Supply Chains: From Inside-Out to Outside-In

Supply Chains: From Inside-Out to Outside-In

Table of Contents Big Data and the Supply Chains of the Process Industries The Inter-Enterprise System of Record Inside-Out vs. Outside-In Supply Chain How to Enable Outside-In Success? 2

Big Data and the Supply Chains of the Process Industries Gaining Value from the New Frontier As a marketer, the big data revolution is well underway. My colleagues and I have been on the forefront of gaining value from this new frontier for some time. Companies best capturing and harnessing the power of Big Data are creating meaningful differentiation and becoming leaders in their industry. In 2014, Big Data will also become a real enabler for high performance supply chains, and ultimately, further growing the competitive edge companies desire. The wealth of data available today has become so large and complex that it s outgrown the ability to aggregate and process it using traditional databases. Companies are increasingly integrating information from multiple data sources, both inside and outside their four walls, in order to leverage the benefits of Big Data. The challenge is combining their structured data, with other data sources, in a way that positively transforms a company s collaborative business processes. So, how does this apply to the supply chains of our process industry clients? Big Data reaches across; the structured data of a company s enterprise, their commerce with trading partners (suppliers, customers, logistics service providers, etc.), and a wealth of unstructured data. The goal is to capture intelligence around the real-time business issues process industry companies face. Top performers are leveraging Big Data driven strategies to innovate, compete, and capture value. Big Data will generate value and raise revenues by: Making information visible and actionable Exposing variability Enabling nimbleness Delivering precisely tailored products or services Predicting major asset failure Sensing transportation hub congestions Creating innovative after-sales service offerings Improving decision making from tactical to strategic If you aren t using Big Data analytics, rest assured your competitors are, or will be soon. Where to start? Ensure you re plugged into an ecosystem designed, from the ground up, to deliver the promises of Big Data in a big way. This ecosystem is what we call a Supply Chain Operating Network. That s the key. Start with connectivity, capturing all the transactional data among supply chain partners from raw material procurement through distribution to the end customer. Use powerful business process enablement apps to help achieve flexibility, scale, and alignment. Combine these structured data sources with unstructured data, predictive algorithms, and next generation platform technologies to get your hands on the powerful real-time analytics that drive keenly informed decisions and supply chain excellence. 3

The Inter-Enterprise System of Record Supply Chain Operating Networks Take the Friction Out of Global Supply Chains A Supply Chain Operating Network (SCON) truly integrates the extended, varied, distributed, and complex needs of thousands of individual trading partners and their respective enterprises. Robust data integration, automation, business process enablement, and analytics are all inherent in its design. Elemica just so happens to be the unrivaled SCON for buyers, sellers, and logistics service providers in which to seamlessly and efficiently conduct commerce across the global process industries. So, what s driving this SCON evolution? The pace of change is accelerating rapidly for process industry manufacturers. Flows of goods and information are more widely distributed and complex than ever, presenting significant challenges like increased risk coupled with decreased visibility. More mergers and acquisitions activity, increased competition, wider fluctuations in the availability and costs of raw materials, reduced demand and supply predictability, and dispersed assets further add to the broad array of challenges companies face when planning their operations. As a consequence, volatility is increasing, while predictability is decreasing. Successful companies must further evolve their ability to collectively sense and properly respond to changes in market demand and material supply. Process industry companies have invested heavily in internal process standardization and companywide ERP systems. The scale and internal efficiency of these investments have driven savings through simplification and centralization, while enabling increased control over internal operations. Many still pursue additional efficiency gains by adding B2B integration companies, traditional licensed software, or niche application providers to work alongside their on-premise ERP systems, and these solutions are built out of the standardized internal enterprise processes of procure to pay and order to cash where an ERP s design functions best. This approach can be referred to as the inside-out supply chain. However, unique characteristics associated with the extended global process industries keep this strategy from being a complete solution. When the standard processes meet the outside world they stumble. While internal integration can be forced through by corporate requirement, external supply chain partners customers, suppliers and logistics service providers are not necessarily accepting of these demands. They each have their own way of doing things. Companies can t expect them all to collectively adopt a single process. When companies transform their supply chains to respond directly to external market drivers, it is known as the outside-in supply chain. A SCON removes the friction coming from these two competing but valid requirements; 1) the standardized internal enterprise processes of the inside-out supply chain, and 2) the flexibility needed to work with the operating demands of the outside-in supply chain. Companies must find ways for these two requirements to co-exist. 4

