This week I was with 1,100+ supply chain professionals in Palm Desert for the Gartner Supply Chain Executive Conference. The theme of the event was “Survive or thrive in an age of uncertainty” and the attendees were mostly Director, VP or SVP supply chain professionals.

The temperature (109 at its highest) was not the only talking point of the event. The hot spots of the events from my perspective were:

    • The announcement of the Supply Chain top 25
    • End user keynotes from Unilever, HP, Pfizer and Ford Motor Company
    • SAP Round Table on Inventory Optimization and Response Management

    

SAP is HOT in the Gartner Supply Chain Top 25

At the event Gartner released the findings from its eighth annual Supply Chain Top 25. The goal of the Supply Chain Top 25 research initiative is to raise awareness of the supply chain discipline and how it impacts the business. As usual SAP customers rose to the top and by our calculations 20 of the top 25 use SAP software

The top 25 are as follows:

  1. Apple
  2. Amazon.com
  3. McDonald's
  4. Dell
  5. P&G
  6. The Coca-Cola Company
  7. Intel
  8. Cisco Systems
  9. Walmart
  10. Unilever
  11. Colgate-Palmolive
  12. PepsiCo
  13. Samsung
  14. Nike
  15. Inditex
  16. Starbucks
  17. H&M
  18. Nestle
  19. Research in Motion (RIM)
  20. Catapiller
  21. 3M
  22. Johnson & Johnson
  23. Cummins
  24. HP
  25. Kimberly-Clark

 

Unilever: Delivering Sustainable Profitable Growth through the Supply Chain  

Pier Luigi Sigismondi, the Chief Supply Chain Officer of Unilever described how “the company has transformed its supply chain into a  globally led, interdependent organization”. This has “allowed Unilever to move from an era of functional excellence to a holistic approach of supply chain management, drive profitable volume growth through engaging the supply chain with the business, and to transform its network into a demand-driven value chain”.

 

He explained that at the start of this project, “Unilever had a vision of doubling the size of the business in the next 10 years (80b euros) and reduce their environmental impact”. The size of this challenge was highlighted by some of the statistics that were shared:

  • Unilever have 2b consumer’s every day.
  • 54% of sales are in emerging markets
  • Sell into 180 countries
  • 1000's of products in the portfolio
  • 280 factories globally with 60% located in low cost countries
  • 480 warehouses
  • 31b euros procured annually

 

Unilever supply chain transformation  

  • Step 1: Start with the basics: Unilever 1st focused on:
    • Improving brand equity by reducing complaints and product incidents (recalls)
    • Enable top line growth – Unilever improved on shelf availability in all regions by 740 basis points.

  • Step 2: Focus on what is making the real difference?
    • Global scale with local agility – e.g.
      • Segmenting the supply chain by portfolio mix, category mix, channel mix and geographical mix.
      • Different routes to market by region
      • Central sourcing with local call offs.
      • Regional logistics hubs for integrated operations for order to cash processes
    • Speed – As Pier Luigi stated several times "speed is our currency", and you have got to be 1st to market. Discussed the partnership with Lotus F1 Team and how to bring products to market globally in less than 6 months.
    • Partnership with suppliers – Enabling tactical buying to leverage strategic suppliers 
      • 48% of innovation pipeline is with partners
      • 1.3 b euros of capacity are committed by partners (Equivalent of 40 factories).
    • Sustainable growth (Unilever Sustainable Living Plan) is end to end across the supply chain from raw materials, through manufacturing and transportation through to consumer use and disposal
      • 60% of paper and boards are certified or recycled.
      • 1/4 of agricultural raw materials are sustainably sourced (goal is 100%)
      • Over half of Lipton tea contains rainforest certified tea
      • 600,000 tons of CO2 has been cut out of the supply chain
      • 1/3 of sites produce zero waste
    • Building a talent powerhouse – “If you think education is expensive, try ignorance"!!

S

 

HP: Agile Supply Chain Management: Optimizing for an Unpredictable World

Tony Prophet, the Senior Vice President of, Operations for Hewlett-Packard Company talked about the multi-year journey his company is on to drive flexibility, speed and leverage its scale as a modern supply chain. As Tony stated, "HP has one of the largest IT supply chains in the world" so the challenge is not trivial when you "deliver 4 servers, 120 PCs and 100 printers EVERY 60 seconds!!"

In mid-2009 HP started an initiative to improve supply chain processes and to date (or up to the end of 2011) have:

  • Reduced nodes In the network by 25%
  • Reduced physical network partners by 20%
  • Reduced total number of suppliers 48%
  • Reduced factories in the Printing and Personal Systems Division from 80 to 30. These factories are geographically dispersed in America, Mexico, Brazil, Europe and Asia. This broad manufacturing base makes it easier to sell and distribute across the globe.

