The transformations that have taken place in the world have made the consumer much more informed and demanding, demanding that companies offer a superior service that is customized to their needs. With a lot of information and purchase options, in addition to being able to search for more details and read the opinions of other customers, the consumer is able to compare prices and look for other options even inside the store. Another impact feature is the so-called 'servicification' of products. The customer does not necessarily want to buy a product, but enjoy the service and establish a unique relationship with the company. And there is no lack of examples of the effect of servicification on current consumption behavior: DVDs, CDs, cars and houses are being replaced by Netflix, Spotfy, Uber and Airbnb. What matters is no longer “having”, but “using”.
Figures 1 : Product Servicification
Source: ILOS
As a result of all these changes in consumer behavior, the supply chain faces a much greater complexity and will have to change. Being more efficient, flexible and agile is mandatory in a context of greater demand volatility, smaller and smaller orders, portfolio growth, increased competition, creation of new service channels, increased delivery points, expected delivery times. times smaller, less tolerance for faults, etc... In Brazil, the context is even more complex considering the important infrastructure bottlenecks and the complex mosaic of taxation.
To deal with this challenging and increasingly complex context, there are three basic ways: Simplification, Technology and Collaboration. It is necessary to reflect on the path(s) we should follow to meet the long-term goals. The path of Simplification consists of continuous improvement through the elimination of waste in all processes. The new Technologies help to make better decisions and react to complexities with greater speed. And Collaboration consists of sharing information, knowledge, experiences, strategies and resources with other areas, companies or consumers.
- Simplification
Simplification refers to identifying the processes that really add value to the operation, to maximize its performance and eliminate those that do not. The value reference must be from the customer's point of view, that is, the starting point is the identification of value for the customer. If what is being offered does not meet this value, there will be dissatisfaction and if the offer goes beyond the value there will be waste. Afterwards, it is necessary to evaluate the entire process and identify the steps that do not generate value for the customer and eliminate them, thus avoiding wasting resources, time, etc… This is the lean mentality or Lean Philosophy.
“The starting point for Lean Thinking is to define what is Price. Different from what many think, it is not the company, but the customer who defines what is value. For him, the need generates the value, and it is up to companies to determine what this need is, seek to satisfy it and charge a specific price for it, in order to keep the company in business and increase its profits through continuous improvement of processes. , cost reduction and quality improvement.”
Source: Lean Institute
It is important that this waste elimination process be carried out on a recurring basis, accompanying the change in value for the customer. In this sense, PDCA is a great tool for continuous improvement, in which the P (Plan) refers to planning, defining goals and methods, the D (Do) refers to training, executing and collecting data, the C (Check ) is to evaluate results and compare them with the goals and the A (Action) is the corrective, preventive and improvement action.
An example of the application of simplification in logistics management is Starbucks, which receives and distributes various items, in addition to having a large number of stores to be served globally, which makes its operation very complex. After a perception of a drop in sales and an increase in logistical costs, the global operation underwent a restructuring that led to the reorganization and simplification of the chain around the world. Learn more about this case in Alexandre Lobo's post: Starbucks: Supply Chain Overhaul to Reduce Costs.
- Tech
A automation is one of the most sought after ways to deal with complexity, however, before investing in technology, it is very important to ensure that the processes are already well designed and implemented, as technology alone will not bring the potential results if the processes and people are not prepared.
Technology can be used in various ways in supply chain management, it is possible to think of numerous applications for automation, block chain, applications, internet of things, big data, augmented reality, 3D printer, artificial intelligence and so on… DHL, for example, it implemented vision picking in its DCs, which would be the use of smart glasses by its employees to support the picking activity. The use of smart glass allows the employee to scan and access important information such as the list of products and their location, hands-free. Watch the video to better understand the application of this technology in a warehouse:
To learn more examples of technology applied to the supply chain, be sure to read my 2018 post that lists a series of applications of the internet of things at different stages of the chain.
