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On the way to becoming a digital champion –

with supply chain collaboration!

Barkawi Management ConsultantsMunich • Atlanta • Dubai • Riyadh • Shanghai • Shenzhen • Vienna

Collaboration:From the joint use of numbers, data and facts through to perfect vendor integration – with the right KPIs, end-to-end and in real time!

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In general, how you collaborate means how you are networked. In a corporate context it refers to people

working together on projects or in teams, linked together, for instance, via the internet. In supply chain management, collaboration stands for the digital interconnection of the entire value chain and all the partners involved in it at all levels, such as vendors and suppliers of logistics services.

The joint real-time usage of information and data, for instance sales figures and spare parts invento-ries, optimizes the entire supply chain to the benefit of all those involved in it. Collaboration, connectivity and working together as partners makes modern enterprises digital champions!

López – ‘The Wolfsburg Strangler‘López was once a star. José Ignacio López de Arriortúa (*1941), a Spanish manager, started out working for Opel and General Motors (GM), before becoming Head of Procurement at VW. He is famous for pressuring suppliers, being a brutally tough negotiator and ruthlessly lowering the prices he

was willing to pay. His uncompromising approach to vendor negotiations enabled him to substantially cut production costs, and earned him the nickname ‘The Wolfsburg Strangler‘.

The core of his ‘concept‘ was to dictate the maxi-mum cost of each component. In his view, increases in production capacity had to come about without in- vestment from VW. Instead, he wanted the suppliers to pay for them. Suppliers as partners? Collabo- ration? Connectivity? Unknown concepts at the time!

Nowadays, production lines come to a standstill if suppliers or manufacturers don‘t act as partners – and not only at VW. In August 2016, for example, the business journals bore headlines like ‘VW Supplier Dispute Affects 28,000 Employees Due to Missing Parts‘. Two vendors had discontinued their deli-very of components because of a quarrel with their parent company Prevent about an order that VW had cancelled. The little suppliers felt mistreated, accused VW of abusing its position of power and plunged the multinational corporation into chaos.

Collaboration: From the joint use of numbers, data and facts through

to perfect vendor integration – with the right KPIs, end-to-end and in real time!

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Welcome to the year 2017! Suppliers are partners that modern, high-perfor-mance enterprises are closely attached to. ‘Vendor integration‘ is the catchphrase. They share data, information, costs and successes! Collaboration and connectivity create a digital bond between suppliers and manufacturers that is to everybody‘s benefit! Successes are more lasting because they are accomplished together. López wouldn‘t stand a chance today!

But it is not only over-aggressive negotiating tactics that can lead to a life-threatening production stop. There are also other things that change abruptly that can be brought under control better and faster with digital networking and collaboration. For instance, the globalization of the automotive indus-try has brought with it numerous advantages. But after the disastrous earthquake in Japan, the disad-vantages of globally interconnected supply chains also became apparent.

It was just a little color pigment, but because the only factory that made it was damaged in the 2011 Japan earthquake, many carmakers suddenly lacked a special ingredient for their lacquers: Xirallic. Of four pigment plants around the world belonging to the company Merck, the only one that could deliver the sought-after aluminum oxide refined in a special process was in Onahama – bang smack in the middle of the earthquake zone.

Because the pigment is needed for a range of metal- lic effects, numerous paints couldn‘t be produced, and that sent out ripples across the entire industry: Ford, Chrysler, Volkswagen, BMW, Toyota and Gene-ral Motors all used coatings with Xirallic, and they were all desperately scrambling for an alternative. The planners, supply chain specialists and S&OP ex-perts at all the afflicted companies were at a loss for what to do. Many assembly lines came to a stand-still. The age-old risk of single sourcing had struck mercilessly, and the fallout was immense.

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And what is more, there wasn‘t much in the way of supply chain software to support the systems back then. Control software calculated for weeks trying to come up with new scenarios and supply chains – more or less in vain. Today, special software takes care of that kind of task in just a few minutes.

Whether it be large ERP systems, special software or supply chain suites, all of these digital systems serve to connect all the involved partners and share information and data in real time. This makes it pos-sible to intervene in the logistics system at any time, for instance, to do predictive maintenance.

The collaboration between manufacturer, supplier and customer enables, for example, an elevator system in a New York skyscraper to be serviced before parts malfunction and put the lifts out of order for days.

Action not reaction – that is the motto of digital champions!

So, on the foundation of integrated data, collabora-tion and connectivity are the answer to the ques-tion of how companies can flexibly and cleverly organize and connect their supply chain, inventories, materials management and much more besides.

The goal is to be able to efficiently deal with defects, catastrophes, insolvent suppliers, delivery stops and materials bottlenecks, and serve increasingly hybrid customers, despite fluctuating, unpredictable demand.

The basis for this can be found in modern IT applica-tions with real time calculations, scenario technolo-gy, mathematically founded evaluations, integrated data, big data… the list goes on.

