Supply Chain Management – What’s Driving Change?

Submitted by Capgemini

Businesses are facing increasing demands in terms of both the agility and technology associated with their supply chains. Many of them are looking to global service providers for support.

I’d like to put two truths before you. One is old, and the other new – but both of them mean that organizations need to change.

The old truth…

The old truth is that businesses need to sell goods and services as well as they possibly can, and at as low a production cost as possible. If this has always been the case, why do companies have to change?

Because the digital economy has turned up the volume. As the number of channels continues to grow, so customer choice and expectations also are increasing – and this happening at a greater speed than ever before.

Selling well means selling more keenly into more new markets than ever before while defending the installed base against like-minded intruders. It also means being more responsive to the wishes and expectations of the market. Henry Ford may have been able to tell his Model-T customers they could have any color, as long as it was black, but that would be a hard sell now.

… and the new

The new truth is that the ERP systems on which the supply chains of many organizations are based– are not evolving rapidly enough. New tools with more capability are simply being bolted onto these platforms to help with planning and to increase performance and responsiveness in key areas. While these fixes may pay dividends, the systems to which they are appended are growing ever more complex and are becoming stuck.

In short, then, businesses are facing increasing demands in terms of both the agility and technology associated with their supply chains. That’s why many of them are looking to global service providers, who have breadth and depth of experience, for support in accommodating themselves to these changes.

Supply chains for multinational businesses are typically organized either by geography or by category, so if they are implementing market-driven changes of the kind I have just described, and they are doing it country by country, they find it takes a very long time. It can take years – by which time, the change to which they are reacting has been superseded by another.

To achieve coordination and consistency, and hence efficiency, what they need is a means of centralizing and consolidating their supply chains, and that’s how global service providers can help. Indeed, such is the demand that at Capgemini, we’re finding the growth rate for business process outsourcing (BPO) services is increasing.

Digital demand planning

Let’s take demand planning, for example. Major organizations typically operate in one-month or three-month cycles. To meet the increasing requirement for flexibility, they need either an extremely responsive manufacturing output, which is not always realistic or considerably enhanced abilities in demand forecasting. The more information a digital nervous system can gather from processes, from orders, from market conditions and from other external sources, the more flexible and accurate the supply chain response can be, enabling demand planning cycles to increase their frequency from quarterly and monthly to an almost continuous process, manufacturing on demand and distributing at will.

What’s more, that comprehensive digital nervous system, incorporating artificial intelligence (AI) and machine learning, can streamline the supply chain even further by increasing levels of automation. Indeed, we’ve frequently found these models reach their best levels of performance when human intervention is limited solely to exception handling.

At Capgemini, we’re moving with our clients in the direction indicated by these trends – in other words, towards continuous and touchless demand planning – so they can be far more agile and responsive. To do this, we combine best-of-breed technologies with our own proven architectures and methodologies, enabling us to build the advanced forecasting models that successful demand planning needs.