The Inter-Enterprise System of Record Highlights to look for in your SCON: A Come As You Are Approach Inherently Integrated Business Applications Fully Leveraged Connections Nearly Infinite Scalability B2B Social Collaboration Adding an inter-enterprise system of record in a SCON enables companies to focus more on sensing, shaping, and driving an intelligent response to the environment happening outside their internal control. 5

Inside-Out vs. Outside-In Supply Chain Bridging the Gap for Success Today, the movement of information, products and materials is becoming more widely distributed and complex and this creates a big challenge for manufacturers. Adding to the difficulty are increased competitive pressures, reduced supply and demand predictability, and more widely dispersed assets. These challenges result in increased volatility and risk with decreased visibility and predictability. The consequences of this reality are significant. Examples include losing sales to competitors because a manufacturer didn t properly anticipate demand or paying extra inventory costs because too much material was purchased before a time of falling prices. These hurt your ability to price competitively in the market. Inside-Out (An Enterprise Focused Approach) = Standardization & Efficiency Where has the investment been to overcome today s supply chain challenges? Billions have been invested in automating internal operations through ERP systems, and they do a good job for what they were designed to do. These systems were designed around standardized enterprise processes of Procure to Pay and Order to Cash. However, they are a one size fits all approach and are poor when flexibility is needed to meet the diverse and variable needs of the customer. Shortcomings of an Enterprise Focused Approach limit you to only being able to automate a small percentage of your supply chain. You can t expect the outside world to accommodate specific needs of your ERP, especially when you consider the sheer amount of trading partners you have and regions in which you operate and sell. Intra-Company Benefits: Enforces Corporate Requirements Standardizes Internal Processes Correlates Multiple Processes Across Departments Inter-Company Shortcomings: Partners have their own ways May Not Accept your Demands Varying Capabilities and Technology Resources What you gain through your Enterprise in the Inside-Out Supply Chain is Standardization & Efficiency. But this single approach will not get you to a world class, fully integrated, supply chain. Outside-In (A Customer Focused Approach) = Flexibility & Speed Where will the investment be going forward? Significant investments will be made to make supply chains more capable of responding directly to customers. Customer focused supply chains need to be designed around the needs of the customer and be interdependent on the operating demands of others. An Outside-In approach emphasizes sensing, shaping, and driving intelligent, fast responses. Intra-Company Benefits: Increases Speed and Accuracy of Interpretation of Partner Performance Compresses the Planning Horizon to Reduce Risk 6

Inside-Out vs. Outside-In Supply Chain Inter-Company Results: Respond directly to customers Correlate multiple processes across all trading partners Recognize Impact of Resource Decisions on Entire Value Chain More and more companies, to stay competitive and relevant, are learning from the best and are adapting. Samsung, Apple, Proctor & Gamble are all examples of fully integrated supply chains. These companies have taken the step beyond the enterprise approach, which is the outside-in supply chain. They are driving the design of their supply chain around the needs of their customers, suppliers and logistics providers. These guys get it! They have highly flexible supply chains and are great companies. They sense demand well and respond quickly to customer needs. This allows you to better meet your customer s needs in a highly competitive world. For example, in logistics, when a carrier is waiting at your gate instead of getting right into your dock, they will charge you a penalty. When you maximize your trading partner s efficiency, you maximize your own. Resolving the Tension of Competing Demands The Enterprise Focused approach and the Customer Focused approach are not mutually exclusive. One is not better than the other; in actually they must work in harmony. Both are needed, and equally valuable. You ve invested heavily in SAP and it s the important first step. First, you need the Enterprise Approach in place and then you can build through to the Outside-In needs of the broader market. There is a gap that needs to be bridged between the two, and today we see a variety of approaches. Currently, it s handled with people, it s handled with one off projects with varying success, it s handled with new and expensive ERP modules (these don t typically come without big consulting fees), or it s handled with a wide variety of web portals. In all reality, it s handled with a combination of all of these approaches. Unfortunately, none of these can scale efficiently enough to keep up with rapidly evolving market requirements. Taking the Next Step So, what s needed? Manufacturers - with all their trading partners must collectively sense and properly respond to demand and supply changes in the market. You can address the Inside-Out supply chain. However, you need additional resources to bridge the gap to really meeting customer needs. Those are 1) Automation of Customer Driven Processes The outside-in supply chain cannot be successful if the bridge between your Enterprise and the Customer continues to be manual and costly. Automation in the Enterprise must be extended out through to the customer s processes. 2) Broad and Deep Trading Partner Integration Automation programs should be across the entire supply chain, and with as many trading partners as possible. And that integration must be industrial strength. 3) And finally, Real Visibility - This includes, understanding where you have product, understanding where you have materials to make product, understanding delays in shipments, and understanding market demand. 7