3. Collaboration
Through the sharing knowledge, information and resources, collaboration is a great tool to deal with the complexity in the search for joint results. Collaboration can take different forms and involve different links, and it can happen within the company or with other companies in the chain, such as customers, suppliers, end consumers or even competitors.
Sales and Operations Planning (S&OP) is a collaborative planning process between the areas involved in meeting demand, from sales to operations. This process provides visibility to the trade-offs involved in the various demand and capacity decisions, enabling the identification and taking advantage of excellent opportunities to increase revenue and reduce costs, even in a highly complex environment. The ILOS website presents several texts on the subject, learn more at the link: https://ilos.com.br/web/?s=s%26OP.
Collaboration between customers and suppliers in the supply chain can take many forms, such as rapid response programs, VMI, CPFR, among others. Sharing information in real time, enabling reactive actions, with less dependence on forecasts and inventories, and quick response to changes in demand between customers and suppliers in the chain are only possible through collaborative initiatives. These initiatives reduce the bullwhip effect in the supply chain and bring benefits both in terms of increased service levels and reduced inventory levels.
Another form of collaboration in the chain is the so-called horizontal collaboration, where entities from different chains, which may even be competing organizations, share their demands and structures, making better use of resources. Some possibilities for this initiative are the sharing of warehouses, vehicles, return freight, among other capabilities. An interesting example of collaboration between companies that, at first, had no relation in the chain is the partnership between P&G and Tupperware: both produce in Belgium and deliver in Greece and, while P&G's transport was limited by weight, Tupperware's was constrained by volume. The joint solution was the sharing of road and rail vehicles, which enabled a better occupation of assets. In this example, the combined logistics costs reduced by 17% and carbon emissions by 30%. Despite longer lead times, there was an increase in Tupperware's service level. Read more about this form of collaboration in Thatiana's post on Horizontal collaboration in supply chains.
Supply chains are increasingly complex and inserted in increasingly challenging contexts. The first way to deal with these challenges is to simplify, cutting out activities that do not add value to the customer, that is, eliminating process waste. From lean processes, the next way to deal with complexity is to invest in technology. In this way, it is possible to make better decisions and gain reaction speed. Technology is also a way to enable collaboration, which is the third way to deal with growing challenges. Collaborating with other areas within the company, with other companies within the chain or with other supply chains can bring benefits of cost reduction and increased service level for all involved. I believe that the future of Supply Chain Management depends on Simplification, on the development of Technology and Collaboration relationships.
Sources:
WOMACK, JP; JONES, DTA Lean Thinking in Business, 4th ed. Rio de Janeiro, Editora Campus Ltda, 1998.
https://ilos.com.br/web/starbucks-reformulacao-do-supply-chain-para-reduzir-custos/
https://www.youtube.com/watch?v=I8vYrAUb0BQ&feature=youtu.be
https://ilos.com.br/web/exemplos-de-aplicacao-da-internet-das-coisas-no-supply-chain/
https://ilos.com.br/web/a-colaboracao-horizontal-nas-cadeias-de-suprimento/
Beatris Huber
https://ilos.com.brManaging Partner of ILOS, Master in Business Administration from COPPEAD/UFRJ with extension at the European Business School – EBS, Germany and Business Administration from UFRJ. More than 10 years of experience in training and consulting projects, focusing on Logistics and Supply Chain. In the training area, he developed company games and online courses and today teaches classes in Data Analysis, Inventory Management, Warehousing Management, in addition to applying business games such as Beer Game in open and in-company programs in companies from different segments, such as Coca -Cola, Nestlé, ThyssenKrupp, Votorantim, Carrefour, Mallinkrodt, Souza Cruz, Via Varejo, Monsanto, Itaú, Renner, Ipiranga, among others. In consultancy, he carried out projects such as Redefinition of the Logistics Network, Inventory Management, S&OP Process Structuring and Diagnosis of Storage and Transport Operations in companies such as Coca-Cola, Souza Cruz, Editora Moderna, Petrobras, Ducoco, Ultragaz, Silimed, Eudora among others.
