The Global Supply Chain: Richard Howells, SAP
Globalization is proving to be both a blessing and a curse for consumer products companies. With access to new regions, consumers and suppliers, this industry enjoys an expanding world of selling and sourcing opportunities. But with this expansion comes complexity. Here, Richard Howells, senior director, solution marketing, SCM, SAP, addresses supply chain dilemmas and offers expertise on how to improve demand visibility across a global supply network.
What emerging supply chain challenges must today’s
consumer products manufacturers address?
Howells: Retailers demand shorter delivery cycles, favorable prices and high product availability. Consumers want to find items on the shelf. And, the increasing emergence of outsourcing, both offshore and near shore, has resulted in highly distributed supply networks that require multiple partners, direct and indirect, to bring products and services to market. As a result, global supply networks have become highly complex.
This double-sided dilemma makes it extremely difficult to put the right products on the right shelves at the right time -- and at the right level of profitability. To overcome these challenges, balancing demand and supply within our own supply chain as well as with suppliers and customers means we need new levels of collaboration across functional and departmental boundaries.
Long lead times and lack of visibility make it extremely difficult for many companies to respond appropriately to dynamic demand. This lack of demand visibility results in compromised ability to put the right product in the right quantity on the shelf to meet shopper needs. These problems cause three primary issues common in consumer products companies that lack integrated supply and demand planning capabilities:
• Lack of demand visibility
• Slow supply response
• Escalating costs due to inefficient operations
How are companies improving demand visibility?
Howells: As global demand grows, companies are finding that the fundamentals that create high-performing supply chains within countries or regions don’t necessarily translate easily to global environments, including business process pressures on the supply chain, poor or infrequent communication with language (and potentially technology) barriers, and an exponentially greater number of partners. But these global supply networks still need to properly balance the basics: cost, service and productivity.
Forecasting, the traditional gauge of market demand, has been viewed as half art and half science and almost always does not predict demand as accurately as needed. To get a more comprehensive view of demand, you have to collect and digest data from many different sources. Whether it’s point-of-sale data from retailers, actual orders from customers, promotional plans from marketing or forecasts from your sales team, you must harmonize and consolidate these data streams to get a clear picture of demand.
How can companies respond faster and smarter across a global supply
network?
Howells: With uncertainty at all levels of the demand/supply continuum, forward-thinking companies are expanding supply planning activities across the supply network rather than relying on a top-down, centrally managed approach. By enabling this distributed supply planning that links all partners, facilities and functionalities, it becomes possible to establish optimum safety stock levels and synchronize delivery schedules for finished products as well as materials.
How can companies control fluctuating network costs?
Howells: Supply chain executives can never lose sight of the fact that there are enormous cost pressures on the supply chain to increase asset utilization, improve productivity and reduce inventory levels. Ironically, these pressures are in great part responsible for the distributed global supply networks that I discussed earlier. These cost pressures are not going away, so it is incumbent on the supply chain organizations to continue to eliminate waste, improve productivity and optimize capacity and inventory across the network.
The leading companies have put in place cross-functional S&OP processes that turn disparate internal and external views of demand and supply into one aligned cross-departmental plan. This is both in sync with and measured against the financial and KPI goals of the company.
What emerging supply chain challenges must today’s
consumer products manufacturers address?
Howells: Retailers demand shorter delivery cycles, favorable prices and high product availability. Consumers want to find items on the shelf. And, the increasing emergence of outsourcing, both offshore and near shore, has resulted in highly distributed supply networks that require multiple partners, direct and indirect, to bring products and services to market. As a result, global supply networks have become highly complex.
This double-sided dilemma makes it extremely difficult to put the right products on the right shelves at the right time -- and at the right level of profitability. To overcome these challenges, balancing demand and supply within our own supply chain as well as with suppliers and customers means we need new levels of collaboration across functional and departmental boundaries.
Long lead times and lack of visibility make it extremely difficult for many companies to respond appropriately to dynamic demand. This lack of demand visibility results in compromised ability to put the right product in the right quantity on the shelf to meet shopper needs. These problems cause three primary issues common in consumer products companies that lack integrated supply and demand planning capabilities:
• Lack of demand visibility
• Slow supply response
• Escalating costs due to inefficient operations
How are companies improving demand visibility?
Howells: As global demand grows, companies are finding that the fundamentals that create high-performing supply chains within countries or regions don’t necessarily translate easily to global environments, including business process pressures on the supply chain, poor or infrequent communication with language (and potentially technology) barriers, and an exponentially greater number of partners. But these global supply networks still need to properly balance the basics: cost, service and productivity.
Forecasting, the traditional gauge of market demand, has been viewed as half art and half science and almost always does not predict demand as accurately as needed. To get a more comprehensive view of demand, you have to collect and digest data from many different sources. Whether it’s point-of-sale data from retailers, actual orders from customers, promotional plans from marketing or forecasts from your sales team, you must harmonize and consolidate these data streams to get a clear picture of demand.
How can companies respond faster and smarter across a global supply
network?
Howells: With uncertainty at all levels of the demand/supply continuum, forward-thinking companies are expanding supply planning activities across the supply network rather than relying on a top-down, centrally managed approach. By enabling this distributed supply planning that links all partners, facilities and functionalities, it becomes possible to establish optimum safety stock levels and synchronize delivery schedules for finished products as well as materials.
How can companies control fluctuating network costs?
Howells: Supply chain executives can never lose sight of the fact that there are enormous cost pressures on the supply chain to increase asset utilization, improve productivity and reduce inventory levels. Ironically, these pressures are in great part responsible for the distributed global supply networks that I discussed earlier. These cost pressures are not going away, so it is incumbent on the supply chain organizations to continue to eliminate waste, improve productivity and optimize capacity and inventory across the network.
The leading companies have put in place cross-functional S&OP processes that turn disparate internal and external views of demand and supply into one aligned cross-departmental plan. This is both in sync with and measured against the financial and KPI goals of the company.