How to Enable Outside-In Success? Adapting Your Supply Chain for Success As a follow-up to Inside-Out vs. Outside-In Supply Chain, which explains the difference between an Enterprise Focused Approach and a Customer Focused Approach, this post covers how to successfully enable a real customer focused supply chain. Today s environment has many challenges which results in high volatility and risk with decreased visibility and predictability across your supply chain. Your success in the marketplace is determined by how you adapt to the environment, proactively or reactively. The movement of information, products and materials is becoming more widely distributed and complex which results in huge challenges for global or large regional manufacturers. Adding to the difficulty are increased competitive pressures, reduced supply and demand predictability, and more widely dispersed assets. The consequences of this new reality are significant. Examples include: losing sales to competitors because a manufacturer didn t properly anticipate demand or paying extra inventory costs because too much material was purchased before a time of falling prices. These hurt your ability to price competitively in the market leading to decreased market share and supply chain inefficiencies. Taking the Next Step What s needed to move from an enterprise focused supply chain to customer focused? Manufacturers with all their trading partners must collectively sense and properly respond to supply can demand changes in the market. In order to do so, you will need additional resources to bridge the gap to meet customer needs. Those are 1) Automation of Customer Driven Processes The Outside-In supply chain cannot be successful if the bridge between your Enterprise and the Customer continues to be manual and costly. Automation in the Enterprise must be extended out through to the customer s processes. 2) Broad and Deep Trading Partner Integration Automation programs should be across the entire supply chain, and with as many trading partners as possible. And that integration must be industrial strength. 8

How to Enable Outside-In Success? 3) And finally, Real Visibility This includes, understanding where you have product, understanding where you have materials to make product, understanding delays in shipments, and understanding market demand. So, what s needed when looking at Supply Chain Networks or Solutions in the market? Two Powerful Forces The Customer Focused Approach is enabled when you integrate across as many trading partners as possible. As critical mass is reached, you can execute the Outside-In supply chain with most all of your trading partners, not just a few or a select group of them. A customer focused approach takes two things 1) Flexible, adaptable business process applications 2) A real supply chain network Applications in and of themselves are nothing without the network. Combining those applications with a real supply chain network is the key because the applications are able to work with the outside world. Some supply chain solution providers are able offer supply chain applications, yet lack a Network to build those applications upon, severely limiting their power. For example, you may have an application to swipe credit cards to make a sale, but without the network, you re unable to immediately capture an authorization from the bank. Or, more specifically in our world, what good is a logistics application if it can t send a load tender motor message to a carrier, or what good is a VMI solution if you are not getting continual inventory and forecast feeds from your customers? While other solution providers offer a Network, they lack the ability to extract data from the business documents on their Network in order to build real powerful supply chain business applications. To implement and operate a fully integrated supply chain, choose a solution that offers both powerful forces, Supply Chain Applications and a Real Supply Chain Network. Look for: Fast & easy partner on-boarding with Integration tools to minimize barriers to on-boarding And Self service testing Clean and actionable data giving you the ability to Enforce business rules before data gets to your ERP And Manage master data online Clear visibility into business issues with Proactive alerts & notifications And a Transaction dashboard. 9