Experienced SCM management consultant Ashish Saxena joins SAPinsider for a podcast on the latest SCM trends and issues of interest to SAP customers. Topics of this discussion include:
- Major trends of 2014, including digitization, analytics, and collaboration
- Best practices for integrated supply chain planning
- Trends to be on the lookout for in 2105
Listen to the podcast, and read the transcript of the conversation here:
Ken Murphy, SAPinsider: Hi, this is Ken Murphy with SAPinsider, and today I’m pleased to be joined by Ashish Saxena, an SCM management consultant, with experience with Cognizant, IBM, and recently with Amazon. Ashish, welcome to the podcast.
Ashish Saxena: Ken, thank you for having me here.
Ken: Ashish is here today to speak with us about some trends and issues in the SCM space that are of interest to SAP customers. Ashish is also going to be a featured speaker at the SAPinsider SCM conference in March, which kicks off March 30 in Las Vegas. Ashish, I’d like to start with analytics as it pertains to supply chain. More and more organizations are recognizing the importance of business intelligence, how are companies integrating this into the supply chain?
Ashish: Ken, first of all thank you again for having me here. Supply chain, as you may have noticed, and I’m sure your audience have noticed, in the last, in 2014, it just became a hot topic in the industry. And we will continue to see that trend in 2015 and hopefully the new two or three years, for sure. And what’s driving this, what’s fueling it, is the entire notion around digitization and enhanced consumer experience. So, just to, I want to share some facts through Gartner, McKinsey, and different analysts that by 2020, there will be 43 trillion gigs of data, and 8 billion sensors will be operational by then. Specifically to the sensors, a lot of that data is pertaining to supply chain, it has a huge impact. And if you look at the trends which are going on right now, the big trends, Internet of Things, social media, connected cars, smart homes, all these you know, emerging technologies — or rather, becoming more stabilized technologies — are generating more data as we speak.
So in the context of supply chain, first I would like to highlight that there are three big themes which should be a top priority for any supply chain executive. It’s visibility, analytics, and collaboration. And why analytics, the role of analytics in the supply chain is becoming more important because when you look at the focus in the market today, it is primarily driven by sales and marketing engaging the consumers, the consumer sentiment through social media or through Internet of Things, the question to ask is what, how do I take that data and drive my supply chain, can my supply chain support all the front-office digitization which is going on in the industry.
So I wanted to share an example of a large grocery chain, it’s a classic example, something to learn from, and which will answer a question here is this particular grocery chain did a phenomenal job on marketing, leveraging analytics, and started launching campaigns on a weekly basis in different markets. However, that whole effort came down on its knees in about 20-25 days because the back-end supply chain was not able to support these weekly campaigns, and that triggered a lot of focus in the industry, it is time now that supply chain executives think of value chain from R&D, to sourcing, to production, to logistics, tied very tightly with marketing and sales. So think of basically co-innovation, co-developing products from that consumer sentiment, trying different types of distribution channels by segmenting, so customer segmentation should drive supply chain segmentation, so there are many, many examples, and many different ways in how analytics will play a big role in the supply chain, and should be, and that’s where we’ll see a lot of focus, I’m pretty sure we’ll see a lot of focus in 2015.
Ken: So other than the grocery chain that you mentioned as an example of a failure, I mean, how would an organization overcome the challenge of proving ROI?
Ashish: Absolutely, that’s a great point. What I’d like to say is, first, change the operating principle of the mindset, the new mantra for a supply chain executive should be “I want to optimize my supply chain to drive customer and shareholder value” which is no longer about just cost savings, or no longer just about improved productivity, which again, adds up to the cost savings. So in order to get — ROI is always challenging, and especially when there is, you know, when analytics is involved because everybody is trying to do analytics. There are three things I would like to highlight. First of all, the importance of supply chain analytics to get a good ROI is to narrow down to what drives my business decisions. Focus on what decisions do I make to improve my business, to improve my customer service, and then apply supply chain analytics tiered around that.
The second one is that with the new customer insights available, then we have to find new supply chain channels, new distribution channels or in fact multiple supply chains within the same organization. It’s no longer one-size-fits-all; it’s tailored to different consumer insights, different customer segments. Apply supply chain analytics, that’s how you basically dive into the marketing organization and jointly drive the ROI.
