Sections

Digitalization Turns Supply Chains Inside Out – And This Is Just The Beginning

Dr. Ravi Prakash Mathur

For generations, developments in manufacturing and IT have pushed the productivity frontier to a new level. Technology delivers not only new concepts and approaches, but also improved operational effectiveness and advanced supply chain management that open the way to a distinct, competitive advantage.

If we take a moment to examine the illustrious history of modern-day manufacturing, it becomes apparent that technology continues to push the boundaries of the impossible.

Supply chains in the 20th century

The 20th century saw giant leaps in operations and supply chain efficiencies driven by significant technology innovation. At the forefront of the revolution was the automotive industry, where manufacturing shifted from craft manufacturing to assembly-line or unit-flow manufacturing. Over time, manufacturing systems became large in scale, making the planning processes that supported them increasingly complex.

Multiple products, plants, markets, and suppliers became part of the system, requiring material planning systems that could handle a web-like network of supply chain nodes. Computing advancements led to applications that improved supply chain planning for large manufacturers in terms of material requisition and production plans. At the same time, programs – such as continuous improvement, lean management, Six Sigma, quality management – were pursued to improve production efficiency.

Supply chains in the 21st century

At this stage, as all competitors started adopting best practices, the maximum value a company could hope to deliver at a given cost, technology, and skill set began to diminish. As more organizations reached the productivity frontier, which can be defined as the sum of all existing best practices, profitability started to erode.

The other challenge was that the supply chain was no longer defined as a chain of linear relationships. Value chains gave way to value networks. Outsourced business processes – including those pertaining to manufacturing, R&D, logistics, and marketing – and the emergence of digital platforms were the primary factors that led to this change.

Supply chain network mapping became more complex and posed a further challenge in supply chain optimization. While some organizations adopted replenishment-driven, pull-based supply systems such as those based on a theory of constraints, others chose the forecasting method. Such innovative thinking paved the way for hybrid supply chain systems, which combine push- and pull-based systems and embrace multiple push-pull boundaries.

Supply chains today

As organizations use digital platforms to create new business models, the supply value chain is getting reconfigured and realigned to unlock even greater value. There’s no doubt that digital value nets are more customer-aligned, collaborative, agile, scalable, and fast-flowing. But they do come with their fair share of challenges.

Consider the rise of the e-commerce site. By building in data aggregation and analytics, manufacturers are empowered to predict demand and optimize demand and supply. In addition, increasing use of e-wallets and payment banks have taken the payment process out of a linear value chain and placed it firmly on a digital platform that supports various portals.

Another example is that of furniture being sold through Web portals. Furniture bought online is shipped in knocked-down condition and assembled in the customer’s home. Effectively, the manufacturing plant, which was traditionally upstream in the supply chain, has moved to the customer’s home.

Supply chains in the future

There’s little doubt that organizational boundaries are dynamically changing. The future of the supply chain will be more collaborative, complex, and dynamic – all of which will require more agile processes.

This is a significant challenge for IT systems that support such operations. Conventional IT solutions that worked well for linear supply chains will need to evolve further to provide greater efficiency throughout the supply chain. More important, such advancement will need to push the productivity frontier to help manufacturers gain a new competitive advantage.

For more insight on modern supply chains, see Live Business: Creating Digital Supply Networks.

Comments

Dr. Ravi Prakash Mathur

About Dr. Ravi Prakash Mathur

Dr. Ravi Prakash Mathur is Senior Director of Supply Chain Management (SCM) and Head of Logistics and Central Planning at Dr. Reddy’s Laboratories Ltd. He heads the global logistics, central planning, and central sourcing for the pharmaceutical organization. Winner of the 2015 Top 25 Digitalist Thought Leaders of India award from SAP, Dr. Mathur is an author, coach, and supply chain professional with 23 years of experience and is based in Hyderabad. He is also actively involved in academic activities and is an internal trainer for DRL for negotiation skills and SCM. In 2014, he co-authored the book “Quality Assurance in Pharmaceuticals & Operations Management and Industrial Safety” for Dr. B. R. Ambedkar University, Hyderabad. He is also member of The Departmental Visiting Committee (DVC) for Department of Biotechnology, Motilal Nehru National Institute of Technology (MNNIT) Allahabad. Professional recognitions include a citation from World Bank and International Finance Corporation for his contribution to their publication “Doing Business in 2006” and the winner of the Logistics-Week Young Achiever in Supply Chain Award for 2012.

Consumer-Driven Digital Enterprise: The Digital Future Of Consumer Products

Jim Cook

Across industries, there’s a lot of talk about how digital is rewriting the rules of engagement.

