Is your Supply Chain Ready for a Rebound?: E.J. Kenney, SAP America

Albert Guffanti

3/18/2010

Following the global recession of 2009, experts predict a brighter 2010 for companies positioned to capitalize on a rebound. Given volatile demand, increasing product variability, stringent trade and compliance regulations, and complex sourcing and distribution models, E.J. Kenney, vice president, Consumer Sector, SAP America, explains how improved supply chain performance enables leading companies to seize opportunities as business improves.

What indicators are you seeing to identify a recovery?

Kenney: There have been several signs. In December alone, retailers collectively reported a 2.9 percent year-over-year sales increase at stores open at least a year, according to Thomson Reuters Corporation. And, due to increasing order volumes, manufacturing expanded at its fastest pace in more than three years. The Conference Board Consumer Confidence Index, which had increased in December, improved further in January.

What can supply chain executives do to position themselves for the eventual upturn?

Kenney: The common theme is how to respond profitably to volatile business conditions -- changes in demand, supply and the economy in general or consumer needs overall. For supply chain executives, the challenge is always to respond to rapidly changing business conditions via flexible yet cost-effective systems and processes that synchronize supply to demand. In very practical terms for this particular situation, that means planning production and distribution capacities for upturn scenarios; making sure to identify the real disruptive demand increase versus other factors like seasonality; and preparing to offer better service to retailer customers to gain shelf space during the upturn.

Matching demand and supply is not new. Why are you seeing a renewed focus in this area?

Kenney: Demand and supply volatility is at an all-time high. Not only is the absolute spend going up and down, but also the split between categories is changing more dynamically. For instance, categories like frozen food have benefited from the downturn. There are now solutions available that tie real consumer demand back into supply network planning. This allows an entirely new level of responsiveness for a consumer products supply network and true synchronization of demand and supply across the network.

Are you seeing sustainability initiatives affecting supply chain operations? How can supply chain executives align with corporate sustainability goals?

Kenney: More and more retailers request detailed information on the sustainability impact of their suppliers' products. Probably groundbreaking was last year's announcement of Wal-Mart's sustainability index that will eventually give consumers a rating about the sustainability of each product. So, job one is to establish the visibility internally and be able to provide the sustainability detail to both retailers and shoppers. Second comes the ability to improve it. Here the supply chain executives can play a key role by increasing the efficiency of the supply network, reducing waste in the value chain and driving important supply chain innovations.

For example, packaging changes to eliminate excess weight can reduce fuel costs. Meanwhile, distribution and route optimization efforts reduce the number of vehicles required to maintain customer service levels. Manufacturing optimization coupled with proactive recycling initiatives eliminates waste and reduces production costs.

Sustainability will not only have direct impact on the bottom line, but will also become a key competitive factor in the consumer goods business. Companies able to demonstrate their sustainability impact and how they are making improvements will win the battle over consumer mindshare and wallet and gain market share during the upturn.

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