The third thing is that you have to create new competitive advantage, especially again in the context of supply chain, the new information, again, comes through collaboration. Collaboration with customers, collaboration with suppliers, and collaboration with the business partners, so creative competitive advantage. Another example of that would be, you know, I want to share, is a very large manufacturing firm, I worked with them actually last year and one of the things from an analytics point of view we did was predictive manufacturing, where this particular company is going to incorporate not only just machine data, but human performance data, environmental data, operational data, you take all these sets of data and predict what should be a right outlook or a yield for the client, for their different product lines. And the extension of that is they’re sharing that information with their customer, it is a B2B scenario, but their customer, so their output is going as an input to their customer, which in turn, improves the yield for their customer, so we’re talking about driving ROI through analytical models like this company’s doing and many others that will hopefully be doing it in 2015.
The last thing I would say here is, Ken, that we’re, I said earlier, drive customer and shareholder value, so I want to touch base a little bit on the conventional metrics and challenge them, as a supply chain executive. It’s no longer just about like a perfect order or a fulfillment cycle time. Bring a new metric to measure the ROI, which is flexibility, adaptability, how do I react to my disruptions? Some of these are qualitative and some of them are quantitative, but with this new set of metrics, then you are truly able to see what impact this analytics has, just besides cost savings.
Ken: You earlier mentioned the consumer, and I’m curious if you can address recent developments in making the supply chain more consumer-centric, so we’re hearing a lot more about the consumer economy. How’s that relevant in supply chain?
Ashish: That is a great question, and my experience, and even through, it was brought up at a Gartner conference, SCM conference last year, that as the consumer economy is strengthening, and a lot of companies are focusing on digital right now, it is actually not trickling into supply chain as much. In 2014, we saw a lot of executives actually struggling, everybody acknowledges that there is a need to make supply chains more consumer-centric, but they’re struggling where to start. So, just to share some numbers, I’m sure official numbers will come out soon but the expected marketing spend last year on digital channels, in 2014, was about $135 billion. And a large part of it was focusing on social. The question is, were the supply chains stacked against it, how much is their supply chain spend? And I’m pretty sure if you go investigate the numbers, it’s going to be a fairly low number from a supply chain perspective in terms of consumer-centric.
So, coming down to it is the need to become more consumer-centric, I don’t think it’s a choice anymore; it’s a mandate, if you will, and how do you actually drive it? A large part of it has to come from collaboration, and like I said earlier, collaboration with consumers, customers, and collaboration with the business partners, which is their suppliers, their third-party service providers. But what you collaborate on is also key. One thing in your decision-making process, when you drive a business strategy, or a supply chain strategy, take the consumer insights, invite the customers to the table, invite the suppliers to the table, and making those key decisions, a lot things are strategy. Also share the risks, because if all parties share the risk, there is transparency and visibility, then it’s a win-win-win for everybody, and especially with the new consumer demand coming in, because consumer preferences have changed significantly, especially in the last five years, the more we listen to the consumers, the better we’re able to adapt. What the end goal of this is, how do you make your supply chain consumer-centric, it’s basically what, in consulting terms we call it “where digital meets physical.” We have been relying on physical supply chains, it’s time to basically make those physical supply chains digital, and some use cases again in the industry is beginning at the source is creating new products and services, along with the consumer horizontal of the suppliers.
Ken: Also Ashish, it seems a concern that we’re hearing from SAP customers is they have a lot of data but perhaps have some trouble harmonizing their data from a supply chain perspective, I’m wondering if you could offer advice to those customers how they can maybe start along the right path?
Ashish: Absolutely. It is, especially for SAP customers, like you mentioned, I hope they do realize they are sitting on vast amounts of data, because anybody who has just SAP ERP, I want to go a little bit tactical to give the audience a flavor of what they have, what they really own today, when I made the comment “vast amount of data.” Look at traditional ERP, order-to-cash, purchase-to-pay, finance, all that data is already there, every single transaction and strategy. Then SAP has these specialized products specifically for supply chain, which is APO for demand and supply planning, then there is standard Warehouse Management, for all warehousing and distribution, and then Transportation Management, Global Trade Services, and it goes on and on. The key, exactly to what you said is, how to harmonize this data? The data is rich, and a lot of it is dark data where people have not tapped into it. So first, let’s take a look at a technical point of view.