Collaboration and connectivity, all partners and their data interconnected, available and evaluable on call. Only then can a company be proactive, instead of reacting after something goes wrong. Action not reaction – that is the motto of digital champions!

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Collaboration helps with typical supply chain problems

Innumerable companies with various different pro-ducts, entirely different customers and completely different challenges from the market and compe- tition often have almost identical problems, despite being so dissimilar:

Collaboration instead of daily Excel chaos

In most companies, planning is still today bogged down in a plethora of Excel tables. Every department, external partner and supplier has its own. Intelligent integration into a mutual process software? Collabo-ration? Connectivity? Negative! The daily struggle to consolidate data costs time and money!

Collaboration eliminates uncertainty about areas of responsibility

Sales is usually close to the customer and to where the money is made, but it seldom feels responsible for sales forecasts. The resulting excess invento-ries and loss of profit margin can quickly become life-threatening to an enterprise.

Digital champions put their faith in collaboration: a centralized data platform into which Sales can enter sales figures on an everyday basis, and which is closely linked to Procurement and suppliers, enables professional S&OP that can be forecast with great precision.

Collaboration enables optimal production management

Globally dispersed production sites often manufac-ture without being integrated into a unified planning and forecasting process.

But in order to remain competitive, you need coordi-nated production activities, transparency regarding volumes, capacity utilization, runtimes, etc., and to have all figures, data and facts recorded in real time. That makes a clever structuring and optimization of the processes by means of modern collaboration possible!

Collaboration perfects inventory management and dealer inventory

In many cases, inventories are anything but per-fectly assembled fast-mover assortments. On the contrary: 80 % of inventories bind capital and don‘t move enough or even at all. As a rule, what is lacking here is information about what is actually needed and used. Collaboration and digitization would solve this problem in no time!

Collaboration promotes customer satisfaction

Customers that have to wait days, weeks or months for a repair or a new piece of equipment aren‘t generally among the most satisfied. The wrong replacement parts in stock? That is a realistic scena-rio in many companies!

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Directly linking your warehouse with the supplier‘s inventories through digital collaboration gives an enormous boost to part availability, delivery capabi-lity, service levels and customer satisfaction!

Collaboration generates perfect partner integration

The vendors deliver the wrong amounts at the wrong times, inventories are always too high or too low, materials shortages lead to production downtimes – this is no exception in many companies either. And here too, perfect vendor integration is the solution!

Collaboration lowers the cost of coordination for transport providers

It is a lot of work and enormously expensive to coor-dinate the logistics between manufacturers and forwarders, courier, express and parcel services (CEP) when volumes and deadlines vary – and the efficiency level is low.

Directly connecting service providers to the OEM in a collaboration and integration perfects a coopera- tion by means of total information transparency and data connectivity!

Barkawi is your specialist independent partner

And in addition to these well-known problems, there are any number of other challenges that supply chain professionals are confronted with on a daily basis.

Various modern supply chain software products help here. There are many of these programs on the market, all with different objectives, functions, appli-cations, interfaces, etc., which makes choosing one a difficult task.

Barkawi Management Consultants has been an inde- pendent partner in innumerable collaboration and digitization projects, with its profound knowledge

of the world of digitiza- tion, the providers, their products and the bene-fits and drawbacks of the respective special supply chain applica-tions!

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Barkawi Success StoryThe buyers of helicopters – such as the Air Force or air charter services – are all faced with the same problem: if a gearbox inspection shows that the gearbox cannot be saved, the expensive airplane is grounded – for 18 months, because that is how long it takes to procure the replacement part ‘gearbox‘.

Keeping several gearboxes in stock to prevent that from happening gets very expensive, very fast, because each one costs around € 60,000. So keeping a buffer of gearboxes is a decision one wants to consider carefully, if warehousing costs aren‘t to explode.

The dimensions that are often involved can be seen in an example from Barkawi‘s consulting practice in the agricultural machinery industry: A tractor mustn‘t break down, least of all at harvest time! To make sure they don‘t, agricultural machinery dealers keep stocks of tens of thousands of different replace- ment parts worth several million euros on hand in their workshops. The 450 dealers of a market leader in the agricultural machines segment keep more than half a billion euros in stock – several million parts.

But despite this there are still machines that still stand still because parts are not available, and at the end of the year, expensive write-offs are due for unused parts.

Our solution: with the ingenious cloud platform ClearOps, 20 % less capital is tied up at the 450 dealer venues and the number of machines waiting for parts has halved. And not only that: In addition to the improved service at lower costs, dealers are also reporting a 5-8% increase in sales in their spare parts business.

Massive amounts of capital are often tied up here; really big amounts. So considerations about the optimum inventory have to be based on sound data and less on rough estimates. Using smart supply chain software and inventory management, modern vendor managed inventory (VMI), collaboration and perfectly customized mathematical algorithms improves the ability to deliver the required part, while at the same time cutting costs and invento-ries. Barkawi is the specialist on this topic!

