The concept of an integrated supply chain has been around for several years but it has taken a new turn since last year. With the advent of cloud, social media and advanced supply chain systems like SAP, companies are now able to create a low cost, efficient, agile and integrated supply chain.
Let’s start with the basics – what is an integrated supply chain? There are numerous definitions floating around but in simplest terms it is “an effective information exchange between supply chain partners (internal and external), in a timely manner and at fast speeds to creating a value chain network”.
At the heart of this network is the first key element – information or data – like demand, forecast, operational status, inventory status, order status, exceptions, transportation and more. Data exchange between various supply chain partners allows better visibility of inventory, and supply chain processes & events thereby allowing companies to service their customers better. Industries concerned with food safety, patient safety or sustainability can further collaborate to share additional supply chain data for end-to-end traceability. And, as social platforms are becoming data-rich, their influence is permeating in supply chains as well, as I have explained in my article “Social Media in Supply Chain” (http://csuitepen.wordpress.com/2013/03/22/social-media-in-supply-chain-the-new-frontier/)
The second key element are the supply chain partners. Traditionally companies have viewed supply chain as the one within their organization. In the last decade, when globalization peaked, companies started collaborating with their suppliers and third party service providers. The new integrated supply chain goes beyond these two models by bringing customers, customer service, marketing and IT as enterprise partners. A 2012 CEO study conducted by the IBM Institute of Business Value (http://www-935.ibm.com/services/us/en/c-suite/ceostudy2012/) reveals that CEOs see renewed or new partnerships between Operations, Marketing and IT to build an agile and customer centric organization. Figure 1 provides one of the views of an integrated supply chain of the future.
Figure 1: One view of an Integrated Supply Chain
As there are more partners, there are more complexities driving the need for simplification, timeliness and speed of information exchange – the third element(s). Simplification mostly relates to IT technologies that provide a robust and low cost common platform for the partners to come together. Cloud platform brings these benefits to companies. Unlike the traditional on-premise infrastructure, supply chain technologies are now available as SaaS offerings via cloud. Companies can chose a subscription based model that lowers upfront cost, reduces the burden of maintenance & upgrades, provides reliable service and future scalability, thus reducing the total cost of ownership. Also, SaaS offering via cloud is a multi-tenant model, which implies that a company and its supply chain partners can co-exist leveraging the same system thereby minimizing the need for extensive integration and maximizing data sharing. This data exchange can happen in almost real-time and robust infrastructure capabilities of cloud service providers like IBM ensure faster speeds.
Now that you have a view of an integrated supply chain of the future, the next question is “how to develop one?” It typically starts with a supply chain analysis to identify a company’s capabilities, strengths, weaknesses and opportunities in the context of three key elements of an integrated supply chain: (1) What data is available to them and how effective is information exchange? (2) Who are the supply chain partners and how well are they connected? (3) What IT systems are currently in place and what capabilities do they provide? This particular topic is vast and generally requires an expert to do such an analysis.
After the business analysis, a critical decision for most companies is to select a suitable technology or system that would support the vision of an integrated supply chain. SAP offers an extensive suite of supply chain solutions that help achieve this vision (http://www54.sap.com/lob/scm/software/overview/highlights.html).
- SAP Advanced Planning and Optimization (APO) provides advanced planning capabilities for demand planning, production planning, cross-docking, supply network planning and global availability by integrating multiple forms of data including supplier/company/customer forecasts, historical data, POS data, capacity, inventory position and much more. Advanced predictive analytics capabilities allow companies to run simulations for “what-if” scenarios especially for unplanned events
- SAP Extended Warehouse Management (EWM) provides basic to advanced warehouse operations capabilities by including labor management, operational KPI cockpit, cross-docking, complex put-away & picking logic, material handling capabilities, voice enablement, and standard integration with APO, SAP Environment Health & Safety (EH&S) and Global Trade Services (GTS)
- SAP Transportation Management (TM) provides full suite of transportation capabilities from shipper and logistics service provider perspective. New algorithms and advanced analytics provide effective route and freight planning capabilities, mobile screens for real time updates, and event management to track shipments throughout the supply chain (all the way up to customer delivery)
- SAP Supply Network Collaboration (SNC) is a 360-degree collaboration tool that provides a gateway to integrate various supply chain partners. SNC provides a multi-mode communication layer for data exchange and visualization of supply chain events and results. SNC is particularly suitable for APO functions by allowing suppliers, contract manufacturers and distributors to provide their data to the host company. This allows sharing of forecasts and inventory in almost real-time
- SAP Track and Trace addresses supply chain traceability with three solutions – Global Batch Traceability (GBT), Auto-ID (AII/OER) and Event Management (EM). GBT enables complex batch genealogy and end-to-end batch tracking, while supporting numerous formats of batch numbers. Auto-ID (AII/OER) enable RFID and other barcode scanning activities and capture serialization of batch data from manufacturing to end customer. OER is the enterprise repository for product tracking and provides reporting for regulatory requirements. Event Management (EM) in the scope of Track and Trace provides visibility of processes and assets involved in the supply chain. Key application of EM is automated exception resolution and alert mechanism, hence creating a responsive supply chain
- SAP Sales and Operations Planning (S&OP) provides a unified model of demand, supply chain and financial data to balance supply & demand. Real time simulations allow scenario based decision making and drives cross-functional collaboration in the organization
SAP has additional specialized offerings for supply chain optimization (Figure 2). The ones highlighted above are the key ones that companies worldwide are adopting and realizing benefits of an integrated supply chain.
Figure 2: SAP Supply Chain Solutions (source: SAP)
Furthermore, SAP has made a game changing technological innovation called SAP Hana – an in-memory data platform for real-time analytics and applications. By combining the transactional data and analytical data via in-memory computing, Hana architecture provides “never seen before” type speeds, for example, reducing forecasting process from 8-9 hours to 1-2 hours. Additional information on SAP Hana is available on http://www.saphana.com/community/learn. SAP has announced that its supply chain applications are now powered by Hana.
Lastly, SAP supply chain applications can also be hosted in the cloud. IBM cloud-based solutions for SAP (http://www.ibm.com/cloud-computing/us/en/sap/) incorporate IBM best practices, SAP solution offerings and a robust platform to provide an agile and low cost integrated supply chain.
With the dynamic socio-economic market factors (like emerging middle class & fast growing emerging economies), rapidly changing technology and continued global interdependence, companies are being forced to be more innovative, be more customer centric and be more efficient than ever. In the midst of this race, gain competitive advantage by developing your integrated supply chain.
For more on SAP Supply Chain Management- join me April 24-26 in Prague at Logistics & SCM, PLM, Manufacturing, and Procurement 2013. Also make sure to get the latest event updates by following #SCM2013 on Twitter.