Sharing Real-Time Demand and Inventory Data is Only a First Step
Spend Matters welcomes another guest post from Becky Partida, a supply chain management research specialist at APQC.
Increased information visibility is a goal for many organizations. For the supply chain, many organizations look to the sharing of real-time, electronic demand and inventory levels both within the enterprise and with external partners to create greater visibility, which can lead to better inventory levels and shorter order processing times.
APQC’s Open Standards Benchmarking in logistics reveals that a little over half of responding organizations (59 percent) have implemented programs dedicated to the sharing of real-time demand and inventory data. Of these respondents, 33 percent have implemented the practice to some degree and 26 percent have implemented the practice extensively.
To determine the potential impact of sharing real-time demand and inventory data, APQC compared the logistics performance of organizations that have and have not implemented this practice. The responses indicate a mix of results associated with the practice that calls into question whether organizations are making the most of their access to demand and inventory data.
APQC’s data in the figure below shows that organizations that do and do not share this data have nearly identical order fill rates. Those that do not share the data have an order fill rate only 0.4 percent higher than that of organizations that do share it.
One would expect that organizations using real-time inventory and demand data would have superior inventory tracking and thus would fill more orders completely. However, the small difference between groups that use real-time data and those that do not may indicate that organizations that have not implemented this practice take other measures to ensure inventory is closely tracked.
Surprisingly, APQC’s data also indicates that organizations sharing real-time, electronic demand and inventory data expedite more sales orders than organizations that have not implemented this practice. As the figure below illustrates, the difference between the groups at the median is not large, but organizations that share demand and inventory data expedite 2 percent more of their orders than organizations that do not share real-time data. This difference can translate into additional costs from expedited shipping and the need for extra staff to process rushed orders.
APQC’s data hints at a disconnect between the adoption of practices aimed at increasing supply chain visibility and the actual use of the information obtained through these practices. The adoption of real-time information sharing is intended to give organizations and their external partners a better idea of what products customers will be ordering so that they can have the inventory to meet customer needs. However, the information is only as good as the actions it spurs organizations to take. If an organization or its partners do not use the information available or use the information but take no steps to improve poor logistics processes, logistics performance will stagnate or suffer.
It is clear that simply having real-time information on demand and inventory is not enough. In order for information visibility to have value, organizations must make sure their logistics processes are efficient and the information is strategically used both internally and by any external partners or service providers. Having these items in place will allow organizations to experience the full benefits of supply chain visibility.