End-to-end supply chain visibility and the ability to track every stage of a product’s journey, from sourcing raw materials to end-of-life, is imperative to understanding a company and its environment. However, few companies have a 360° view and, with it, the ability to improve and become more profitable. While organizations recognize the need to improve supply chain visibility, the vast majority have not taken steps to map them adequately: 44% have not charted their supply chains, and 26% have only their Tier 1 chains.
This lack of information, especially for extended supply chains (comprising tier 2 and tier 3 suppliers), can lead organizations to miss critical points and increase their exposure to risk. The number of organizations that have not mapped their supply chains is considerable and varies depending on the industry. The industry sector with the highest proportion with unmapped chains, at 51%, is manufacturing, and the lowest, at 34%, is retail.
This situation is likely because, for years, the industry has felt that the return on investment (ROI) of a visibility program takes too long or is unattainable, even though there are clear signs that this is not the case.
The supply chain ROI formula
To maximize ROI, direct and indirect costs must be taken into account, as well as savings that could directly impact market share, reputation, and brand growth.
A basic formula for calculating ROI is :
ROI = a sum of recurring savings + interruption savings
Recurring savings = Savings on manual resources + Insurance savings + Procurement savings
Disruption Savings = Crisis Containment + Inventory Costs
Real-time visibility enables companies to proactively avoid product waste and the downstream effects of out-of-stocks: any disruption means a loss of value for shareholders and all members of the chain. Over time, direct and indirect savings provide an exponential return on investment, allowing companies to focus their resources on innovation and growth.
By fostering the belief that it is not possible to put concrete numbers to the benefits of a supply chain visibility program, the brand or company will likely be at a significant disadvantage from a competitive and long-term business strategy standpoint.
You cannot compete without seeing the whole forest
Data shows that having complete visibility and control of the entire supply chain delivers exponential cost savings and ROI. Therefore it is possible to state that improving visibility:
– Reduces both product waste and financial resources.
– Shines a light on the dark spots in the supply chain, allowing companies to focus on what matters.
– Helps drive continuous efficiency and improvement in internal processes.
– Provides better customer service: one of the biggest competitive differentiators in the market.
After investing in visibility, it is possible to calculate the ROI by analyzing and comparing monthly sales reports after the investment. In turn, technology analysts such as Gartner mention three lines where investments in visibility can have a good ROI:
- Increased earnings
- Cost reduction
- Capital investment reduction
Visibility increases brand performance in the market, as it becomes the support for a better sales system. Visibility systems helps mitigate risks and identify problems on time, helping reduce costs. They also help identifying competitors and improving management and brand positioning.
So, to the question of “how are companies impacted by visibility programs?” the answer is that almost all brands will benefit because they will no longer have blind spots on product positioning, appropriate pricing, insights on inventory levels, and more.
In Latin America, point-of-sale visibility is an area that companies do not pay much attention to, usually because they do not have the appropriate tools or knowledge. Few manufacturers understand that sales numbers are not enough to identify a problem.
maxiaNET assists its clients in achieving 360° visibility in the market, to the extent of detecting and measuring any key factor for a brand, be it demographic, regional, economic, cultural, political, or specific to the distribution chain or channel.
In maxiaNET’s experience, by investing 2% of the cost of the product in visibility, it is possible to generate brand growth of 20 to 30%. If the investment were 10% of the cost, the brand growth could go up to 78%. The ROI of the visibility systems varies depending on the strategy followed, but after 2 or 3 months of its implementation, the ROI and the brand growth are usually evident.
Visibility allows a company to connect with its partners and consumers, while also providing a sustainable plan to build trust, drive improvements, reduce risk and react much faster and more effectively to a disruption.
For example, in Peru, one of maxiaNET’s clients had very little presence in a convenience chain with 400 locations throughout the country. With the visibility service, this client gained market leadership as it was able to identify opportunities and verify that its products were displayed correctly and in compliance with all its requirements.
What maxiaNET identified is that the client’s product in the chain was positioned in a way that did not attract the consumer’s attention, information that can’t be faithfully translated into a sales report. Thanks to the information and photographs provided by maxiaNET’s audit system, the client saw both quantitative and qualitative information about the products, finally understanding the reason behind low sales in the region.
The information provided by maxiaNET as part of its visibility service is presented in a “dashboard” from which clients can view key brand data by chain, city, and region; available 24 hours a day, in real-time, and from any device.
End-to-end visibility and consistent KPI monitoring are key for making the right decisions, mitigating risk, and ensuring profitability. Isolated information is not useful to drive continuous improvement. Analyzing the data allows companies to define whether a observed phenomenon is due to a pricing issue, demographics, type of chain, how the product is displayed, or any other factor affecting the brand.
Supply chain leaders must ensure that the necessary goods and materials are in the right place at the right time, budgeted appropriately, and replenished as needed. To achieve this, they need access to real-time data to manage all suply chain aspects. The only sure way to gain this visibility level and control is to invest in the right processes and technology. And at maxiaNET, we are ready to help.
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