Ari Haapaniemi 02.12.2016 10 min read

Overcoming The Biggest Supply Chain Challenges

Lack of visibility and control– these are the two first points on each supply chain managers’ list of complaints when you ask about their biggest supply chain challenges. Due to pressure from global competition, companies have outsourced their supply chain operations to third party logistics partners (3PL) in order to better focus on their core competencies. This has led to a situation where companies no longer own their supply chain infrastructure but their SCM still needs to maintain a high level of visibility and control over it. 


Issues With Traditional SCM Systems

The problem with traditional SCM systems is that they were not initially designed to see and manage anything beyond a domain of a single enterprise. As a result, they lack the capability to provide real end-to-end visibility to supply chains extending across several organizations. In order to fill this gap, the supply chain community has introduced the concept of supply chain control towers that can be seen as globally centralized systems (in context of a single enterprise) that pulls in data from multiple systems. And not just from enterprise’s internal systems, but also from multiple enterprise systems in different 3PL companies. This ultimately provides visibility into inbound and outbound distribution flows over the entire supply chain.

The idea behind the control towers sounds great. Unfortunately, when putting the theory into practice the control towers have neither been able to meet end-to-end SCM visibility nor control requirements. Quite often control tower deployment projects exceed their budget and schedule, and have not been able to deliver end-to-end visibility (not to mention the control of the supply chain). Most projects are capable of delivering a solution that is able to provide visibility into one part of the supply chain (e.g. air freight) just fine, while other transport modes in the supply chain (e.g. ocean and rail carriers) might entirely lack visibility.

One could say that in many cases, control towers are more like a one-eyed watchtower. They are only capable of providing partial visibility, without any control.

One reason for these shortcomings is the lack of connectivity. Control towers integration capabilities are not flexible enough to make it possible for multiple systems to exchange supply chain related data automatically and correctly. With extended supply chains, data is often event-based, distributed across multiple systems and multiple data formats. Therefor, extensive and flexible integration capabilities are essential in order get a unified view of the supply chain.

How Can Integration Challenges Be Tackled?

Cloud-based integration platforms may provide an answer to this by allowing companies to set up a global logistics service bus. A global logistics service bus can feed control towers the information they need, exactly when they need it. A few years ago, some large enterprises deployed their own enterprise service bus solutions that enable different business applications inside company firewalls to exchange information automatically. Ultimately, this eliminated the need to send applications to understand data format destination system uses and where the systems physically resides – ESB takes care of the transformations and routing. This same idea can be applied on the cloud-level by deploying a cloud-based integration platform (iPaaS) that is capable of communicating with applications both external and internal (outside or inside the firewall). When an iPaaS is supplemented with cloud-based data storage, all integration components fall into place. This allows the control tower to focus on its core competences, such as:

> Visualization of the supply chain using the data pulled from the integration platform (or received, if data is event-based) and from the participating systems. 

> Managing shipping documents.

> Cargo tracking, all the way to the item or parcel level.           

> Sophisticated supply chain analysis. 

> Proactive event management.

One of the most challenging aspects of SCM visibility is the intercontinental logistics carried out by ocean and air cargo carriers. By utilizing the integration capabilities a full-blown iPaaS provides, achieving a unified view of the intercontinental supply chain is fairly straightforward. For example, the ocean logistics community has standardized the message structures shippers can use to make and cancel bookings, along with which ones carriers can use to inform the shipper about the status and location of each container – these data standards facilitate the integration by providing common semantics and structure (EDIFACT, X12) that are fairly easy to implement.

Within the air cargo industry, things are a bit more complicated in terms of technology. Old, established messaging standard (Cargo-IMP) is still very much live and widely used, but lacks the flexibility required by modern SCM. In addition, several airlines have adopted new standard (Cargo-XML) or are using their proprietary formats to accept air waybills from shippers, and to provide status updates back to the shippers. Even though the message structures may differ from one airline to another, the semantics remain the same, thus, simplifying integrations.

Given the fact that there are about 50 airlines and 25-30 ocean carriers that handle a majority of the global logistics, it should not be that overwhelming of a task to integrate all major players to the control tower functions. This would ultimately result in visibility over the intercontinental logistics.

How Can We Make This Work?

Supply chain integrations need to embrace loosely-coupling and canonical data models that can only be provided on global scale by tools like an iPaaS.

Of course, there are also cases where iPaaS might not be the best solution. For example, ground level transport tracking might require a different approach. Tracking road/truck logistics integration may be hard to implement due to the vast number of providers and lack of standardization. Instead of trying to achieve iPaaS integration with all the players, it might be better to develop easy-to-use end user applications, like supplier web portals or mobile apps, which road transports operators (truck drivers) can use to record supply chain events. End users applications integrate with the APIs hosted on iPaaS that, in turn, transforms events to a format where they can be consumed by control tower. Sounds easy? In reality, because we depend on people to remember and correctly record the events, it’s impossible to achieve 100% coverage over ground logistics. However a lot can be achieved by introducing good usability apps and with appropriate training.

In regards to controlling the supply chains, there are development initiatives which aim to share one master data view of the shipping documents to all stakeholders in the supply chain. This enables all parties to see and access the same e-documents and react accordingly if, for example, the shipper decides to reroute the shipment, or carrier escalates invalid shipping document back to the shipper. Also here iPaaS-based integrations play key role. However, this is such an important thing and therefore deserves its own blog post. 


Ari Haapaniemi

Head of Products and Solutions, Youredi

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