Sometime in the late 1990’s (I believe in 1998), Art Mesher, then an analyst at Gartner (and current CEO of Descartes Systems), wrote one of the most influential pieces ever in the supply chain industry. I can’t actually find the exact article in my files, so I am relying on memory and some related materials I was able to track down. The title was something like: “The 3 V’s of Supply Chain: Visibility, Velocity, and Variability.”
This framework for thinking about where supply chain processes and technology needed to go had a huge impact on both supply chain technology vendors and companies. The themes were further explicated by Gartner in a series of research notes, and indeed remain standard in overall supply chain thinking to this day.
I thought it might be interesting to contemplate the three V’s for a minute, and assess where we are at seven years after the original thinking. Each one of the individual V’s is worthy of its own piece, and we’ve certainly touched on each of them at different times (see for example, Does Your Supply Chain Need Glasses?).
Over the past two years especially, my sense is that many companies have started to get pretty serious about supply chain visibility, though from an analytic perspective one of the challenges is that visibility means many different things to different companies. Back in 1998, legacy systems and other barriers often meant companies couldn’t even easily see what inventories they had within their own facilities, let alone across the extended supply chain. Most are in much better shape now, though that extended supply chain thing is still an issue for many if not most. Visibility to transportation execution has also improved substantially for many, and many companies have implemented technologies to help them improve visibility for long, offshore-based sourcing strategies.
Gartner also suggested that to improve decisions processes, companies would need to start looking past their own inventories and ability to respond to customer needs to achieve visibility to the real-time capabilities of their trading partners. We may have a few early examples of that, such as Dell being able to look through their first level suppliers to see what is happening with deliveries of components those suppliers need, but we’re well away from this level of visibility generally.
Variability is also tricky, because it really has two major components: reducing the level of supply chain variability, and being agile to respond to the inevitable variation in execution that will always occur. There is a lot of effort, especially among very large companies, to reduce variability through process improvement and supply chain simplification. Many are using six sigma principles outside of their roots in manufacturing to drive out variation, while more generally “reducing complexity” is a strategy of many companies.
I don’t believe, however, that we made a lot of progress in becoming “agile” to supply chain change and disruptions. More on that topic at a later date.
Velocity is perhaps the most interesting of the 3 V’s. While we have Dell demonstrating and promoting the benefits of financial and material velocity, the reality is that over the past few years more and more companies are extending their supply chains, in some cases dramatically, by moving to offshore manufacturing models. At the same time, even within supply chains that can be very long in total, we have pockets of high velocity, just-in-time processes. I would also add that in general, most companies are just now really looking to substantially shorten other supply chain processes, such as the product design. The Limited Brands, for example, has a goal of reducing the time it takes from product concept to store shelf by something like 75 percent.
So, my take on the 3 V’s: visibility: lots of progress, but still a long way to go; variability: something most are just getting their arms around across the broad supply chain; velocity: some progress, but outside of design cycles, the least important to most companies right now.
That’s my perspective – would love to hear yours.
What are your thoughts on visibility, variability and velocity? How would you rate the supply chain progress on these issues? Is the original framework still just as valid today?
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