Creating Value Through End-to-End Supply Chain Planning
Meet the Experts
⇨ Supply chains are complex network of entities. Due to their interconnected nature, supply chain transformations in a part of supply chain generally have a cascading effect on other entities and processes within the supply chain.
⇨ Most supply chain transformation initiatives start focused on one specific area. It is, therefore, crucial that the impact of these focused transformation initiatives on the broader supply chain is incorporated in business case development as well as transformation planning.
⇨ When it comes to business case development, it is essential to quantify the impact on other parts of the supply chain. Sometimes, cost reduction in certain areas may increase costs in other interfacing areas. A business case hence needs to account for these cascading effects.
Supply chains are a complex network of entities. Even within a company’s four walls, multiple functions and teams interface and collaborate to run optimal supply chains. Due to their interconnected nature, supply chain transformations in a part of supply chain generally have a cascading effect on other entities and processes within the supply chain. Most supply chain transformation initiatives start focused on one specific area. It is, therefore, crucial that the impact of these focused transformation initiatives on the broader supply chain is incorporated in business case development as well as transformation planning. SAPinsider recently had the opportunity to discuss this topic with Ashish Punjabi, Partner-Supply Chain Solutions with PwC. You can watch the full video of the discussion here:
The Imperative to Look at the Big Picture
When it comes to business case development, it is essential to quantify the impact on other parts of the supply chain. Sometimes, cost reduction in certain areas may increase costs in other interfacing areas. A business case hence needs to account for these cascading effects. Consider freight optimization consolidation as an example. What may seem like an attractive opportunity for transportation leaders means increased inventory being held. And that is not good news for inventory managers who are measured on total inventory costs. Supply chains are riddled with such examples of balancing acts, and therefore, developing a business case needs to take an end-to-end impact approach.
But sometimes, the challenge starts with the very first step of agreeing on what exactly does the term “supply chain” encompass. As Ashish highlighted: “The biggest challenge I sometimes find is aligning with the definition of supply chain. As rudimentary as it might seem, it becomes a very big problem once you are talking to the client, and they are your stakeholders. As an example, in logistics and warehousing, I have seen clients who do not correctly define what constitutes their supply chain. So as a critical first step, whenever we have those conversations, we need to get a light on what is their interpretation of supply chain in their company.”
He further added:” My opinion or definition of a supply chain is that it is the entire flow from suppliers to customers. So, anything in between like in a classics core definition of plan, source, make delivery done, everything falls in the supply chain bucket. So it is critical that the first thing you get aligned on is the definition of what encompasses your end-to-end supply chain.You have to look at the supply chain to understand its core elements. And once you have this definition, you can start looking at the end-to-end origination of localized supply chain issues. So, my first ask to my clients and my colleagues is, do you even know what problem you’re are trying to solve for? That’s the first problem. If you have a good answer there, then we can build a road map. The next critical aspect is to understand what the priorities are. What do you address first? That is the basic challenge I see in terms of solving for supply chain is is not even really knowing where the priority lies for the chain, maybe for the silo they do.”
End-to-End View of Planning
When it comes to project planning, understanding the impact of local transformation initiatives on end-to-end supply chains is critical. As highlighted previously, a localized transformation may impact other areas. Keeping an end-to-end view during these localized transformation initiatives means a clear roadmap of the transformations that need to happen in other areas of supply chains to ensure a true end-to-end transformation.
This approach of keeping the big-picture in perspective while tackling specific challenges that arise in segments of supply chain has benefits that touch upon all three layers of supply chain planning and execution- strategic, operational and tactical.It can help identify systemic challenges in your supply chain, that go beyond the segment in which you may be currently problem solving. With the big-picture view, you may realize that the root cause of the problem you are trying to solve originates in a totally different sub-function.
The transformation opportunities identified may go beyond process improvements. An attempt to improve trailer volume utilization can lead to a need for product design enhancements. Or, during the route optimization initiative discussed previously, you may find an opportunity to invest in replacing your existing fleet with an innovative one. An intelligent manufacturing initiative may present opportunities to transform your procurement and raw material inventory management approaches. A shell of an end-to-end transformation plan needs to be in place to capture these opportunities and assign them on a roadmap.
When you quantify the value of siloed projects, what you may think as a cost savings might not actually be cost savings going down. As mentioned previously, if you’re trying to consolidate shipments, it may lead to more and holding more inventory. That may not only cause issues for inventory managers but also for procurement professionals. There are many different aspects that kind of come together. The implications are not just on the project solving the problem but goes beyond that. The end-to-end view allows you to formulate strategic plans based on challenges encountered in the operational and tactical aspects of supply chain. In this specific example, the issue may be the ordering patterns by the procurement function, due to the intermittent information sharing by manufacturing. Threading all these together, an overall inventory management strategy can be formulated.
Making the task of connecting siloed issues with the end-to-end supply chain provides perspectives that can help you reflect on whether your supply chain design itself is optimal or not. Ashish summarizes this succinctly: “ut again, know what kind of supply chain you want to be? Do you want to, you know, are you ready to fall but be quick to get up and run or are you not willing to fall? And if you fall, you want to take a little bit longer. So that’s how your investment of effort in doing this. That’s how you order design your supply chain.”
WHAT DOES THIS MEAN FOR SAPINSIDERS?
There is no doubt that taking an end-to-end approach to supply chain transformation is an imperative. Organizations that continue taking the siloed approach keep struggling with the same supply chain challenges year over year. However, as you embark on your journey towards end-to-end supply chain transformation planning, there are certain aspects you need to keep in mind:
- Evaluate your current state with the big picture perspective. A critical first step in any transformation journey is to understand the bottlenecks and challenges with the current state. This end-to-end mapping helps you understand your complete supply chain. This will come handy from a big picture perspective, when you are tackling localized issues within your supply chain.
- Understand integration gaps and fill those gaps. End-to-end supply chain integration is critical for building the big picture view. Unless your people, processes and systems are tightly integrated end-to-end, developing the capability to develop an end-to-end picture is impossible. The current state mapping exercise above will help you understand the integration maps.
- Leverage the power of advanced analytics. Once you have an integrated supply chain, you have the end-to-end visibility and control that is foundational. Leveraging the power of analytics on this foundation, you can build supply chains that are balanced for resiliency and agility, two very critical requirements.
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