Enhancing Customer Experience with Risk Resilient Supply Chain at BSH Home Appliances Group
Offering more than 10,000 products to 50,000 customers in more than 50 markets, BSH has a factory network of more than 40 sites and more than 150 warehouses and distribution centers. With the goal of making life better for customers through world-class home appliances and services, the company prides itself on product and supply chain innovation.
During the COVID-19 pandemic, answering the increasing demand for reliable products and delivery dates was particularly difficult. Moreover, changing long-term customer needs due to strong seasonality and new distribution channels were added as new challenges. The ongoing manual planning and execution processes at BSH were not enough to provide customers with the information they need, on-time and in the form they want.
Knowing the key to achieve risk resiliency in the ever-changing VUCA world is to enable transparency and visibility in the supply chain operations, BSH Home Appliances Group chose SAP Integrated Business Planning (SAP IBP) applications for Supply Chain and SAP S/4HANA to coordinate business planning and execution functions for enhancing the customer experience.
Building risk resilience in the VUCA world
Businesses are planning in the perfect world, but executing in the VUCA world where things don’t always go to plan. As a global producer of home appliances, BSH needed to change the operating environment to match continuously increasing and changing demand to the restricted supply. To manage this, the company needed to build risk resilience within supply chain operations.
BSH aimed to synchronize planning, manufacturing, and logistics operations in order to achieve high level of transparency and visibility into supply chain operations to take a resolute and agile decision-making process.
“No matter how well we can plan product allocation and order promising, if we’re not able to execute and deliver as planned, everything falls flat. We need synchronization and collaboration between our planning and execution functions.” says Bernard Czap, Head of Global Supply Chain at BSH.
The company followed a comprehensive process integration from planning to real-time order processing and fulfillment while integrating sales and operations, production planning, and scheduling processes. With this seamless integration, the company can now manage bottlenecks, with allocation concepts to handle scarcity, allowing it to be more reliable when it comes to real-time order promising and fulfillment.
Keeping the promises high and stock level low
The company primarily followed two approaches for enabling this transformation. The first approach was to replace the previous push-based planning process with a pull-based system. This means designing the entire supply chain to adapt to unexpected changes, instead of predicting what product variants would customers purchase in the upcoming months.
The second approach was to achieve a lean production system since, which was seen as the key to stability. This required the ability to “leveling product mix and volume”. For example, by producing the same appliances every Monday at the same time and achieving a fixed structure to balance production and streamline suppliers’ processes.
With Demand-Driven Material Requirements Planning (DDMRP), BSH now only produces the predefined quantity of appliances that have been removed from the warehouses; in other words, BSH produces what is sold. Also by decoupling the inventory, BSH achieved a valuable buffer against unexpected disruptions by standardizing the manufacturing operations. This enabled the company to reduce inventory costs while improving customer satisfaction to the next level.
Michael Huber Global Program Lead Digital Supply Chain at BSH adds: “With Demand-Driven Requirements Planning (DDMRP) we are reducing our stocks and improving our ability to deliver to our customers at the same time.”
Enable demand-driven predictive and prescriptive planning
By leveraging SAP Integrated Business Planning (SAP IBP) with S/4 HANA and establishing the S&OP process, BSH can use forecasts as input parameters for calculating the stocks. This enables the company to ensure that there are the right products in the right amount in the warehouses at the right time.
Bernard Czap further adds,“With SAP IBP for Response, we consistently combine the tactical operational planning with the actual execution of day-to-day business, in other words, Supply Chain Execution & Fulfillment. Bottleneck management, allocation concepts to handle scarcity and to be much more reliable in what we tell our customers when it comes to order promising became the main capability to drive the company, especially in a notorious situation of worldwide supply shortages.”
With SAP Integrated Business Planning for demand, BSH has improved forecasting and sales planning with automated and semiautomated functionalities for demand sensing, not only for long-term but also short-term forecasting of products. SAP Integrated Business Planning for S&OP brought cross-functional teams from across the company together to agree on the same figures. And the SAP IBP for Demand Driven Replenishment component ensures and improves the demand-driven supply of our multilevel value-chain network.
Dietmar Baumann, Global Program Lead Digital Supply Chain at BSH adds “With SAP Integrated Business Planning for Supply Chain, we can now handle customer orders even better: which location must be supplied, when, and how so that production and logistics can coordinate their activities and deliver orders on time and as required.”
After the implementation success in China, BSH is planning to roll out SAP IBP for response and supply company-wide, including integration with all its markets, factories, warehouses, and material groups. To ensure that planning is properly executed on the delivery side, the company is in the early stages of employing SAP Networks for Logistics, SAP Transportation Management, and SAP Extended Warehouse Management applications that can be integrated with SAP IBP and SAP S/4HANA.
Discover why planning is at the heart of operations, and explore what this might mean within integrated business planning: IDC Spotlight: Integrated Supply Chain Planning
This blog was written by Öykü Ilgar from SAP.