Remember your college days when you just spent 3 hours in an Advanced Lab and arrived back to your apartment with a headache and your energy spent. With hunger calling, you go to the fridge and pull together a meal based on whatever is there – beans on toast or maybe a mystery ingredient chili. You did not think about a gourmet meal. You focused on solving your hunger with the ingredients available. With the current disruptions in Supply Chains, mystery meat chili may be becoming the norm. Let me explain…
In the past 24 months, we have had supply disruptions, port closures, canal blockages, plant shutdowns, soaring energy prices, a paper shortage, missing transportation capacity and political unrest, all causing major material shortages, price increases and product stockouts. To survive in this environment, we must rethink our supply chains to be more resilient to ensure we have the ability to support customers. If we do not figure it out, our competitors will.
This unprecedented level of disruption has challenged the way paper and packaging companies act and think forever.
From just-in-time to “take what you can get”
Last week, I met with an executive from a printing company with whom I discussed the impact of changes on supply planning. In light of the current paper shortage, he explained, "Securing paper supply has become an essential part of planning, and we are struggling not only with shortages of products but also with delivery delays. No longer can we rely on the well-established just-in-time inventory approaches, which are more and more being replaced by scouring supply, planning ahead and rationing inventory."
This shift in purchasing behavior then often hits oversold paper mills as global supply is restricted in some parts of the world like Europe, where strikes caused by the changing economic conditions or energy problems forced European mills to cut production. In addition, they are struggling with a lack of transport capacity and primary products and, as far as possible, are trying to offer their customers alternatives to the products they normally order.
That made me think how this completely changes business dynamics. It goes beyond how we sell the products available. It drives the way we must operate to survive.
Who would have thought that my college experience would have prepared me for the new norm of running manufacturing operations?
Manufacturing in the “New Normal”
Leaders in the paper and packaging industry are paying attention to the increasingly complex circumstances they face with renewed commitment. They are focused on how to manage business performance in the current environment while at the same time, planning for the future. In this changing environment, the focus is no longer on capacity, but on the ability to respond quickly to customer needs and market changes while still controlling costs and quality.
Until recently, supply chains were mainly measured by efficiency metrics. Today, it is about resiliency and responsiveness.
Beyond labor productivity and asset-efficiency, the next performance leap in paper mills will be through end-to-end effectiveness of collaborative supply chains. A closer integration of manufacturing with upstream and downstream processes will become the new norm, with circular economy aspects also gaining in importance, for example through the collection and environmentally friendly processing of wastepaper. Your production processes must evolve to support the complexity of the current norm and dynamic future demand and customer requirements.
Lessons Learned
Recent years have challenged manufacturers with unprecedented levels of disruption, but not necessarily to the detriment of business performance. For many manufacturers, the pandemic accelerated innovation, adaptation and transformation. So, I think my college experiences all those years ago, where out of necessity, I used what was available, has come to reality in business life. In some cases, we do not have the luxury to make to order and give the customer exactly what they want. We need the flexibility to have to think out of the box and the agility to maximize what we have available, to still give customers a great experience.
For more on how SAP is helping paper and packaging companies improve their supply chain outcomes visit SAP.com
This article originally appeared in this SAP Community page, and is reposted here with permission.
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