Our experience shows that inventories in all warehouse stages can easily be reduced by more than 20 %. In the case of extremely expensive replace- ment parts and/or large inventories of parts, having the right stocks improves competitiveness and makes any manager happy, because supply chain software helps transform dead, tied-up capital back into wor-king capital.

Before

Reduction of spare parts inventories

After

> -20%

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SummaryFor a long time now, it has not been only manufac-turers and their products that compete with each other, but complex supply chains made up of inde-pendent companies in a partnership. Why? Because ability to deliver, speed of delivery, reaction times, etc. are an integral part of the product today! If someone has to wait for weeks for a part, that manufacturer and its product are history!

Amazon & co. dictate same-day delivery, and the customers are coming to expect that. Better, faster, bigger product ranges and often even cheaper thanks to a perfectly networked supply chain! The world‘s biggest mail-order company is showing us how it‘s done: planning forecasting, suppliers, service providers, customers, procurement, inven-tories, replenishment, all integrated into a single digital data flow, perfectly plannable, transparent, as fast and flexible as possible: that is the goal of supply chain digitization and collaboration!

Barkawi Management Consultants are experts in the field of collaboration using cloud-based IT solu-tions to efficiently operate supply chain processes.

With these concepts, we bring together supply and distribution chains across company borders, channel and optimize them. This is centered around demand forecasts, production management, procurement of inventories in a complex network, simulations and scenarios using ‘what-if‘ questions, etc.

Our solutions combine the latest technology from the fields of big data and internet connectivity with mathematical algorithms that have been developed in close collaboration with leading universities and research institutes. Their goal is to process real time information from a plurality of connected systems.

In real terms this means, in one of our projects, for example, bringing together the data from agricul-tural machine manufacturers and more than 450 spare parts dealers. The parts became more readily available, which improved both the sales figures and customer satisfaction, while reducing the costs. That is what we call a win-win situation, and it was achieved with modern collaboration!

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Barkawi Management ConsultantsBarkawi Management Consultants is an inter- nationally active management consultancy that specializes in supply chain management and after sales services. It was founded in 1994 and today employs more than 200 staff at venues in Munich (head office), Vienna, Riyadh, Dubai, Shenzhen, Shanghai and Atlanta. Numerous global enterprises with logistically complex business models, such as Airbus, Coca-Cola, Daimler, General Electric, Henkel, Siemens, etc. are among Barkawi‘s consultancy clients.

Barkawi‘s hands-on implementation-focused ap- proach to consulting can also be seen in its own entrepreneurial activities. It serves as an incubator for a number of start-ups that are active around the world with innovative product ideas and new business models. In doing so, Barkawi‘s profound know-how in the field of supply chain management joins forces with passionate entrepreneurialism and gives rise to successful spin-offs the likes of B2X, a leading provider of customer care services in the fields of mobile phones and IoT.

Barkawi Group now encompasses eight companies that together employ 1,200 staff in 20 countries.

Barkawi Management Consultants – The entrepreneur among consultants!

Authors Carena Barkawi, Founder and CEO

For many years, Carena Barkawi has been CEO of the award winning consultancy Barkawi Manage-ment Consultants in Munich. Barkawi Management Consultants is part of the Barkawi Group, where Carena Barkawi is CEO of the Holding.

Dr. Andreas Baader, Managing Partner

Dr. Andreas Baader heads our After Sales Service division. Before joining Barkawi Management Consultants in 2000, Andreas Baader held various executive positions at SAP AG, most recently mana-ging the Application Design Sales Support division there. Andreas Baader studied engineering and wrote his doctorate in the field of aerospace tech-nology.

Barkawi Management Consultants GmbH & Co. KG Baierbrunner Str. 35 81379 MunichPhone: +49 89 749826-0 info@barkawi.com www.barkawi.com

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Amazon & co. show us how – better, faster, bigger product ranges and often even cheaper thanks to a perfec-tly interconnected supply chain! Innovative supply chain champions work with integrated service providers. Collaboration is the magic word! Suppliers are partners that young, high-performance enterprises are closely connected to. When integrating vendors, they share data, information, costs and successes! Collaboration and connectivity generate a digital bond that is beneficial to all sides. And the successes are lasting because they are achieved together.

An unbroken integrated supply chain based on KPIs updated in real time makes forward-looking enterprises fit for the future: planning, forecasting, suppliers, service providers, customers, procurement, inventories, replenishment... all integrated into the modern supply chain! Perfectly plannable, transparent, as fast and flexible as possible: that is the goal of supply chain digitization. And collaboration is the starting point.

But what is supply chain collaboration actually? What has to be done? Where does one start?

‘On the way to becoming a digital champion with supply chain collaboration!‘ by Barkawi Management Consultants provides a concise overview of how collaboration turns the challenges of modern supply chains into measurable results!

Barkawi Management Consultantswww.barkawi.com

On the wa y to becoming a digita l champion –

wi th supply chain collaboration!