We are shown examples of how digital disruption is impacting almost every aspect of businesses – from reinventing business models to transforming business processes. Re-imagining a business platform is almost a requirement in today’s consumer-led and data-driven economy. (You know the businesses that are quoted in every article on digital.)

A key question here, though, is: whether the consumer products industry is indeed facing digital disruption, or does it really need deeper digital innovation? Disruption turns an industry on its head by offering consumers something that previously did not exist, while innovation enhances an existing value proposition – making it better, faster, or cheaper.

It is important to distinguish between the two, because hype often causes businesses to overlook the true value of digital transformation. Companies may presume such radical changes have nothing to do with them, especially if they are already in a dominant market position. So while digital is dramatically changing industries such as retail and healthcare, the disruption in the consumer product industry may not be as severe – not yet anyway. Instead, what consumer products businesses should focus on is how they can transform digitally to gain the capacity to build and grow “live brands.” This is preparation and not protectionism.

Create direct customer experiences: Secure the dominant market position

The digital age has fundamentally shifted customer and consumer expectations. Consumers increasingly value outcomes over products. To build ongoing engagement and loyalty, consumer products companies need to sense and engage consumers and customers in the moment, i.e. build “live brands” by seamlessly delivering highly personalized experiences – anytime, anywhere.

This ability to create direct customer experiences helps consumer products companies create a sharper competitive edge to secure dominant market positions. Leading consumer products companies know this well.

Red Bull sets a fine example in creating direct customer experiences to protect and strengthen its brand. Today, it has moved beyond a beverage company into a content media company spanning web, social, film, print, music, and TV – creating brand experiences of exhilaration and adventure. Red Bull collects data from every touch point that it has with the consumer, building an enhanced profile of every individual so that it can respond with products that consumers desire – whenever and how they want them.

Procter & Gamble recently launched an online, direct-to-consumer subscription business for its Tide Pods (its highest-priced laundry detergent). The service (currently only available in Atlanta), branded Tide On Demand, offers free shipping of Tide Pods at regular intervals. P&G has also been testing its delivery laundry service – Tide Spin – in Chicago. While the direct-to-consumer services may not form a bulk of its revenue, they allow P&G to quickly build a live understanding of its customers, their preferences and habits, and then hone in on these insights to create new offerings that customers want.

Build a real-time supply chain: Support lasting customer loyalty

As consumer products companies move towards sensing and engaging customers in the moment, they also need to ensure a fast and profitable response to dynamic demand.

This necessitates connecting customer insights that brand owners have collated and analyzed with supply chain insights to accelerate time to market. Ultimately, it is about transforming previously linear supply chains into customer-centric demand networks – where demand information is captured through new signals from various sources (such as retailers, wholesalers, sites like Amazon, directly from customers, or the Internet of Things) and fulfilled through the orchestration of a network of internal and external partners.

With that, consumer product companies can start getting answers to questions such as:

  • What are my short-, mid-, and long-term views of expected demand across channels?
  • How can I combine supply chain planning with strategic, financial, sales, and operational goals?
  • How can I extend planning by collaborating with customers, partners, and suppliers?
  • How can the company translate the plan into actionable targets for fulfillment systems?

All these should go full circle to help make manufacturing more responsive, optimizing capacity to help ensure availability of finished goods produced just-in-time to meet demand, thereby also lowering inventory costs.

Consumer products companies need to consider how they can create the digital future today. We invite you to learn more about digital transformation for the consumer products industry, where you will get access to valuable resources including whitepapers and customer case studies.

Comments

Jim Cook

About Jim Cook

Jim Cook is the Industry Advisor for consumer industries in South East Asia, with over 20 years’ experience of IT and business consulting. He has held various roles from solution architect, project and program management, business development as well as managing an SAP partner organisation. Jim is passionate about transformation within consumer driven organisations. Jim is particular interested in customer engagement solutions and the value that can be achieved from end to end SAP deployments.

Predictive Procurement Gets Real

Marcell Vollmer

The physical and digital worlds have officially collided. In the old days, we’d have the morning paper delivered to our doorsteps and read it on the way to work while sipping coffee we made at home. Today, the news stories we care about are automatically delivered to our mobile devices, and we scan them while enjoying the beverage that was ready and waiting for us at the local coffee shop after we ordered it via mobile app. In years past, we attended events after work to expand our professional networks. Now we link to our peers — and their peers — around the world, online in real time.

Connecting the dots

As a society, we are more connected than ever. Thanks to the Internet of Things (IoT), we can see and be seen like never before. We can learn about the future and use this information to shape it to our advantage.

There are plenty of examples of this in the consumer world—for example, refrigerators that predict when you’re about to run out of milk and automatically order and have it delivered before you even notice, and devices that know you’re on your way home and turn on the lights before you get there.

