A quantitative approach for evaluating the impact of increased supply chain visibility

Abstract

Communication and collaboration between supply chain partners is more important than ever. To achieve this, visibility between different supply chain tiers is essential. Recent literature has discussed the benefits of increased supply chain visibility, but more research is necessary to provide concrete evidence. The main question this article aims to answer is about what parts of a supply chain are critical for establishing and increasing visibility. Toward this end, this study uses the amount of unmet customer demand as a performance measure, and performs simulations and empirical analysis on multi-tier supply chains of various sizes. Results indicate that the customers (i.e., downstream supply chain) are the most critical components, and the managers must focus on increasing visibility with them. In addition, visibility in the downstream can be nearly as effective as full visibility in specific settings: The maximum gap between the amounts of unmet demand for the two settings is about 7%. However, the main value of full visibility becomes more apparent when significant deviations exist between forecasted and actual customer demand amounts. As the experiments demonstrate, full visibility in the entire supply chain is the most effective level of visibility.