PLANNING IN THE SUPPLY CHAIN ​​– A COMPARISON BETWEEN COMPANIES IN BRAZIL, GERMANY AND THE UNITED STATES

By Maria Fernanda Hijjar, joao succar e Alexandre Lobo.

ILOS, with the support of several national and international partners[I], promoted a survey with Brazilian, German and North American companies, seeking to map the degree of development of companies operating in these countries with regard to planning in the supply chain. There were three main aspects addressed in the study: Demand Management, Supply and Operations Management and, finally, Product Lifecycle Management.

Figure 1 – Supply Chain Planning
Source: ILOS; Based on the book “Demand Driven Supply Chain: A Structured and Practical Roadmap to Increase Profitability” – Paulo Mendes

Demand Management

Managing demand means understanding, managing and influencing customer demand, balancing their needs with the company's capacity to meet them.

Demand Management has relevant impacts on marketing and commercial planning, on the supply of products and raw materials, on production scheduling and control, and on companies' logistical operations. Thus, this process must bring together professionals from different areas of the organization, in order to ensure the involvement of all those who outline business strategies, those who define manufacturing capabilities and those who deal with consumers, their needs and behaviors.

Quite simply and directly, a good Demand Management necessarily starts with the definition of a team with objective and clear responsibilities. Relegating demand planning to a diffuse and unguided group will certainly make the process unfeasible even before it begins.

In this regard, most companies, both in Brazil, Germany and the United States, show satisfactory performance. In Brazil, 82% of companies have a demand planning team with defined responsibilities. The presence of professionals from different areas in these teams facilitates the flow of information, helping to increase commitment and alignment of decisions. Comparing with other countries, however, it is observed that part of the Brazilian companies still need to develop: in Germany and in the United States, 95% and 94% of the companies, respectively, have an established demand planning team, a higher percentage than in Brazil.

Another important point when it comes to demand planning concerns the proper balance between the company's supply capacity and market demand. This is the primary objective of the Sales and Operations Planning (S&OP) process. In this case, German and Brazilian companies show similar levels, with just under 80% having a formal S&OP process. Although the quality and scope of the S&OP process can vary greatly from company to company, observing that three quarters of Brazilian companies already have some formal process indicates that companies are maturing with regard to supply chain planning.

In addition to the participation of various areas of the company itself, it is important for good Demand Management to break down boundaries between different organizations, so that planning can count on the participation of different companies from different links in the logistics chain. Collaboration between customers and suppliers can maximize benefits for both.

In this context, two of the best-known collaboration initiatives are Collaborative Planning, Forecasting, and Replenishment (CPFR) and Vendor Managed Inventory (VMI). In these two cases, the discrepancy between Brazilian companies and German and American companies is more evident, with only 40% of national companies having CPFR or VMI with a customer or supplier. It is also noteworthy that almost all American companies adopt the CPFR, albeit at different levels, and that almost 90% of German companies adopt the VMI. This result shows that, when it comes to breaking the boundaries of the company itself, Brazilian companies still have more difficulty than their international peers. Undoubtedly, in more mature markets and with a higher degree of governance, it tends to be easier to establish partnerships between companies – an even greater challenge in the Brazilian context.

Figure 2 – Demand Management
Source: Panorama ILOS – Supply Chain Planning 2015

Supply and Operations Management

A good supply chain planning process should ensure that companies have the necessary inputs to manufacture their products, allowing them to be able to produce and distribute their goods. Supply and Operations Management encompasses those actions necessary for the final product to reach the customer's hands. Among the essential activities for this to happen are: Supplies, Production, Logistics and Customer Service, which must be supported by the managers of the organizations.

As with demand planning, formally establishing an area responsible for Supply activities is essential to be able to develop effective planning for this activity. Given its complexity – far beyond a simple acquisition of inputs – having a team dedicated to this in a structured way can generate significant benefits. In this regard, Brazilian companies show an excellent performance, with almost all having defined a purchasing area. The same is true of German and US companies.

With regard to production planning, the issue of push production versus pull production has been discussed a lot, including the pros and cons of each option. Ultimately, a production that is completely driven by demand, which responds entirely and exclusively to what is effectively demanded by the customer, dispenses with activities related to sales forecasting and reduces the need for inventories of final products to zero. Many companies try to get as close to the pull model as possible, sorting and separating products that can be made to order from those that still need to be manufactured against stock. This discussion and classification are on the agenda of German and North American companies, however, it is not an important classification for most Brazilian companies.