It’s happening in procurement as well, and transforming the function as we know it. Procurement is complex and involves lots of moving parts, from sourcing and manufacturing to transportation and logistics. It’s an intricate web of systems, processes, and relationships that must be coordinated and managed, both internally and externally, to ensure that goods and services get delivered on budget and on time.

Predicting the future

Over the years, procurement has made great strides, leveraging disruptive forces such as business networks and cloud technologies to evolve from a tactical manual process to a strategic digital one. Paper orders and invoices are all but dead. Electronic payments are taking hold. Buyers and sellers are meeting and collaborating online.

Yet the transformation has only begun. Aided by Big Data and the IoT, procurement is becoming smarter and more predictive than ever.

Data is the lifeblood of any organization. From structured information on production, marketing, sales, HR, finance, facilities, and operations to transaction-level data on suppliers, customers, and partners, it tells the story of a business. For years, companies have been mining data simply to figure out what it all means—essentially, to learn from the past and perform better in the present.

Now they are leveraging advances in technology such as in-memory computing, real-time analytics, and the IoT to create assumptions about what will happen in the future and take actions that drive optimal outcomes.

Eliminating risk

Supply chains are more global than ever, and as a result, fraught with more risk. Many companies are turning to the IoT to anticipate and mitigate this risk before it disrupts their business. Consider the mining industry. Trucks are the critical link to transport raw materials to either further process or sell them on the market. If one of these trucks stands still due to maintenance issues, losses to the company could run into the millions, as they only can sell what they get out of a mine and deliver.

With the help of sensors, companies can continually monitor their fleets and receive notifications on upcoming maintenance needs to prevent breakdowns before they occur. Critical components such as engines and braking systems, for example, can be connected by small IoT sensors that monitor their temperature, hydraulic pressure, container angle, position, and vibrations. The sensors transmit all data to a live dashboard, and if a key parameter such as temperature changes, it will trigger an alert for the radiator. This information is then automatically routed to the procurement system, where a replacement order for radiator hose and radiator cleaner is automatically processed in line with the company’s procedures and policies. Related maintenance service is scheduled with a qualified technician who will arrive as soon as the material arrives and perform the work before a fatal defect of the radiator causes the truck to literally stop in its tracks. Risk avoided.

Delivering value

Supply chains are no doubt complex — and the data within them even more so. But data is the new global currency. And the IoT holds the key to unlocking its value. With the IoT, companies can not only spot patterns and trends in their business but anticipate risk and changes and adapt their businesses to gain advantage.

For more on how data analysis is transforming business, see Living The Live Supply Chain: Why You Need Data Scientists.

The article originally appeared in Spend Matters. It is republished by permission.

Comments

Marcell Vollmer

About Marcell Vollmer

Marcell Vollmer is the Chief Digital Officer for SAP Ariba (SAP). He is responsible for helping customers digitalize their supply chain. Prior to this role, Marcell was the Chief Operating Officer for SAP Ariba, enabling the company to setup a startup within the larger SAP business. He was also the Chief Procurement Officer at SAP SE, where he transformed the global procurement organization towards a strategic, end-to-end driven organization, which runs SAP Ariba and SAP Fieldglass solutions, as well as Concur technologies in the cloud. Marcell has more than 20 years of experience in working in international companies, starting with DHL where he delivered multiple supply chain optimization projects.

How Emotionally Aware Computing Can Bring Happiness to Your Organization

Christopher Koch


Do you feel me?

Just as once-novel voice recognition technology is now a ubiquitous part of human–machine relationships, so too could mood recognition technology (aka “affective computing”) soon pervade digital interactions.

Through the application of machine learning, Big Data inputs, image recognition, sensors, and in some cases robotics, artificially intelligent systems hunt for affective clues: widened eyes, quickened speech, and crossed arms, as well as heart rate or skin changes.




Emotions are big business

The global affective computing market is estimated to grow from just over US$9.3 billion a year in 2015 to more than $42.5 billion by 2020.

Source: “Affective Computing Market 2015 – Technology, Software, Hardware, Vertical, & Regional Forecasts to 2020 for the $42 Billion Industry” (Research and Markets, 2015)

Customer experience is the sweet spot

Forrester found that emotion was the number-one factor in determining customer loyalty in 17 out of the 18 industries it surveyed – far more important than the ease or effectiveness of customers’ interactions with a company.


Source: “You Can’t Afford to Overlook Your Customers’ Emotional Experience” (Forrester, 2015)


Humana gets an emotional clue

Source: “Artificial Intelligence Helps Humana Avoid Call Center Meltdowns” (The Wall Street Journal, October 27, 2016)

Insurer Humana uses artificial intelligence software that can detect conversational cues to guide call-center workers through difficult customer calls. The system recognizes that a steady rise in the pitch of a customer’s voice or instances of agent and customer talking over one another are causes for concern.

