Traditionally, companies have approached supply chain management in terms of increasing efficiency and driving down costs. This is changing.
Today’s companies compete in a digital economy where customers are empowered with information and options. More than ever, these customers want products, experiences, and outcomes that are uniquely tailored to their preferences.
As companies compete to attract these empowered customers, they are constantly changing their business models to differentiate themselves and deliver what customers want. As a result, the number of ways products and services can be made, distributed, and sold have expanded exponentially. This puts more stress on companies to seek new ways to manage the associated supply chain complexity and make it all run smoothly.
No longer a back-office concern
These changes mean that today, when it comes to supply chain management, your company needs to think not only about efficiency and costs but agility and speed as well.
If the supply chain was a back-office operation in the past, today it is a highly connected operation that is of strategic concern to the front-office. Extending beyond the traditional players of customers, suppliers, manufacturers, and distributors, today’s supply chains now reach out to the customers’ customer. Increasingly, this is done with products that use software and sensors that enable active feedback with customers throughout the life of the product – resulting in longer, stronger relationship ties with ongoing customer needs fulfilled by dynamic supply chains.
Companies that will win in this new reality are the ones that can nimbly fire up new production and distribution supply chains and flexibly collaborate with new partners with minimal effort. These companies will seize opportunities faster, meet shifts in demand more effectively, and flexibly support new business models. They will convert their supply chain from a system of delivery to a system of differentiation.
Take for example, Kaeser Kompressoren, an SAP S/4HANA customer. For years, the company made, sold, and serviced air compressor units to plants and other operators. Today, Kaeser provides options for “air as a service” where it delivers the compressors for free, maintains them in working order for free, and only charges for usage – which is monitored through connected IoT sensors.
Under this model, it is more important than ever before for Kaeser to be connected directly with the customer. Because it’s on the hook to deliver a steady and uninterrupted flow of compressed air, maintaining service levels is critically important to meeting this need. This means that Kaeser needs visibility and insight to plan better across production, maintenance, and distribution supply chains. The insights gained in this model, furthermore, enable Kaeser to design equipment and services that better meet customers’ needs and enables them to service customers for longer.
Keeping pace
Kaeser is just one example. Similar changes are happening all around us. To keep pace, many SAP customers are taking a hard look at managing new business models and optimizing their business plans in a more integrated manner across supply chain, sales, and financial operations.
To address this need, the SAP Integrated Business Planning suite helps customers collaboratively create sales and operations plans, refine forecasting, and quickly respond to demand changes. An earlier post by Guido Kaup reviews how this works in detail. Here, I want to focus on the broader advantages for companies considering the move.
Unleashing the power of a collaborative supply chain network
With SAP S/4HANA and SAP Integrated Business Planning, supply chain planning and optimization can run in the cloud.[1] The system makes it easy to quickly connect to new partners as business needs evolve – partners that more readily share the data needed for visibility and synchronization of the supply chain. This is a tremendous advantage when it comes to supply chain agility.
What’s more, SAP Integrated Business Planning is a complete supply chain planning solution that combines capabilities for sales and operations, demand, response and supply planning, and inventory optimization, all on the same SAP HANA database. And as a cloud solution, it is managed, monitored, and maintained by SAP – so you can focus on managing your supply chain rather than the software that supports it.
A digital core for the digital supply chain
SAP S/4HANA is designed as a digital core that connects your entire business – and connects you to other businesses as well. Collaboration tools make it easier to work with partners up and down the supply chain. Simulation tools support better decision making and more accurate forecasts. And predictive analytics give insight into what’s coming so that it is easier to react in a timely manner to prevent supply chain disruptions.
This SAP S/4HANA digital core, moreover, supports innovations and extensions provided by SAP Leonardo – SAP’s system of innovation. If your company wants to interact with customers more effectively and monitor how they use your products, an IoT deployment that tracks usage and manages preventative maintenance along the lines of Kaeser Kompressoren’s new business model may make sense. If you want to understand your customers more to serve them better, you may want to deploy machine learning for insight on how to optimize processes. For companies that want to gain advantage in the digital economy with a complete supply chain solution from one vendor, SAP S/4 HANA can help make it all happen.
With supply chain depth
As much as you need to look to the future, you also want continuity. This is why functionality you’ve depended on for years still remains – but is now stronger and deeper. With SAP S/4HANA and SAP Integrated Business Planning, you get expanded support for deep areas such as:
- Material resource planning (MRP)
- Production planning and detailed scheduling
- Global available to promise (gATP)
- Integrated business planning for demand, inventory, response and supply, and sales and operations
In addition, a supply chain control tower provides end-to-end visibility and decision support across the digital supply chain.
Don’t let your supply chain hold you back
It’s a digital economy out there and companies that want to compete successfully need digital supply chain capabilities. Learn more about the 5 C's of the Digital Supply Chain from the IDC paper "The Strategic Imperative for an Agile Supply Chain" here
[1] SAP S/4HANA runs in the public cloud, private cloud or on-premise.
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