23 minute read
Caroline Cioe, Vice President of Sales, Digital Supply Chain, at SAP North America, on the future of supply chains
The Future of Sus Supply Chain
Caroline Cioe, Vice President of Sales, Digital Supply Chain, at SAP North America, charts her company’s impressive supply chain transformation journey.
Future of Sustainable Supply Chains
For decades, supply chains were considered a cost centre, and managing them focused on minimising costs and maximising efficiency.
his was seen in the form of offshoring manufacturing to low-cost regions, identifying lowest cost suppliers, initiating just-in-time strategies, and more. And then the world changed. The global pandemic, lockdowns, natural disasters, and wars have made companies realise just how vulnerable supply chains have become due to risk and disruptions. Now, supply chain management is about how to balance cost and efficiency whilst alleviating that risk and incorporating sustainability and just-in-case strategies.
According to SAP, we need to rethink how we build supply chains to design risk right out of them whilst embedding sustainability into them. Caroline Cioe, Vice President of Sales, Digital Supply Chain, at SAP North America, explains, “Disruption causes an imbalance in the system, so we are now pushing to get more balance in the supply chain. Technology can help, especially in connecting the networks together. If you are doing things manually, it is really difficult to connect the extended supply chains. Technology is the only way to get visibility deep into the supply chain.”
So, how can organisations capitalise on intelligent technologies to make them smarter and more profitable? Caroline answers, “As the cost of IOT-enabled sensors has come down, we are seeing more and more smart products and assets across the supply chain. This has enabled access to an unparalleled amount of information about how the supply chain is performing. There is a huge
opportunity to leverage machine learning (ML) and artificial intelligence (AI) to take this IOT-based data from people, devices, assets, products, and vehicles across the supply chain to automate decisions and processes.
“Meanwhile, predictive analytics empower employees to make more informed, real-time decisions, and drive new business models. Technology is also helping alleviate worker shortages and improve retention by improving the productivity and decision making of existing employees, and attracting new talent with state-of-the-art tools.”
In the past, predictions were made based on historical facts. Today, we can use other types of information to understand what is coming. For example, we can look at correlations between outside factors such as economic indicators, events in the commercial real estate world, as well as political events, and use the
technology to better predict what is going to happen in the future.
Caroline believes that predictive analytics are key to any supply chain strategy in the modern day. Other key enablers include probabilistic planning, optimisation, visibility and collaboration. Caroline continues, “Having a platform that connects to other suppliers, contract manufacturers, logistics service providers and trading partners outside the four walls of “Humans and machines can collaborate effectively together. Where we can automate, we should do so, but you still need the intelligence of people to make it work”
Caroline Cioe, Vice President of Sales, Digital Supply Chain
Founded in 1969 in Heidelberg, Germany, Westernacher is a consulting company of creative experts specializing in digital transformation. With over 800 consultants globally we have been a strategic partner with SAP for over 25 years with an emphasis on the Digital Supply Chain. During this time we have directly executed over 10% of the SAP Digital Supply Chain transformations around the globe as a niche player. We are experienced pioneers hyper-focused on the logistics space, including Transportation Management, Extended Warehouse Management, Yard Logistics, Logistics Business Network, and Integrated Business Planning. With our extensive SAP experience and decades of operational experiences across different industries, we are ready to assist you in tackling your business challenges through IT solutions and help you unlock your full potential. To understand how we can leverage our exexp pereri ienencece andand indindusustrtry y knowledknowledg ge e o of f b be es st t p prarac ctictice es s, , c co onnectnnect with us @www.westernacher.com for a more in-depth understanding of these competencies and a repository of customer success stories. Challenges on The Rise
