Speeding Up the Supply Chain With Interoperable Systems

speeding up the supply chain with interoperable systems

Ongoing supply chain disruptions have highlighted the need for more data sharing among supply chain partners. Implementing interoperability—connecting companies’ computerized and automated systems to expedite information exchange—is one way to accomplish it.

Improving data sharing through interoperability can provide many benefits. “Increasing transparency across a value chain through data sharing and collaboration is a powerful way to keep supply chains operating efficiently,” said Tarek Kasah, associate partner, McKinsey & Company. Visibility across all tiers of a supplier network minimizes the risk of supply chain disruptions, improves productivity and gives a holistic perspective on environmental impacts.

There’s been some progress toward interoperability in recent years. The diverse technologies companies use for their own operations are no longer an insurmountable barrier. “Modern cloud technology and the Industrial Internet of Things offer solutions to the technological challenges of data sharing and interoperability across the supply chain,” Kasah said.

But data-sharing standards are still being developed (see sidebar on page 24), and many organizations have reservations about moving forward. “The greater challenge is trust between players, which requires a common understanding on what data can be shared and agreement on how it will be used,” Kasah added.

Data security

For interoperable supply chains to work, organizations need to be confident their data is protected from competitors and unauthorized entities. The growth of remote working has made security issues even more complicated, because data is now being processed through remote connectivity and virtual interfaces.

“You could say that the more virtualization you have, the more potential channels you have to open up opportunities for security hacks or data breaches,” said Andrew Stevens, senior director analyst at Gartner.

Organizations must incorporate strong security protocols at the beginning of any data sharing/interoperability initiatives, and ensure that there’s continuing vigilance and monitoring around security issues.

Kasah said one possible way to safeguard data is to appoint an impartial, third-party trustee that acts as intermediary, reviewing potentially sensitive data and helping to establish incentive arrangements for sharing it. Another approach is to share insights gleaned from the data rather than the raw data itself.

Defining value

Before companies commit to interoperability, they need to understand the benefits they will gain.

“Even two very similar organizations that are making similar products can approach the value of interoperability very differently, depending on what they consider to be highest priority objectives,” Stevens said.

In the food and beverage supply chain, for example, global retail chains might encourage interoperability in order to gain valuable business insights from data shared by their supply chain partners. But the value for some could also be in their ability to answer customers’ questions about the provenance of the raw materials used in their products.

It’s important to understand that the benefits derived from interoperability and data sharing are not spread equally among supply chain partners. “To make this data exchange lucrative and in the interest of both parties, respective terms and conditions need to be identified and agreed upon at the start of forming a supplier partnership,” Kasah said. The partners will need to address issues such as to how data will be shared, what data standards they’ll follow, and who has the rights to data access and ownership.

Options for interoperability

There are numerous ways that companies can implement interoperability and data sharing.

QR codes are one solution. Invented by MHI member DENSO Wave in 1994 to track automotive components, QR codes today provide information for a wide variety of products and services. Scanning a QR code leads to a website that offers whatever details the QR code creator chooses to share.

“One of the beauties of QR codes is that you can set it up to work however you want it to; it’s a reflection of the data that you put into it,” said Kevin Bradshaw, sales and business development manager, Americas at DENSO.

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