A few years ago, lot of people had sort of an excuse or a challenge was that the technology is not sufficient to harmonize all these systems and bring the data together. That’s no longer the story. That’s one thing you can take off the table, I’m pretty confident about it because you know, SAP, if you look at SAP themselves, SAP’s huge investment in BI, BW, and HANA, and new innovations which will be announced later in this year that are coming in, that basically bridges the gap for having this you know, single platform, to bring the variety of data together and drive analytics through it. Then, there are technologies beyond SAP, like Hadoop is one of the most popular ones, which is really doing well and a lot of companies are using. So bottom line is that technology is no longer the barrier to harmonize. What really is the barrier now is the business and the org structure itself. So that’s a barrier, and if I’m a CIO or a chief supply chain officer, that’s what I would go change first is how do I actually kind of rationalize my organizations, and drive this as an executive, towards harmonization of data?
So one simple thing, well, I’m saying it’s simple, it’s easier said than done, but go back to basics in order to operationalize this harmonization model is the basics are the traditional supply chain model has been plan, source, make, and deliver. So set up like an analytics function which cuts across these four pillars or verticals of supply chain. And then you know, bring business people, your IT people, and a few smart data scientists, in this analytics function and challenge them to develop use cases, again, tied to the overall goal of customer-centricity and profitability, and you will be amazed, basically, what this group will be able to do when those are the parameters to work with. The key here is actually the executive sponsorship to overcome the organizational and the business barriers, and once again I say, technology should not be the barrier anymore.
Ken: And lastly, Ashish, do you foresee any big changes this year, as far as industry-specific supply chain trends?
Ashish: Absolutely, this is going to be a terrific year for supply chain, and over the next two to three years because as digitization on the front end is becoming more and more mature, that for supply chain is just starting out. So we got a long runway here to cover, specific to the industry. So while overall, overall the megatrends are social, mobility, analytics, and cloud, they’re going to be not just for supply chain but for any organization, cloud and analytics particularly for supply chain, when you look, zoom into the industries a little bit, retail is going to be omnichannel, omnichannel, omnichannel. They finally figured out a formula of how to basically compete with ecommerce, however not every company has done it well and some companies are in the early stages, so focus on omnichannel, do it well.
From a life sciences perspective, life sciences/pharma, we saw 2014 tremendous churn in the industry with mergers and acquisitions, almost every month there was something coming out. So now, if you look from a life sciences perspective, while the primary focus of life sciences has always been patient safety through traceability, which is very, very important for a supply chain in life sciences, the other thing is now with the mergers and acquisitions, now you have multiple supply chains, multiple assets, distribution channels, it’s time to optimize. So I think you’re going to see a lot of focus on supply chain optimization in life sciences.
The third industry I would like to cover here is manufacturing, and god help! The reason I say that is manufacturing in the last few years has been evolving constantly, there is no breathing room for now for manufacturing, particularly. It started with the, you know, China and India, and emerging markets, but as the manufacturing cost of those markets is increasing, we saw you know, next-shoring and in-shoring is kind of a current, right now, trend, but watch out for 3D printing, we have seen some of the large auto makers embracing 3D printing, so don’t fight it, actually embrace it, and also focus on a lot of product co-innovation, and the connected car is a great example, from an automotive point of view. So watch out for next-shoring, 3D printing, and product co-innovation.
The last one I would quickly touch here is CPG, consumer products, it’s been a little bit of a slow growth specific to supply chain in CPG, what started out a few years was demand-driven supply networks, some people jumped on the bandwagon, some did not, it was not fully adopted, it’s starting now to drive more collaboration, especially in a B2B sense with grocery chains or other retail networks, as well as go back and do demand-driven supply networks really well, that’s what will help CPG.
Ken: Lot of great insights there, Ashish, we appreciate your joining us to share your expertise!
Ashish: Thank you Ken, for having me again, and I hope this helps the audience, this is going to be an exciting year for supply chain, I look forward to another exciting year!
Ken: Great! Well again, this is Ken Murphy, with SAPinsider, and we have been chatting with Ashish Saxena, who is a featured speaker at SAPinsider’s SCM conference, which begins March 3, in Las Vegas. Ashish, thank you again!
Ashish: Thanks, Ken.