Over the last two decades, due to the combination of improved technology and global supply chain eeiciency, the typical length of product life cycle has significantly reduced. As a result, the consumer market is re-shaping its behaviors and expectations to go from wanting their products in two weeks to wanting their products yesterday. To deliver on that expected value, businesses are turning to e-commerce solutions and adopting the omni-channel supply chain to improve consumer experience and product availability. This is a dieicult expectation to balance in combination with supply chain constraints. To tackle this global supply chain uncertainty, organizations have been either: 1.1. IncreIncreasingasing pipelinepipeline inventorieinventories,s, oror shifshiftingting f frorom m Just-in-TimeJust-in-Time to Just-in-Case, which increases exposure to the risks of supply chain disruptions. 2. Strategic reshoring to allow supply chain flexibility, but a shortened product life cycle can quickly render such methods obsolete and costly. ToTo avoavoi id d c ca ap pi it ta al-il-intensintensiveve rereshoshor ringing a andnd s stiltill l enjoyenjoy thethe cocos st t advantages of a global supply chain requires: A capable IT infrastructure that enhances the visibility of the supply chain. Capturing and sharing data instantaneously, while offering predictive analytics – granting organizations a no latency approach to adjust optimal inventory levels and strategies on the go. Solutions
To tackle this issue, we need examine the factors that affect ideal inventory level at any given time: 1. Historical usage 2. Logistics lead time 3. Safety factor (Demand Coeeicient of Variation) Historical Usage
Moving average of historical usage sets up the baseline for any inventory control. The ability to monitor and analyze the moving average of the sales data and parts consumption at much smaller time increments allowing this baseline to be agile and accurately reflects the current market demand. With SAP IBP Supply Chain Control Tower and innovation from Westernacher to add insight to ETA’s, all transactional data from manufacturing, inventory, to logistics, all are recorded in real time on the cloud, allowing quick and easy access by all process owners. In addition, it monitors the imbalances within the supply chain in real time, with capabilities when needed to generate smart alerts for adjustments. Combined with the fully customizable interface, users are enabled for responsive decision making.
Removing t in Suppl
Logistics Lead Time
This can be the most vulnerable piece in the supply chain process. An accident, natural disaster, port shutdown, strikes, can all significantly affect the outcome of the logistical activities. Often times, failure to estimate the accurate scale and duration of such impact can lead to inaccurate stocking decisions. Real-time recording of these data and instant user access can significantly impact the timeliness and responsiveness of your ability to optimize your inventory decisions at any given time. WitWith h thethe d develoevelop pmentment o of f techtechnonologlogi ie es s s sucuch h a as s A A.I.I. . (A(Ar rtifictificiaial l Intelligence) and machine learning capabilities, combined supply chain visibility solutions and carrier or supplier networks can truly set up the cornerstone of your digital supply chain transformation. With such services enabled, SAP Supply Chain Control Tower can now simulate the future possibilities of disruptions at the time of sales order are generated. In addition, by combining blockchain technology, SAP Sustainability Control Tower can now measure, track, and track the scope 3 emissions throughout the life cycle of a product. These measurements also provide a holistic understanding of the supply chain carbon footprint, further narrowing down the root cause for much more effective
the Latency ly Chain
procurement strategies and decision making. AnAno oththerer c co ompmpononentent isis thethe clocloudud-b-ba asesed d d da at ta a ststoraorag ge e fofor r a a carrier’s historic average lead time performance. As this fluctuates, it will record and adjust your lead time factor, which in return automatically sends out alerts for re-ordering point adjustments. In addition, such cloud-based data storage can allow SAP Supply Chain Control Tower to monitor the on-time performances of your carriers, providing more proactive communication and more accurate carrier evaluations. Safety Factor
The safety factor reflects your expectation for your supply chain performance and sets the baseline for your performance. It targets the exceptions that affect your parts consumption or service level out of skew. Given an ongoing tracking sample and equipped with machine learning, your recommended safety factor will be adjusted in real time to reflect the change in business objectives, triggering new ordering points to achieve it. Whether it is due to a natural disaster or equipment breakdown, or if desired service level is to be set from 3 sigma to 4 sigma level, SAP Supply Chain Control Tower will be promptly capturing those critical information and monitoring 24/7 on the cloud. With a digital supply chain, other safety factors such as safety stock within the warehouse can become dynamic and driven based on demand planning. Holistic Understanding
