COVID-19 has forced businesses of every size across industries to rethink their supply chain planning and organization. It is a necessary move, given that the pandemic has significantly altered the workings of supply chains as we know.
Businesses are essentially being ushered into a new generation, requiring a new approach.
To strengthen supply chains, businesses need to adopt digitization and integrated planning.
This article explains the failure of the previous model of supply chain management, the benefits of integrated planning, and the role of SAP solutions specifically.
Integrating Supply Chain Operations and Planning
Keeping supply chain operations in silos limits the flow of information within the structure. This, in turn, negatively impacts the leaders’ ability to make flexible decisions and adapt to the changing situation of the market.
Apparently, enterprises require at least 70% to 90% of visibility into their supply chains to address key points of volatility. Unfortunately, most businesses haven’t gone beyond 20%. If 2020 has taught us anything regarding supply chains and disruption, it is that responsiveness is key to developing resilience and improving efficiency.
Integrating supply chain operations centralizes data, thereby extending oversight and revealing blindspots for prompt action. The gains in efficiency help the business to save costs, inevitably raising profit margins.
As businesses make the transformation from linear to nonlinear collaboration, the ‘supply chain’ no longer resembles a chain at all but looks more like a connected supply network. The latest iteration of supply chains globally is driven by concurrency, agile culture, and digital transformation.
Business leaders would admit that one of the greatest benefits of using the full potential of digital is the ability to monitor, connect, and collaborate across the supply chain.
Supply chains have seen a shift towards technologies such as AI and machine learning, cloud computing, predictive analytics, automation, as well as the Internet of Things.
Businesses that seek the necessary transformation to intelligent and integrated supply chain organization and planning can benefit from SAP tools to develop resilience, boost efficiency, and ensure cost-effectiveness.
Requirements for Building an Integrated Supply Chain
Beyond the digital tools, what makes for an integrated supply chain? After all, cultural factors play a major role in business direction, whether the supply chain or manufacturing.
Agility is the ability to adjust. The digital transformation that supply chains worldwide are undergoing comes from the need to adapt to the changing trends. The stark reality of the pandemic has accelerated this. Focusing on the following functions can make a supply chain more agile: production, capital asset, purchasing, product development, and planning. Here, the focus is planning.
It can’t be integrated if it does not foster communication. The end of implementing an integrated supply chain is to transform communication from a rigid, linear approach to a flexible, concurrent model. Endpoints should be able to communicate directly with each other. In essence, integration breaks down the bureaucracy and allows information to flow smoothly, and directly, from endpoint to endpoint.
An integrated supply chain does not only consolidate different supply chain operations; it also harmonizes supply chain management with other aspects of the organization such as sales and finance. Such collaboration is necessary to ensure rapid, profit-focused planning. It particularly helps when it comes to simulating what-if scenarios and determining what the role of each department should be.
SAP Integrated Business Planning for Supply Chain
This section explains, in detail, the importance of integrated planning for boosting supply chain efficiency drawing upon examples that demonstrate the role of SAP’s Integrated Business Planning tool in achieving that.
1. Data-driven Decision-Making
On the surface, integrating supply chain operations and centralizing data management seems to be a counterproductive strategy that would centralize decision-making. Upon deeper probing though, one discovers that digitizing supply chain management engenders collaboration and empowers users across the supply chain.
Finland-based chemical supplies company, Kemira is a testimony of this. Kemira employed SAP’s Integrated Business Planning for Supply Chain (IBPSC) to ensure end-to-end visibility and empower 600 users involved in the supply chain process for decision-making. As against the traditional model of supply chain management, users at each endpoint are equipped to make better, data-driven profit-driven decisions.
They are also able to resolve issues quickly, especially when they are related to security, which has become a major point of interest recently. Digitization empowers endpoints because supply chain activities become transparent. For Kemira, this approach simplified planning, clarified business targets, and enhanced customer service.
2. Risk Forecasting and Mitigation
COVID-19 has questioned our understanding of risk and risk mitigation. Many businesses never considered the possibility of a global pandemic; thus, they were left exposed once one hit. It is impossible to predict the future. However, we can determine the impacts that different risk scenarios would have on our supply chains and improve resilience.
Since Lennox International utilized SAP Integrated Business Planning, the company has improved forecast accuracy by up to 80%. Brazilian plastic materials company, Tigre Group accomplished a similar feat by recording a 16% reduction in forecasting errors after implementing SAP Integrated Business Planning. Real-time monitoring and reporting proved useful in both cases. Tigre gained immensely from enhanced analytics capabilities which resulted in deeper integration and insights.
3. Proactive Response
Disruptions are inevitable in business. Being without proper planning, many enterprises devote more time, effort, and resources, to reactive decisions, whereas building a proactive strategy is more sustainable. SAP enables Continental AG, a German automotive company to do just that: react faster and more strategically to growing customer demand.
The real-time planning capabilities of SAP Integrated Business Planning enabled the company to gain and report standardized insights, save costs with higher accuracy, as well as improve decision-making. Of course, at the base of all this was the establishment of a unified system for managing equipment capacity information.
The digitization of supply chain operations is important for a business to compete in the next year and beyond. And such transformation must be strategic, one that is built on agile principles and that unifies planning. Improving supply chain efficiency relies on the principles already explained.