In the wake of devastating tragedies in Bangladesh and Paskistan over the past 18 months, OEMs are developing action plans and mitigation strategies to avoid collateral brand damage associated with poorly run and often dangerously unsafe external contract manufacturers. During my recent podcast for the IXN (Episode IXN002 on iTunes) I was asked what is the top challenge facing global supply chains. My answer was terrifyingly predictive: brand management and the impact it has on brand sales when a horrific event happens overseas. Two weeks later, over 1,000 workers (mothers, fathers, sisters and brothers) lost their lives in the building collapse at the Rena Plaza factory in Bangladesh. While the death toll rose, Disney was one of the first brands to pull out of the country, and the EU developed a memorandum of understanding that many apparel and footwear manufacturers were voluntarily adopting.
This week at SAPPHIRE I sat down with Markus Rosemann, Head of Supply Chain Execution, LOB Solution Management, to discuss this problem. Given the actions of the previous several weeks this issue is top of mind in supply chain operations and risk management functions inside, it was a familiar topic.
Integrated supply chain issues for brand management is a critical success factor because as Rosemann put it, “you cannot lose on this front. How you integrate with your partners is a growing need, not only the process and order level (for example, who was manufacturing on Bangladesh and what percentage of your portfolio), but also the need for the supply network to create visibility.” While this has been an issue for years, the impact on brand management today creates a new need to track and trace supplier activity so companies can protect their brand.
While it’s great to use massive data analytics to gauge past order histories and manufacturing performance in quality and social audit reviews, how does an OEM get preemptive? “Supply chains can get preemptive with traceability and visibility,” claims Rosemann. “Batch investigations can help in this process in pharma for example. SAP was able to bring this into tracking by seconds versus longer reporting times. You can look at this even in capacity balancing: where to source, where to make. It has a business relevance, back to order sourcing and share of portfolio. These questions can all be answered.”
Back to my recent podcast, we turned to the nature of integrated approaches which can make the difference in how a company takes on preemptive brand measures. Clearly, SAP enables more and more information to be available in real time and in-memory. With “quick investigation come quick actions,” Rosemann submits. “With responsive networks in place companies can help drive decisions like where to go, where is the capacity? These become also risk management concerns. From a brand management perspective, how much damage to the brand is at risk? How well is it recognized that this is a problem for each OEM? How do I plan my supply network to support my business planning? Navigating through the value chain data is like a ‘SCM GPS.’ Using tools like APO, much of the data is already there in the SAP SCM system.”
My conversation with Rosemann then turned to planning, particularly the area of S&OP. “S&OP is based on HANA and real time information is available, in-memory,” claims Rosemann. “Tracking and traceability scenarios are being looked at on HANA since these are high volume, real-time transactions. This is a risk mitigation approach. Demand signal management is the look on the other side and this is already offered on HANA.” With these tools, Rosemann suggests that OEMs can perform capacity planning and risk balancing in retail from Bangladesh to Mauritania as an example.
Social and sentiment analysis can also play into that from a demand signal management perspective. Social plug-ins can see the sentiment analysis on brands, platform, and customer preferences. So what does this mean having a true voice of the customer in the wake of a horrific supplier event? According to Rosemann, “that is finally changing, best margin is not the only driving force” in industries such as apparel and footwear. “This is an area that we see changing in the market place – demand patterns which are changing, and this can all be viewed inside real-time analytics. We see this as a huge opportunity to leverage the power of HANA, for massive data which can be analyzed and understood. From this, information can be pushed onto strategy, supply planning, and then sourced. This is the real integration and opportunity for a real time supply chain.” I agree and none too soon.
(Image courtesy of the NY Times, Reuters)