Currently, most processes are managed and reported locally by each process owner. When issues arise, the investigation and improvement are often limited to its respective processes as well. With SAP Analytics Cloud, data is collected and shared in real time from all process owners. Together with seamless integration between various SAP logistics solutions, organizations can not only collect real-time data, but also better utilize the data for cross-functional root causes analysis and predictive analytics. This ensures decisions are now driven by the bigger organizational objective, instead of by silos. OneOne keykey exampleexample ofof thisthis refersrefers toto productionproduction andand maintenance.maintenance. Production and maintenance are usually managed and planned by two separate functions within the business that interact with each other. However, our experience tells us that the production and maintenance schedule should in fact be combined into one schedule. Thanks to the evolution of technology and innovative concepts like Industry 4.0, we can now incorporate sensors on the component level, connecting and communicating data through IoT in real time and understand the tolerances and wear & tear of equipment at any moment. This visibility allows us to schedule the preventative maintenance before the machine breaks down, significantly improving the overall productivity, and longevity of the machines, while considering the stress level of its operators. AcrossAcross allall ofof SAPSAP’s’s logisticslogistics solutions,solutions, whenwhen u usingsing WeWesternachersternacher’s’s approachapproach andand deepdeep repositorrepository y ofof assassetsets we’vewe’ve developed and deployed across the globe, the focus becomes management by exception. Instead of dedicating your teams efforts to repetitive tasks, we strive to automate the happy path scenarios and enable the next level analysis of the data and for when deviations occur. Conclusion
The recent supply chain disruptions helped the world realize the global supply chain can be fragile. Particularly when companies and individuals on all sides of it lack information transparency for timely and agile decision making. WithWith d digigititalal tratransformatinsformatio on,n, d da at ta a acaccucuracyracy isis s sigignificannificantlytly improved. Manual processes such as data entry, analytics, and adjustments, can now be achieved through digitalization. With AI, machine learning, and cloud-based computing, digital ERP can significantly shorten the decision-making process and average response lead time. With transparency solutions incorporated on the IoT, not only are process owners notified in real time, the proper amount of inventory needed to cover the required service level is also adjusted. This process will minimize the chance of excessive inventory and stockouts, enabling organizations to unleash the true potential of the Just-in-Time approach in a digitalized supply chain on a global scale. O Overver t thehe l lasast t dedecacad de,e, SASAP P hahas s u uniqniqu uelely y p po ositisitioneoned d ititseselflf toto b be e at the forefront of this discussion through enhanced solution capabilities targeting the existing pain points within the supply chain by tailoring solutions to each unique business model. InIn s shohor rt,t, disdisrupruptionstions memeanan challengechallenges s a as s wellwell asas opopp porortutunitienities s. . As we experienced with the recent pandemic and supply chain disruptions, many organizations have prioritized their digital transformation early into their strategic plannings horizon. The complete transformation will take some time, however, the early adopters who realize the opportunity hidden within the digital transformation will come out as the next disruptors of theirtheir rerespectivespective industrieindustries.s. At Westernacher, we are positioned to support clients during this crucial time with our shared vision and elevated standards for our services. With an operational footprint across all continents and hundreds of implementations success stories, we are here ready to listen, analyze, design, implement, and maintain a tailored solution to help accelerate your digital supply chain transformation journey.
your organisation creates a control tower environment, allowing you to see deeper into your supply chain. Being able to use all the available data to make decisions is a huge advantage. It is critical to expand this visibility and collaboration across the multi-tiered supply chain, from raw materials supplier to the end customer.”
From smart factories featuring 5G, greater connectivity and enhanced
AI solutions, to smart products and assets across the supply chain, Industry 4.0 has a lot to offer companies that have invested in these technologies. Caroline says, “We have seen companies using Industry 4.0 within their factories, and are increasingly seeing this expand across the supply chain of smart assets, and into the hands of consumers and customers leveraging the smart products and devices it enables. When you have an asset that sits deep into the supply chain, you are able to capture the data in real time and get the data to the c-level suite to make a decision. This helps decision makers to make better decisions faster. If we are able to predict when something could go wrong, businesses can benefit from finding a resolution quicker and more efficiently.”
As the degree of automation increases, it frees up the workforce from repetitive tasks, and allows them to focus on more complex problems and decisions that require human interactions. But, will humans ultimately be replaced by machines? Caroline answers, “Humans and machines can collaborate effectively together. Where we can automate, we should do so, but you still need the intelligence of people to make it work. I would rather see humans than machines making strategic decisions. In many environments, you can let the automation run for 80 per cent, and then the remaining 20 per cent is where the human element should step in.”
