The evolving profession of Supply Chain Management

Translated version of “Supply chain managers zijn vaak missionarisssen”, as published in

‘Trends’, May 22nd 2014

BRAM DESMET

"The supply chain must concentrate on

providing the right service to the right customer

at minimum cost and with minimal inventory."

SUPPLY CHAIN MANAGEMENT IS BECOMING MORE THAN LOGISTICS AND

TRANSPORT SCHEDULES

'Supply chain managers are often

missionaries'

The days when supply chain management was confined to logistics and transport

schedules are long gone. Today’s supply chain manager is involved in all corners of

the company. By WOUTER TEMMERMAN

The position of supply chain manager may have grown out of logistics, but at more and more

companies he is becoming the person ultimately responsible for planning and holds ultimate

responsibility for stock. Even having a say in customer service is no longer taboo. The

increase in the density of supply chain management is related to the growing competition in

many markets.

Retail is the perfect example. Using a combination of service and competitive prices,

online challengers like Bol.com and Zalando are pressuring retailers to think differently

about the supply chain. The role of globalisation is particularly noticeable in industry. There

are low-cost competitors from Asia and the Middle East while it is becoming more difficult to

stand out in the marketplace by means of technology or new products. At the same time the

importance of the BRIC countries for exporting companies is increasing and extracting

commodities in Asia has now become a permanent feature. What's more, complexity is

increasing because of the general tendency towards more products with a shorter life cycle.

"Before the financial crisis companies had the luxury of being able to pile up loads of

inventories", says Bram Desmet, consultant at Möbius and professor at the Vlerick Business

School specialising in supply chain processes. "In a more transparent market, companies

must provide the best service at the lowest possible cost price and with minimal inventories.

This puts pressure not only on margin, but also on working capital. As companies must

manage their working capital efficiently, the importance of supply chain management is

increasing everywhere.'"

Getting rid of islands

Supply chain management is an important part of a new economic reality. If

companies want to improve their supply chain mechanism, they will find the greatest

potential in adjustments overarching their internal borders. Modern supply chain

management thinks in terms of the supply chain rather than in terms of a division. It is about

finding a balance between managing stocks, service and costs. If a procurement manager

lowers his costs by purchasing in Asia, then the stocks will increase in order to cope with

delivery times. Exactly the same goes for a production chief who opts for a stable production

plan with high volumes, and for a sales manager who pushes up turnover by means of more

service and more new products.

"This is reasoning based on the individual steps in the supply chain and not based on

the supply chain itself", says Bram Desmet. "The supply chain needs to concentrate on

providing the right service to the right customer at minimal cost and inventory. The supply

chain manager is a pivotal person in addressing this challenge". This sounds logical because

the supply chain manager can form the bridge between sales, production, procurement and

finance. But for a long time logistics and planning were essentially functions of a more

operational nature that reported to production or sales. At companies that optimise their

supply chain management, the supply chain manager is a strategist who brainstorms on a

balanced supply chain plan.

"Many companies are either sales-driven or production-driven or procurement-

driven", says Bram Desmet. "So far only a few companies are really driven by the supply

chain. Modern supply chain managers are often missionaries. They have yet to earn their

credibility and use it as a basis for preaching supply chain thinking.'

Matchmaker

In practice these supply chain processes often boil down to producing an integrated

business plan ('sales and operations planning'). With the supply chain manager as a

matchmaker, a company can integrate all departmental plans and avoid having to use stock

to buffer differences between procurement, production and sales. "A company that wants

to grow ten percent through new products and a bigger focus on the BRIC countries can

estimate that its stock and logistical costs will rise by five percent", says Bram Desmet. "If it

integrates the plans and for instance also defines the objective of reducing its operational

costs by ten percent, it can couple the above efforts to additional efforts in supply chain

management. You can for example improve forecasting or determine stock objectives in

smarter ways."

Integrated business planning ('sales and operations planning') is by no means the

only supply chain process that supply chain management can impact on. Innovation in

products and services is essentially also a supply chain process. Companies that want to

innovate smartly, couple market knowledge to technology knowledge. Anybody who wants

to innovate quickly must also be capable of combining this technological knowledge with the

ability quickly to scale up prototypes into production. Once again the supply chain manager

is the most obvious bridge-builder, although his competence in this supply chain process is

widening from products to services.

Segmentation is another practical example of a process over which a supply chain manager

is getting ever-greater grip. Traditionally, this has always been a marketing or sales

competence. Particularly in business-to-business transactions, however, many companies

are still serving all customers by means of the same service. This is where the supply chain

manager offers an added value, because he possesses a good picture of how much this

differentiated service must cost.