Good Supply and Operations Management should ensure the efficiency of logistical activities. This management involves storage activities (of raw materials, semi-finished and finished products), which in Brazil correspond to approximately 20% of total logistics costs. An efficient warehousing process should ensure cost efficiency and be oriented towards meeting established customer service levels.

In fact, most logistics executives in Brazil are concerned about the efficiency of their companies' storage, with the vast majority of them considering having a good performance in their storage, with a low level of accidents and reduced costs. However, there are still 17% of large companies in the country that do not use their storage to provide good customer service. Compared to Germany and the United States, Brazil is worse off in this regard.

This can be explained by the fact that one third of Brazilian companies do not even have a formalized Customer Service policy, which is far removed from the practices adopted by companies in Germany and the United States. In these countries, it is very common to formalize Customer Service: in Germany 93% of companies have a formalized Customer Service policy, in the United States 87%, and in Brazil only 41%.

Figure 3 – Supply and Operations Management
Source: Panorama ILOS – Supply Chain Planning 2015

Product Lifecycle Management

The increase in competition, the dynamism of the consumer market and the improvement of production technologies make the launch of new products more and more frequent. The proliferation of the number of SKUs in the companies' portfolio and the shortening of the life cycle of most products make the complexity in supply chains increase considerably. This scenario increases the importance of managing new launches and product discontinuities, decisions that become crucial for organizations to plan their Supply Chain.

Product Life Cycle Management involves the planning and control of the products present in the company's portfolio, including management from conception, production and launch, through maintenance on the market and reaching disposal and withdrawal from the line.

The results of the survey carried out show that Brazil still has a long way to go in terms of product management. The comparison between countries, however, makes us conclude that even Germany and the United States, although they are more evolved than Brazil, also have a lot to develop to better manage the life cycle of products.

In the process of developing new products, one of the first steps is sales forecasting. It is important for supporting decision-making and planning of the production process, such as purchasing materials, scheduling production, defining sales channels, among other activities.

In Brazil, about half of the companies (54%) only set a sales target for new products, making a very simplified forecast to project sales of these launches. In the most advanced companies (46%) the forecast is made with more elaborate methods, or else these companies adopt an agile system of quick response to demand, managing to be flexible enough to respond to the increase in sales as the market requests. In Germany, companies that adopt these more advanced methods add up to 58%, and in the United States 65%.

Another point worth mentioning is the companies' product portfolio optimization process. In this activity, less developed companies do not plan to withdraw products from the market, only launches. Discontinuing products is essential for the company to focus on its portfolio, increasing financial results and balancing the complexity of the supply chain.

Figure 4 - Product Lifecycle Management
Source: Panorama ILOS – Supply Chain Planning 2015

Conclusions

Good Supply Chain Planning involves a series of actions to be carried out by companies. Among them are actions involving Demand, Supply, Operations and Product Life Cycle Management.

The results of interviews carried out in different countries show that companies operating in Brazil still have a way to go to improve their supply chain planning. The survey indicates that in Germany and the United States there is a higher percentage of companies that adopt advanced supply chain management practices.

Among the biggest discrepancies between Brazil and the other countries analyzed are the adoption of CPFR and VMI, the management of products in a push and pull way, in addition to the existence of formalized customer service policies.

Bibliographic references

• Demand Driven Supply Chain: A Structured and Practical Roadmap to Increase Profitability. Paulo Mendes, 2011. Ed. Springer.
• Panorama ILOS – Supply Chain Planning 2015 – www.ilos.com.br/panoramas

[I] Research coordinated by ILOS, with support from Revista Tecnologística, CSCMP, University of Arkansas, BVL and Technical University of Berlin.

To reference the article in your publication, use:

HIJJAR, MF; SUCCAR, J; LOBO, A. Planning in the supply chain: A comparison between companies in Brazil, Germany and the United States. Tecnologística Magazine, São Paulo, Year XXI, n. 237, p. 78-82, Aug. 2015.

Maria Fernanda Hijjar, M.Sc. COPPE/UFRJ, is the Executive Partner responsible for the Market Intelligence area at ILOS – Specialists in Logistics and Supply Chain.

joao succar He is an Economist with a Masters in Business Administration with an emphasis on Operations, Technology and Logistics from COPPEAD/UFRJ.

Alexandre Lobo He is an Engineer and Market Intelligence Consultant at ILOS – Specialists in Logistics and Supply Chain.