The system has led to hard results: Humana says it has seen an 28% improvement in customer satisfaction, a 63% improvement in agent engagement, and a 6% improvement in first-contact resolution.


Spread happiness across the organization

Source: “Happiness and Productivity” (University of Warwick, February 10, 2014)

Employers could monitor employee moods to make organizational adjustments that increase productivity, effectiveness, and satisfaction. Happy employees are around 12% more productive.




Walking on emotional eggshells

Whether customers and employees will be comfortable having their emotions logged and broadcast by companies is an open question. Customers may find some uses of affective computing creepy or, worse, predatory. Be sure to get their permission.


Other limiting factors

The availability of the data required to infer a person’s emotional state is still limited. Further, it can be difficult to capture all the physical cues that may be relevant to an interaction, such as facial expression, tone of voice, or posture.



Get a head start


Discover the data

Companies should determine what inferences about mental states they want the system to make and how accurately those inferences can be made using the inputs available.


Work with IT

Involve IT and engineering groups to figure out the challenges of integrating with existing systems for collecting, assimilating, and analyzing large volumes of emotional data.


Consider the complexity

Some emotions may be more difficult to discern or respond to. Context is also key. An emotionally aware machine would need to respond differently to frustration in a user in an educational setting than to frustration in a user in a vehicle.

 


 

download arrowTo learn more about how affective computing can help your organization, read the feature story Empathy: The Killer App for Artificial Intelligence.


Comments

Christopher Koch

About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing. Share your thoughts with Chris on Twitter @Ckochster.

Tags:

In An Agile Environment, Revenue Models Are Flexible Too

Todd Wasserman

In 2012, Dollar Shave Club burst on the scene with a cheeky viral video that won praise for its creativity and marketing acumen. Less heralded at the time was the startup’s pricing model, which swapped traditional retail for subscriptions.

For as low as $1 a month (for five two-bladed cartridges), consumers got a package in the mail that saved them a trip to the pharmacy or grocery store. Dollar Shave Club received the ultimate vindication for the idea in 2016 when Unilever purchased the company for $1 billion.

As that example shows, new technology creates the possibility for new pricing models that can disrupt existing industries. The same phenomenon has occurred in software, in which the cloud and Web-based interfaces have ushered in Software as a Service (SaaS), which charges users on a monthly basis, like a utility, instead of the typical purchase-and-later-upgrade model.

Pricing, in other words, is a variable that can be used to disrupt industries. Other options include usage-based pricing and freemium.

Products as services, services as products

There are basically two ways that businesses can use pricing to disrupt the status quo: Turn products into services and turn services into products. Dollar Shave Club and SaaS are two examples of turning products into services.

Others include Amazon’s Dash, a bare-bones Internet of Things device that lets consumers reorder items ranging from Campbell’s Soup to Play-Doh. Another example is Rent the Runway, which rents high-end fashion items for a weekend rather than selling the items. Trunk Club offers a twist on this by sending items picked out by a stylist to users every month. Users pay for what they want and send back the rest.

The other option is productizing a service. Restaurant franchising is based on this model. While the restaurant offers food service to consumers, for entrepreneurs the franchise offers guidance and brand equity that can be condensed into a product format. For instance, a global HR firm called Littler has productized its offerings with Littler CaseSmart-Charges, which is designed for in-house attorneys and features software, project management tools, and access to flextime attorneys.

As that example shows, technology offers opportunities to try new revenue models. Another example is APIs, which have become a large source of revenue for companies. The monetization of APIs is often viewed as a side business that encompasses a wholly different pricing model that’s often engineered to create huge user bases with volume discounts.

Not a new idea

Though technology has opened up new vistas for businesses seeking alternate pricing models, Rajkumar Venkatesan, a marketing professor at University of Virginia’s Darden School of Business, points out that this isn’t necessarily a new idea. For instance, King Gillette made his fortune in the early part of the 20th Century by realizing that a cheap shaving device would pave the way for a recurring revenue stream via replacement razor blades.

“The new variation was the Keurig,” said Venkatesan, referring to the coffee machine that relies on replaceable cartridges. “It has started becoming more prevalent in the last 10 years, but the fundamental model has been there.” For businesses, this can be an attractive model not only for the recurring revenue but also for the ability to cross-sell new goods to existing customers, Venkatesan said.

Another benefit to a subscription model is that it can also supply first-party data that companies can use to better understand and market to their customers. Some believe that Dollar Shave Club’s close relationship with its young male user base was one reason for Unilever’s purchase, for instance. In such a cut-throat market, such relationships can fetch a high price.

To learn more about how you can monetize disruption, watch this video overview of the new SAP Hybris Revenue Cloud.

Comments