Data Sharing in Supply Chain Network

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Key Takeaways

⇨ Lack of visibility and trust in supply chain networks lead to issues like bullwhip effect.

⇨ The primary factor behing bullwhip effect may not just be lack of data sharing but trust in the data being shared.

⇨ Sharing operational data, in addition to planning data, may help build trust with the entities in a supply chain network.

When the pandemic made the demand for certain products skyrocket, we started hearing the term “bullwhip effect” a lot. But the bullwhip effect has existed in supply chains for decades. The fact is, the technology to address this has existed for a few years now. The issue is more rooted in trust among the players in a chain and the lack of will to invest in near real-time, seamless data sharing with each partner in the supply chain. A good deal may argue that it is more a result of a lack of technology. Still, the fact is, for many supply chains where every player involved in the value chain is a major corporation, technology exists today to help address the bullwhip effect, provided these players will invest money and trust. Technologies like EDI have existed for decades to allow for sharing the level of data that can help mitigate the bullwhip effect. Collaborative planning processes like CPFR have also existed for years. This article discusses an example of architecture that can help facilitate data sharing across all entities in a supply chain network.

Effective Data Sharing in Supply Chain Network

Let us review a simple proposed architecture that can address challenges like the bullwhip effect in a supply chain network. At a high level, the solution addresses the following two challenges:

  • Lack of trust in forecast data
  • Lack of integration of inter-entity systems

As you can see, there is nothing fancy in terms of technology in this architecture. It is driven by the simple aspect of sharing more frequently and more honestly. And it can be implemented with technologies that have existed for decades now. The solution focuses on the critical aspect that, even though forecast and POS data are shared in a supply chain network, the trust issue is that the entity downstream may not be using the numbers they shared. So if we can focus on sharing the manufacturing data at regular intervals to show progress against the forecast across the entity, it will ease many concerns and trust issues and be a better data point for managing demand across all supply chain networks.

The primary concern is that the forecast data provided by the entity downstream is not what they use for operations planning (like manufacturing planning). So the central aspect of the above architecture is to exchange information with the partners that show the progress of manufacturing plans based on this forecast. Sharing your operational data vs. plans with partnering entities in your supply chain network helps establish a robust level of trust. This is where supply chain integration solutions, like the EDI solution from Boomi, can be leveraged to establish that capability to exchange data seamlessly.

What does this mean for SAPinsiders?

To be productive, best-in-class processes and technologies also need best-in-class teams. And a critical aspect of these teams in inter-team collaboration. We can extend the same to the Bullwhip effect. No matter how tightly integrated information flows you create, they are ineffective unless those flows are designed so that the resulting information exchange helps build mutual trust. Some key aspects SAPinsiders need to keep in mind are:

Technology to address the bullwhip effect already exists. The problem concerns the existing planning processes that have not been developed for decades. This challenge, coupled with trust issues among entities in a supply chain, keeps this problem alive. Start by understanding why the problem persists rather than by trying to understand which technology can help address the challenge.

You can not improve what you do not measure. Create a task force with members from all supply chain entities to measure the bullwhip’s impact. This study will serve many purposes. On the one hand, it will highlight the magnitude of the problem. It will provide shared visibility of the root causes of the problem to all entities in the chain so that they can trust the numbers and are open to collaborating.

Build technology solutions with people at the core. This may sound very conflicting too many, but the fact is, we call many software systems “solutions” that are supposed to solve problems that organizations grapple with. And when we use the term organizations, we sometimes forget that an organization is nothing but its employees. People form the crux of any organization. Yet, we build solutions and then force them on people, expecting them to use them best. While this is not the primary reason, this indeed is another reason, despite having the required technology available, the bullwhip effect still lingers.

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