SCM2014: Articulating a new vision for supply chains

Held in Las Vegas in early-April of 2014, SCM2014 (formerly known as SAPinsider) was significant for me on two fronts. As we have noted in prior years, this event focuses extensively on the topic of the supply chain, so both sessions and...


Held in Las Vegas in early-April of 2014, SCM2014 (formerly known as SAPinsider) was significant for me on two fronts. As we have noted in prior years, this event focuses extensively on the topic of the supply chain, so both sessions and manufacturer interactions are particularly useful in both understanding the perception of SAP and the extent to which both new and existing applications are being successfully adopted amongst the user base.

Over the course of a few days in Vegas, conversations with manufacturers yielded a number of useful insights:

  • One manufacturer whom I have spoken to on multiple occasions, who, frankly, was not an early supporter of cloud applications has done an almost complete about-face; specifically on the topic of sales & operations planning, and now believes that SAPs cloud-based offering is 'absolutely the way to go'.
  • There continues to be a great deal of interest in how SAP ultimately leverages the Ariba network within the context of broader B2B commerce networks. Although Ariba still does get pigeon-holed a bit as a non-production item tool, there is great interest in seeing how SAP can broaden this perception and have Ariba become a more significant player in the space.
  • Discussions with a few manufacturers confirmed what I had been seeing through the inquiries that IDC Manufacturing Insights has with both clients and prospects - that SAP's supply chain execution suite (and Transportation Management in particular) is now perceived to be generally on par with the best-in-class market applications. Given the issues SAP had in the past getting TM out of beta, this is a considerable achievement. It will be interesting to see how successful SAP can be at selling these applications outside their installed base (a challenge, frankly, for all software vendors).

While these are fascinating and valuable insights, perhaps the most interesting thing to me from the event was the articulation by Hans Thalbauer, SVP SAP Supply Chain Management, of SAP's new go-forward supply chain strategy. Most interesting in part because SAP always provide a thoughtful, and though provoking, peek into the future of the supply chain; but also because at IDC Manufacturing Insights we are about to publish a research report on our vision for the future supply chain.

As one might expect, reasonable people tend to have convergent, rather than divergent, views of the world; and while SAP's perspective on the future supply chain is not exactly the same as mine, there are obvious similarities. I will, however, leave my own views to that future research, and focus here on what Hans articulated in his Insider keynote.

At the center of SAP's vision are two topics that IDC Manufacturing Insights has been trumpeting for a few years now, speed and customer centricity. SAP clearly understands that supply chains have to be faster and more focused on the needs of the customer/consumer.

Consumers are more informed than ever before, and are demanding personalization in their purchases - personalization of products, certainly, but also in the purchase experience (i.e. omnichannel). Further, once a consumer has decided on a purchase, they 'want it now'. These things are not easily done with traditional supply chains, and SAP believes that a transformation is both inevitable, and already happening, in the form of manufacturers transforming their supply chains to 'demand networks'.

So, what does SAP specifically propose in its new approach:

  • Supply chain monitoring - ensure supply and fulfillment integrity/resiliency and predict issues within the demand network. This could be a supply or supplier issue or an unexpected spike in demand - anything that could potentially disrupt the ability to deliver on-time-in-full. Underlying capabilities include considerations for segmentation, sustainable supply (adherence to regulatory requirements) and perhaps most importantly, visibility. To 'twist' an old saying, 'you cannot react to something you don't see coming'.
  • Integrated business planning - balancing demand plans and forecasts with supply network constraints certainly, but also the broader view of business profitability and the introduction of new products and services. Underlying capabilities include clarity of demand, a robust and cross-functional S&OP process and agile inventory (at all key points in the supply chain)
  • Demand-driven supply networks - use demand sensing and shaping tools and techniques to better 'manage' demand as it relates to the fulfillment network; both in terms of managing traditional fulfillment (transportation and warehousing) as well as in the most effective use of inventory. Underlying capabilities include leveraging market and customer intelligence, having the right response orchestration capabilities to manage omni-channel demand and fulfillment, and having a fast and agile business network in place to align supply.
  • Logistics and order fulfillment - managed for speed, but also efficiency. If customer centricity is to be the first principal of the future supply chain, then businesses must be clear about what trade-offs to make, and when, in the service of service. Underlying capabilities include visibility into customer service trade-offs, an integrated supply chain execution capability, and connected relationships with logistics partners (both to ensure quick and reliable fulfillment but to also provide clear track and trace).

This is a very brief and superficial overview of the things SAP shared at Insider, and we will have more to say about the new strategy, as well as our own future view of supply chains later in 2014, but for now, suffice it to say that SAPinsider remains one of my personal favorite events, both because it focuses where I focus, but also because it provides an opportunity to understand where their manufacturing customers are in terms of their supply chain journey. Highly recommended.

Posted by Simon Ellis, Practice Director, Supply Chain Strategies, IDC

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