    

HP – Leading the way in China

It was particularly interesting to hear about the work that HP have done in China where they have 4 facilities:

  • Chongqing - domestic PCs, export PCs and printers
  • Shanghai - PCs and servers
  • Wuhan - PCs
  • Shenzhen - Printers

 

Chongquing was of particular interest as the location (in Central China) was a key strategic decision to insure availability of labor. However, as Tony explained “exporting from central China was the challenge”. HP collaborated with Chinese ministry of rail to improve logistics to the port cities. They also worked with government to build a larger runway in Chongqing. Next step is to have a “Land bridge” through the introduction of a block train from Central China to Europe (38 days by sea, 25 days by rail at a higher cost, but cheaper than air).  

 

Building Resilience across the network

Tony also discussed the work that HP have been doing around risk management and how they fared during the well published natural disasters over the past few years:

  • Volcano in Iceland April 2010 caused the largest logistics challenge in recent history
    • Impact -70% of HP products move by air!!
    • Leveraged strong logistics relationships to initiate the continuity processes in place
    • Bought charter planes to import from China to open airports in Dubia and ship to Europe from the new hub
  • Tsunami in Japan march 2011
    • Impact - Decimated the physical and energy infrastructure  - roads, rail, sea and air
    • 1st assessed the status of employees
    • Damage assessment across multiple tiers - Japan has a central role in the HiTech industry at 2nd or 3rd tier (produce 16% of semiconductors, 35% of LCD glass and 85% of resins)
  • Thailand flood - Oct 2011
    • Impact - Much of the hard disk motor manufacturing impacted in the market. This caused an extended impact to the entire supply chain.
    • Need to balance efficiency and risk by having alternate sources and have visibility at multiple levels in the network to increase diversity.

 

HP is currently 24th in the Gartner Top 25.  

 

 

 

Ford Motor Company: Manage the Realities and Plan to Change the Future

Stephen Harley, Executive Director of Ford Motors Materials Planning and Logistics organization explained how Ford have developed a supply chain management competency that has enabled it to navigate a record amount of critical supply situations, including ash clouds, snow, hail, hurricanes, tsunamis, floods, nuclear accidents and, as Steve joked “even a plague of Locusts” .

Steve kicked of his presentation by explaining how, prior to financial crash Ford mortgaged everything (including their Brand) for $27b. The day before this presentation, Ford were again declared "investment grade" and know "own the Ford Oval again".

Steve focused his talk on the value of "daily innovation and how not just to survive, but to thrive" in a complex network of:

  • 6 million cars produced a year
  • 70 plants worldwide
  • 1400 tier 1 suppliers with 4400 manufacturing sites
  • 8900 service parts suppliers
  • Up to 10 tier supply chain
  • "Logistic challenges of 34% of suppliers are more than 2500 miles away from a manufacturing site"
  • Ford manages risk for 50 suppliers and 1500 part numbers.

    

“One Ford” Strategy

The “one Ford” strategy is a major initiative to change the future through:

  • Flexible manufacturing strategy
  • Key area of process discipline across the supply chain
  • Manage capacity and complexity of suppliers
  • Improve forecast accuracy
  • Manage risk by
    • Driving the decisions back into the sourcing.
    • Drill down with 1st tier suppliers to identify key items and have alternatives
    • Fully transparent with 1st tier suppliers to get visibility to their suppliers items
    • Recognize employee contributions to managing risk
  • Deploy "scrambling skills" only when necessary

    

 

 

Pfizer: Managing Highly Flexible Supply Networks to Win in the Global Healthcare Marketplace

Jim Cafone the VP of Supply Network Services continued the theme of managing complex global networks (this time in the healthcare industry). He described the size of the challeng within Pfizer who:

  • Generate $65 billion in annual revenue
  • Do business in 150 countries
  • Manage 89 manufacturing sites
  • Work with 500 third parties
  • 600 product groups
  • 3000 recipes
  • 35,000 sku's

 

 

Segmenting the market

The big challenge that Pfizer faced was "how do you optimize a network that is highly fixed, and highly structured in a regulated industry"? 

Pfizer are “winning through supply chain excellence”.  Jim stated that “companies compete and win either on agility, cost or service”. He went on to explain how this translates within a particular product line , Lipitor which has over 800 sku's, which is sold in 84 countries that have different regulatory rules and guidelines. Depending on where it is sold it competes on agility, cost, or service. When on patent it is about service. When it competes against generics it's about costs. In emerging markets it is about agility. Therefore, Pfizer segment markets on cost, agility and service.

