the evolving profession of supply chain management
TRANSCRIPT
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."