Is a one-size-fits-all supply chain still the answer to your customers? Rethink and learn how SAP IBP can support you!

We're facing a new normal - global uncertainty, rising complexity and rapidly changing customer expectations are just a few challenges many business leaders are facing. But still, many supply chains are designed to cope with a traditional linear business model. And yes, most likely your supply chain planning processes will follow your "linear supply chain configuration", making your organization vulnerable to fluctuating customer demands.

Rethink your supply chain configuration

Today's supply chain should not be considered as rigid system, but rather as living and evolving organisms adapting to the environment as required. It's wishful thinking to believe that we can master today's challenges with an inside-out based, linear supply chain configuration. Instead, supply chain leaders are starting to segment supply chain upon market developments and requirements into various supply sub-networks.

Let's face reality, demand and customer patterns are changing quicker than ever before while customization (lot size 1) is adding a significant explosion of product portfolios, BoMs and SKUs. Combined with rather traditional supply chain setups, this can lead to serious challenges towards working capital, customer SLAs, and operational costs (inventory holding costs, freight costs etc.). Often the simple answer is overstock in order to always meet customer demand (component or finished good level) or simply take the high cost of short-term deliveries across the globe as given.

But there might be a better answer in segmenting your global supply chain by considering various demand profiles with their volatilities and the supply capacities. You can imagine that high-volume demands with low variability might require a different setup than customer demands with higher volatility and challenging forecastibility. The entire operating model of such a supply chain is given the low variability following different principles like: stable demand allowing you to outsource resp. procure various components and/or outsource production steps, communication to business partners becoming key and a high degree of automation. While businesses with higher volatility, higher customization might require you to run several production steps upon customer demand in-house (production, assembly etc.) and drive completely different inventory strategies.

However, it seems to become obvious that there's a challenge to follow the dream of a "one-size-fits-all" supply chain, instead it's a constantly learning and adaptive organism requiring a certain level of agility. By doing this, we can expect various business advantages like:

• Optimized sourcing/procurement strategies considering market development and changing patterns
• Differentiated manufacturing and assembly strategies depending on market requirements and expected business assumptions towards developments on business risks/opportunities
• Optimized inventory, replenishment and distribution strategies considering market-oriented product/location mixes, inventory management strategies and replenishment criteria

Surely, it would be much easier to believe we route customer demand through "one supply chain", but reality shows, we have to do more.

How SAP Integrated Business Planning (IBP) can support...

Surely, you should first do a proper analysis of your supply chain configuration from a strategic business perspective considering the various aspects mentioned above like market requirements, strategic aspirations, business priorities, customer expectations etc.

There are several ways how leading supply chain planning systems like SAP IBP can support you in deeply understanding the market while mapping it with the current supply chain configuration, potentially as part of the evaluation of your system configuration and constant "monitoring" instrument.

How exactly could SAP IBP help me?

• Understand your market better by analyzing historical customer and demand patterns and fluctuations. Start segmenting customer demands towards importance and volatility (ABC, XYZ analysis)
• Analyze future market expectations by considering sales forecasts and detect market trends in early phases. Leverage state-of-the-art algorithms to get a more accurate outlook.
• Get insights into potential business risks and opportunities (e.g. currency developments, taxes, political risks etc.) and map it towards your strategic aspirations
• Not only understand the market-perspective, but map it with the internal supply capacities and your business partners (e.g. suppliers) to identify challenges like headcount shortages, delivery issues, distribution costs, in-house vs. outsourced manufacturing costs, etc.
• Check your inventory strategy and identify SLA gaps driven by f.e. suboptimal product-location mixes
• Involve pro-actively business partners like suppliers or customers into your supply chain to receive early demand/supply signals and outsource potential business risks by receiving required commitments
• Monitor your supply chain organization and drive constant trade-off analysis on business assumptions
• Realignment capabilities in ever changing supply chain constellations is key to ensure a deep understanding over time and drive quality assurance (e.g. in case of changes towards products/customers, organization structures, product/sales hierarchy, products being manufactured in new plants, opening/closing distribution centers etc.)

SAP IBP enables you to get deep insights into your supply chains (see below an illustration) and monitor the organization towards constant trade-offs, market developments while giving you flexible instruments to proof your business assumptions. It could become the basis to drive constant adoptions on your supply chain configuration ensuring you're having the maximum profit at lowest possible risk with highest possible customer satisfaction.

In any case, it starts with the right awareness and understanding of the supply chain - it being segmented into several one's as living and changing "organisms" adapting towards market requirements. And yes, as you can imagine, it should be a C-level topic, as finally, your customer promise is worth nothing if you cannot deliver.

You want to learn more about SAP Integrated Business Planning?

If you want to learn more about SAP IBP, please check our official website (below) or reach out to your SAP contact person surely you can drop me a question as well!

Cheers

Arsim