 

Supply chain virtualization 

Jim also discussed how Pfizer addresses the challenge of how to connect internal and external manufacturing, and any other trading partner in the network. There was a time when everything was done within the 4 walls of Pfizer, but this has shifted to "focus on core and outsource the rest" with a single business ERP platform. And as Jim pointed out “as you move your value chain outside your 4 walls you take on a lot more risk".

 

 

Hot Topic: Inventory Optimization and Response Management

SAP hosted a lunch round table on the topic of “Advances in Supply Chain - Inventory Optimization and Response Management”. This session was VERY popular and we way exceeded our goal with 60+ registrants. The session was hosted by Keith Baranowski who discussed the topic with Dave Winstone the Director of Supply Chain, Dow AgroSciences, and Michael Hartman of ICON-SCM. There was an active debate on how Dow utilizes the software and the lessons learned, best practices, and what to consider when such projects are undertaken.

 

Summary

This was a great event to meet and talk to the top supply chain exeutives, but my favorite quote of all was not supply chain related at all.

      "Next year, we will have this event on the sun. It is just as hot, and just as difficult to get to!!"

 

Richard

You can follow me on twitter @howellsrichard

Supply chain management is one of the key elements which influence the fate of the organization.  The areas where companies are required to concentrate are supply chain visibility (both downstream and upstream) and flexibility to align dynamic business and global scenarios.


 

In any decision making process, the probability of taking correct decision is directly proportional to the amount of related information available, from past, and information on activities which may happen in future. The same rule applies in business where the clear visibility of the upstream and downstream processes helps to take decisions which are right and improve their supply chain operations.


 

Just to mention few of the areas where organizations should strive to improve visibility, through working collaboratively with suppliers and customers , are advanced shipping notification (ASN) from supplier and providing similar information to customers , demand forecast sharing from customer , point of sales and inventory information from customer , supplier production plan and inventory levels etc.


 

As the supply chain visibility information provides the right data points and indicators to take appropriate decision, to implement the decision it is equally important for the organization to be/remain flexible. All the information and right decisions will not convert to competitive advantage unless decisions taken are not implemented as per plan.

 

It is pertinent for organizations to be flexible to change and slim business processes.Visibility and flexibility in tandem delivers the growth organizations require to stay ahead in competition.

Managing Supply chain efficiently and effectively is always a prime focus for organizations across the globe.Managing perishable foods supply chain like Dairy products is much more complex. 

 

Customers are now more concerned with the quality and food safety, and it is forcing dairy companies to maintain better end to end traceability from raw material to finished product. Also there is an overall impetus to increase process efficiencies, reduce cost, and ensure compliance with food regulations over the whole supply chain.

Today I would discuss the supply chain challenges of Dairy industry and how SAP can help to overcome those challenges.

 

Dairy Industry Challenges

  • Increase in milk production cost : Higher cost of maintaining animals in diary  
  • Food regulation on the elapsed time for which  unprocessed milk can remain in inventory and lack of superior cold-storage transport
  • Increasing retailers’ power and negotiating for lower prices.
  • Managing inventory level efficiently and avoiding out of stock situations to ensure customer retention.
  • Complex and frequently-changing payment conditions based on quantity and quality characteristics of milk
  • Limited supply chain visibility due to number of isolated application systems landscape
  • Stringent government regulations on food safety, financial reporting , and bioterrorism threat
  • Continuous innovation to maintain the position in market
  • Expanding customer base demands flexible and unified IT platform

 

How SAP  can help

  • Collaborative planning and improve visibility across extended supply chain ensures efficient management  of inventory level ,which brings down the working capital , and avoids out of stock situation.
  • Improve yield and reduce waste : Supports shelf life based picking and distribution.
  • Instant top-down and bottom -up traceability. Track and trace product at all stages of production, processing , and distribution.
  • Improved purchasing operational tasks with automatic vendor evaluation (based on price, delivery, and quality), management of contacts and scheduling agreements, automatic invoicing etc.
  • Backward price determination of purchase orders : The price is calculated after the goods receipt postings based on the characteristic values (for instance , fat, protein contents etc) of the goods receipt batch
  • Enhance operational efficiency: Single integrated system enables dynamic information from procurement, production, quality, sales and other departments.
  • Supports end to end business functions: Procure to pay , plan to produce , order to cash , and Finance.
  • Quicker Accounting and end of period closing process.
  • Consolidating and reporting KPIs  like gross profit, operating cost, net profit, forecasting accuracy , production schedule adherence, order fulfillment rate  etc.

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