SAP’s approach is to build an ecosystem of trusted partners to enable its customers to get the value as quickly as possible. Caroline explains, “A lot of SAP solutions provide an industry template, but there are certain
things that make a company unique, so our partners use technology to tailor the solution to make it more bespoke to that company. Trusting your partners, enabling transparency and having openness allow you to get the information you need. SAP is all about creating networks that let you share information from deep inside the supply chain. For example, when there is disruption in the supply chain, real-time information is communicated, allowing executive decisions to be made immediately.”
Caroline says there is no alternative these days but to leverage technology in order to become more agile and risk-resilient. She explains, “Technology enables organisations to gain a competitive edge. Companies using technology will leapfrog those that are not doing so. A strong ecosystem with transparency and visibility enables a company to react faster, get products out to market quicker, and solve any potential disruptions faster than if they were to try to do it manually.”
SAP’s ecosystem of partners bring solutions that extend SAP’s functionality to create more of a holistic approach. SAP successfully partners with a range of professional service entities, from large SI’s like Accenture, Deloitte and Ernst Young, to boutique partners like Westernacher, MSCG and ArchLynk.
Speaking of future trends likely to impact supply chains everywhere, Caroline highlights sustainability as a major topic of board rooms around the world. She says, “We are now seeing that most companies have sustainability as part of their corporate strategy or mission statement, but many are still struggling when it comes to how to track, monitor and measure key performance indicators across often global and complex supply
chains. Everyone wants to drive towards a better world and a better planet. The 2020s have been named the Decade of Action by the United Nations, which calls for the acceleration of sustainable solutions for the world’s biggest challenges – poverty, gender, climate change, inequality, and closing the finance gap. SAP’s solutions are strong on this front. I think we are going to see economic times change with the recession, so we need to turn to technology for additional recessionproof solutions.”
According to Caroline, a sustainable business is driven by:
• Governments • Regulatory bodies • Customers • Investors • Employees
Caroline adds, “Our global supply chains sit right in the middle of these challenges, both as a major contributor to the problems, and as a great area of focus, where we can take action to address the problems. End-to-end supply chain transparency is critical, both within the walls of a company (Scope 1 and 2), and across the business network of suppliers, contract manufacturers, service providers, and other trading partners (Scope 3). Sustainability initiatives must extend from the design, to the decommission of a product, from raw materials sourcing to last-mile logistics, and even to product usage, returns and recycling processes.”
At every stage in the lifecycle of specific products, there are social and environmental impacts on the environment and on people. As a result, governance – or accountability – is important at every stage throughout the supply chain and product lifecycle.
Caroline outlines a sustainable product lifecycle as follows, “Firstly, it is necessary to design products that are recyclable and environmentally sustainable. This involves designing to minimise carbon footprint of both processes and products, collaborating with suppliers on sustainability issues to foster product innovation, and ensuring all packaging and products are biodegradable, reusable or recyclable.
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“The second step is to plan to reduce emissions and ethically source materials. You should aim to focus on improving demand accuracy to reduce obsolete inventory, leverage scenario planning to predict end-oflife scenarios and support circular processes, simulate the CO2 footprint of the plan through the procurement, production, and transportation processes, and report actual results against the plan to determine progress and areas of improvement. “Sourcing materials that eliminate slave labour and ensure fair trade regulations is key to improving visibility across all tiers of your supplier network, as well as identifying and monitoring the most salient risks and gaps within your supply chain and how those may impact business resilience.
“As far as the manufacturing side is concerned, the goal is to manufacture with minimal waste and environment impact,
monitoring energy usage as a function of production volume, measuring CO2 emissions against compliance commitments, optimising manufacturing to reduce waste, and ensuring the overall safety of the workforce.
“The final point is to deliver products and services in a sustainable way, using logistics processes that optimise loads to reduce mileage and carbon footprint,using CO2 - and energyoptimised warehousing and transportation, and developing a process to ensure the safety of workers, making sure only qualified personnel can handle dangerous goods.” Sustainability is therefore tied into every project that SAP is running. Caroline enthuses, “It is something that is front and centre for all of us.” As for the future, Caroline is excited about the emerging technology
trends in the supply chain space. She concludes, “There is so much happening right now around probabilistic planning, networking, leveraging AI and ML in a more efficient manner, and tying it all together with a digital thread. We need to look at synchronised planning to ensure we are using the digital twin effectively, and, of course, all of that really relies on Industry 4.0 taking us there. As we connect deep into the supply chain and make better use of the data for decisions, it will be about that quick time to action we need to be successful.”