For many companies, the step towards a more strategic role for supply chain

management is still a fairly big one. Yet there is a certain sense of urgency, according to

Bram Desmet. "Besides the opportunities in integration, innovation or segmentation, we are

already seeing the emergence of new challenges", he predicts. "3D printing on an industrial

scale may drastically redraw supply chains. What's more, sustainable evolutions will receive

greater attention for return streams, reuse or recycling. I have also noticed a trend towards

more local production, from offshoring to onshoring. Finally, there are the big data, which

companies will also want to leverage for the more efficient control of the supply chain".

At companies that optimise their

supply chain management, the supply chain manager

is a strategist who brainstorms

on a balanced supply chain plan

COLRUYT INVESTS IN SUPPLY CHAIN ACADEMY

To improve its supply chain management, Colruyt Group established a Supply Chain

Academy in September. Middle and senior managers of all departments involved in the

supply chain can at the board’s request receive basic training designed to sharpen their

thinking in terms of the supply chain. There is also a deepening programme that gives

specialists in the group, such as staff who make forecasts, an opportunity to raise their

expertise. At the same time the Academy is focusing on developing an internal network of

supply chain experts who will disseminate knowledge throughout the organisation. For

Colruyt, the Academy is a logical next step in its push towards a more customer-driven

organisation. This customer focus is evident from the development of retail formats like

OKay, Bio-Planet and Deambaby. André Céron, logistics director for non-food and one of the

driving forces behind the Supply Chain Academy, stresses that this must not stop at the

strategic component.

"We want to respond as well as we can to the needs of our customers. In the case of e-

commerce, for example, you no longer have the internal customer, i.e. the shops that you

must keep stocked, and the focus is shifting entirely to the end-consumer. Colruyt Group is

strong in operational excellence, but you still need people who are willing to adjust their

thinking about the supply chain." The retail group acknowledges that the pressure of

competition impacts on the complexity of logistical streams. It wants to respond alertly to a

changing market in order to remain effective. "For that reason we need more people who

can reflect strategically on the supply chain", says Céron.

"In the past the supply chain started when goods arrived at the distribution centre and

ended at when the products went on sale in the shop. Today you must put yourself in the

shoes of the supplier. If the supplier and the retailer think only in terms of islands in the

supply chain, you run the risk of losing touch with the changing needs of consumers."

COLRUYT

"We must put ourselves in the shoes of the supplier".

GOOD MARGIN WITH MINIMAL STOCK

With its digital projectors, Barco has traditionally operated in the top segment of the market

(such as cinemas), but in 2013 the company embarked on a step into the middle segment

(such as larger conference rooms and auditoriums).

At the end of last year, the company launched its initial series of projectors. Dealers watch

over stocks, look for resellers and develop the market, with strong support from Barco.

Barco itself mainly manages the supply chain. So it must have a good understanding of how

sales are evolving at different places in the world. The company then has to estimate how

much stock a dealer network needs and make this known in good time to the suppliers. This

entails risks. If there is an underestimate, a supplier will lack the flexibility to absorb shocks

and market share will fall. If there is an overestimate, a supplier will not simply be able to

stop producing for a certain time – contracts do not allow this kind of latitude – and stocks

will start to pile up.

Efficiently integrated supply chain processes are the key to achieving a good margin with a

minimal stock. At Barco, supply chain management is crucial in the middle market in order

to control profitability. This resulted in Barco beefing up its forecasting skills, but also in the

setting up of a programme called Connect to streamline relationships with distributors and

resellers. "We are still expanding the distribution network", says Piet Vandenheede, business

process owner of supply chain management. "Western Europe and North America are well

developed, but we are also working in China and in other regions". Barco had already highly

developed its supply chain competences in its niche markets, but today it faces the challenge

of also playing this as its strategic trump card in the more complex middle market. VP

Operations Johan Heyman confirms this: "We don't want to become trapped between a

supplier who prefers a fixed production plan and a distributor who wants as much flexibility

as possible". It is in this context that the supply chain manager evolved into a key function

between business and operations, but with an emphasis on business. "Otherwise you just

create a glorified planning function", says Heyman. "First and foremost the modern supply

chain manager thinks from the baseline of a strategic vision of his market segment. So this is

a pivotal function in the organisation. The organisation obtains the best results where the

people of the supply chain possess the most incisive insight into the market."

BARCO

"Supply chain management

is a pivotal function

at our company."