparent. Too many companies continue to use old procurement processes, which make, collaboration with suppliers, impossible. As a result, procurement teams simply lack the ability to examine the breadth of their supply chain, to make informed decisions about who they are partnering with, and to manage relationship.
• Company's reputation. The negative consequences, as the lack of control of the supply chain or the use of old IT systems, can cause a permanent damage to company’s reputation. This results in the erosion of customer confidence, which will have a direct impact on profits.
• Regulatory compliance. An important benefit of implementing supply chain traceability systems is compliance with regulatory requirements. Being aware of where your product has been, where it is now, where it is going, who is handling it, and how long it has been in transit, are all useful metrics for keeping your business in step with regulatory agencies. Therefore, consumers are more aware of where their product comes from and demand more information about what they buy: this is another reason why traceability is so important today.
• Maximum efficiency. Being able to track products as they move through your supply chain also allows to identify inefficiencies and bottlenecks. In other words, traceability maximizes operational efficiency and minimizes costs. If there are data, which concern the inefficiency of a particular process, steps can be taken or removed to improve that process.
• Consumer involvement. Traceability helps sales: customers love stories and demand more information about the products they buy. Smart companies use their supply chain tracking systems as part of their marketing, connecting with consumers by telling their story and sharing information about their products. In advertisements, companies highlight how far their products have traveled, and how much care is devoted to their manufacture, packaging and shipping. This type of advertising paints a picture of the journey, that products take to get to customers home.
• High costs. Traceability costs arise from the implementation and maintenance of processes, as well as from the specialized skills of workers. In particular, when a new software for product tracking is implemented, it can require high costs both for its application and for staff training, to use and update the software. This cost, if it is not internal, is in any case incurred, entrusting the management to external users.
• Inefficient data storage system. Data storage systems have a limited space, as they must keep the complete history of all transactions between all participants: for this reason, these systems can be inefficient. The use of a large and adequate data management system could be a plausible solution both for storing data and for their transfer among users.
• Difficulty of cooperation among different actors. Since the supply chain is characterized by the cooperation among different actors, sometimes, it should be difficult to implement, since each actor will look at its own interest and benefit. For example, some participants may benefit from information sharing, while keeping their identity unknown.

⁃ Better and stronger business partnerships. An important action along the supply chain is to enhance existing business relationships. Companies will naturally choose to work with partners, who meet the transparency and sustainability requirements: in this way, they will be able to collaborate more efficiently.
⁃ Gain competitive advantage. An entire industry, not only the single business, will benefit from transparency along the supply chain. Companies that practice supply chain transparency are viewed through a more positive lens than others, thanks to their social responsibility initiatives: these companies reveal information about their origins, ethics, and production.
⁃ Accurate information. Dealing with accurate information is essential to take correct decisions. Using supply chain transparency, you can be confident that the information you are working with is accurate. This leads to fewer mistakes and better decisions, which can have a positive impact on your business.
⁃ Negative partner reaction. Since transparency is about sharing information, sometimes managers can only provide positive information and hide negative news, to avoid bad consequences on the external environment. In this way, partners in the supply chain can discover such news and react accordingly, for example by ending the contractual relationship.
⁃ Lower problem comprehension. Through visibility and transparency of the supply chain is possible to determine the source of problems. It is important to have a controlled view of every step of the supply: from the moment of the order to the moment of arrival. The main problems arise from shipping materials to production plants, where delays often occur, or the right documentation is not attached. Unfortunately, without adequate transparency, it is impossible to know, for example, when and why a shipment was blocked: there may be a crucial supply, blocked in a port, somewhere in the world, and the problem is solved several days later.
⁃ Limited access to data. Nowadays, many users share a high quantity of information. It is important to carefully manage this data, and to ensure that only supply chain users have access to it. However, today, supply chains are quite large, and an increasing number of users are registering, consequently, information about competitors is also shared. Therefore, the sharing of valuable data can be limited, and users may doubt the accuracy of these shared data. Obviously, this could damage the value of the supply chain, whose integrity and value are based on the legitimacy of data provided by each user. Furthermore, not only the data integrity is important, but also the possibility of being unaltered: further checks may be necessary to ensure that what is shared, is correct.

It is essential to clearly define these three concepts, together with benefits and drawbacks, to gain a general overview of the subject.
In relation to these concepts, collaboration among companies along the supply chain is critical, but to create and manage successful partnerships, time and dedication are required: this will not only lead to improved customer service, but also to a better implementation of resources, a reduction in inventory investment, and a reduction in emergencies, better working relationships, and increased profit for all participants in the supply chain. The lack of such cooperation, as well as the lack of accurate information can cause some problems and complexities arising from supply chain processes.
After this brief introduction, the next paragraphs will analyze the main characteristics of supply chain visibility, the traceability of products and processes and the use of real-time data to satisfy the final customer.