I am starting a blog series called “Supply Chain Leadership”, where I hope to pose thought provoking, and forward looking questions to executives in my supply chain network. Posted monthly, this series will provide insights into the most pressing challenges, innovative items in their budgets, and how these executives have handled talent, complexity, end-to-end S&OP, and technology.
Continuing the Supply Chain Leadership series, I caught up with an executive in the consumer electronics business. His deep manufacturing, planning and technology background led him to one of the top consumer electronics companies in the world. His insights on the challenges and future of supply chain are incredibly thought provoking.
1. As we enter 2014, how would you describe the most pressing supply chain challenges?
a. Expanded product portfolios and product options are challenging our ability to maintain accurate forecasts.
b. Growth in new markets has presented us with challenges in understanding customer response to new products.
c. Material leadtimes have remained in an “extended horizon” status are affecting our ability to respond to demand variation.
d. International markets are growing as a proportion of overall sales, which is driving inventory growth.
2. Looking back at the past few years, what parts of supply chain have improved and what have you seen as the contributing factors for that improvement?
a. The company’s Sales and Operations Process has matured and is now providing consistent insight into Supply Chain challenges (mentioned in Q1), while creating visibility to risks and opportunities in the supply and demand balancing process.
b. The implementation of an enterprise system has enabled us to scale our planning and execution processes to keep up with significant growth and complexity of our product portfolio.
c. Reporting tools have been improved dramatically, driven by in memory based storage and on line (interactive) query capability.
d. Redesigned Supply Chain networks have enabled the company to ship more products direct from the source to the customer with a significant reduction in “hand offs” and material handling (waste).
e. Global Supply Chain operational personnel have matured in experience and skill due to corporate initiated training including; face to face, centralized class rooms, and on line classes.
3. In the creation or support of your Budget Plan, what are the new items you see for this year and beyond, things that haven’t been on prior year Budgets, or things that have seen the greatest increase in priority?
a. The new product portfolio is a much higher proportion of our budget and the volume of new products is generally higher than typical years.
b. Increased regional capacity has been put in place to support international growth.
c. A portion of the company’s portfolio is more margin challenged than in the past, leading to much higher scrutiny of premium freight, rework, and / or pricing flexibility
4. When assessing your S&OP/Integrated Planning, what are the areas you feel need addressed to improve your S&OP/IP process?
a. Much more work is needed to continuously and consistently align the Supply Chain and Financial plans.
b. The company’s ability to sense and respond to market variation is more complex (see Q1), given the broader product portfolio, which is challenging our (reporting) capability to provide ongoing insight to the executive team.
c. Sales and Operations processes in our international operations (local or ‘in region’ S&OP) have improved, but need to mature to keep up with regional challenges.
5. The End-to-End supply chain strategy has been well documented. What capabilities does your company have that is better in class for integrating end to end?
a. The company’s investment in an enterprise wide system using the same planning, transactional and reporting tools gives us the potential to re-plan on an ‘as required’ basis, giving us the capability to respond to any identified opportunities.
i. Typical planning activity is weekly – improved from monthly.
ii. Capability is daily or as required.
b. In region sourcing has expanded, giving the company an opportunity to reduced overall response time and ultimately improved service (flexibility).
c. When we do identify an opportunity (or risk) our integrated manufacturing strategy supports ‘quick turn’ at lower premium costs.
6. How aligned and connected are you to the many supply chain nodes? What are the reasons you would want to improve this alignment?
a. The company’s internal network is completely integrated which gives us the capability to see retail store level activity in remote regions (China) and respond.
b. Point of sales demand data is captured on a real time basis, providing us with responsive execution plans throughout our Distribution network.
c. Improved alignment on re-seller ‘sell thru’ data will give us the capability to ‘see beyond’ the next purchase order.
i. EDI and / or transactional integration is an area of opportunity for our non-Automotive businesses.
ii. Having access to customer sell thru and potentially customer inventory will help us identify risks and opportunities at the customer’s storefront.
7. This “connected nodes” is very much tied to supply chain visibility. How would you rate your complete visibility to all nodes? Why do you believe it is like this? What do you believe are the 2014 actions that need to be taken?
a. I would rate our internal visibility a 9 of 10. The limitation would be that our transactional system will not be global until July 2015. This limits our ability to ‘see’ the entire supply chain and limits (to some degree) our reporting capability.
b. Our entire network is ‘connected’ through system master data which enables a complete and integrated planning process. Each planning event includes retail stores, distribution centers, and manufacturing plants in the same requirements regeneration.
c. One of our limitations to visibility is customer information (see Q6.c.i and ii).
d. Our 2014 supply chain improvement plan includes, but is not limited to;
i. Continued roll out of the company wide transactional system
ii. Implementation of an improved and Hana based sales planning tool. This tool will enable sales ‘event’ planning such as margin analysis on a promotion.
iii. Complete implementation of a Long Range Planning process which will be integrated with the Financial Plan and enable continuous financial planning.
iv. Continued training for Supply Chain personnel.
v. Forecast improvement plans which focus on the adoption of improved reporting and better regional S&OP processes.
8. How would you rate your ability to understand risk & tradeoffs? With which functions do you need to improve your “simulation” tradeoff processes the most?
a. Today, we have the right information, but lack timely insight. We are addressing that through Hana based executive reporting and dashboard development. I would rate the company’s capability for scenario planning a 7 of 10.
b. The company’s longer range plan is to an S&OP simulator for risk and benefit analysis. The initial intent is to utilize the tool as a sales planning engine, which would feed our demand planning module.
c. The vision is to utilize this engine for scenario planning across the supply chain.
9. Supply chain “talent” has been brought forward as a concern. How would you assess the talent challenges in your organization, and what actions are you putting in place to address?
a. Our global supply chain maturity has improved from less than 5 to 7, on a scale of 1 – 10 (see Q2.e).
b. The company has stabilized our Supply Chain turnover to nearly zero, which has helped facilitate sustained and improved training. c. Our plan includes, but is not limited to;
i. Expanded on line training modules – related to operational and technical training
ii. Efforts to ‘cross train’ where Supply Chain personnel can work across regions and / or in different functions.
10. New technology, especially comprehensive customer data and internet connected devices, are driving new supply chain models. How has new technology impacted your area and what new supply chain models/capabilities have you put in place or are considering?
a. The most significant change in technology (other than the continued ERP roll out) is the migration to an in memory based storage and retrieval.
b. Our CIS roadmap includes mobile reporting and executive dashboard improvements, but those have not become operational plans to date.
Consumer Electronics is also my primary background, having led supply chains at Apple, Bose and Sony. His answers provide insight to what all consumer electronic companies are facing, customer intimacy. The impact of not getting closer to the customer is degrading forecasts and margin challenges. They are using S&OP to provide visibility to risk and opportunity, although they are challenged to extend a central S&OP to the regions. And, the regions, especially new markets, are where the growing demand is. It also is requiring them to manage freight, rework and pricing with more detail. New supply chain models, such as direct ship to the customer, regional capacity, and sell through analytics, are being created.
This is why consumer electronics is, in some ways, leading the supply chain innovation. Segmentation of demand, creating new supply chain models, analyzing new forms of data, and striving to solve the demand/supply challenge in real time are things that make consumer electronics supply chains a very interesting group to watch.