Capgemini helps its clients harness the latest innovations to create modern, consumer-driven supply chains. By Alan Dorich
Thanks to advancements in technology the supply chain is not what it used to be. We recently connected with Vice President of Supply Chain Technology Cyndi Lago and Vice President and Supply Chain Solutions Leader Tom Cassell of Capgemini to gain insights on how companies can stay competitive by leveraging digital strategies. Capgemini helps companies gain a core set of digital capabilities and enabling processes needed for a modern supply chain, including smarter demand sensing and inventory optimization.
Supply Chain World: Let’s start with the concept of a “digital supply chain.” What is it that makes this different from more traditional models?
Cyndi Lago: With emerging technologies, companies can now move beyond traditional demand forecasting algorithms and optimize their operations with the use of analytics. A digital supply chain is more about how you use that information and data-driven insights to optimize your inventory and demand. Take what you’re seeing from your different trends based on demand sensing, so you can now have a demand formula that’s more accurate.
Tom Cassell: Digital supply chains can tap into specific capabilities, data sets or platforms that were previously either difficult or impossible to leverage, and what’s exciting is how newer capabilities are driving more value when used with traditional approaches. Demand planning and demand sensing are good examples. Where demand planning uses statistical models to forecast, demand sensing looks to incorporate what is happening in the supply chain in real time to more accurately predict demand in the near future. We’re currently helping a company that has been using a traditional, history-based forecasting approach but has struggled with accuracy in the shorter term. They can now apply demand sensing that will complement its history-based approach, allowing them to deploy inventory more accurately through the supply chain. This will likely have a positive impact on customer service as well as the bottom line.
When you’re able to calculate these demand signals in real time, you’re adjusting your fulfillment on the supply side. It is literally connecting the shelf to the fulfillment engine of your supply chain.
SCW: How else are leading companies modernizing their supply chains?
Cassell: One characteristic of a modern supply chain is the network collaboration needed to enable end-to-end visibility. This involves taking the type of network collaboration that we’ve seen on the consumer side, similar to Facebook and LinkedIn, and enabling the same type of collaboration on the business side. If I’m using a supplier for a certain raw material, business networks can see that and recommend another supplier based on common elements to your procurement behavior.
In addition to greater collaboration, companies gain tremendous visibility; these networks allow users to share critical pieces of supply chain information – from procurement to logistics to planning – with key partners on the demand and supply side. We’re going to be able to share a ton of this type of data, all in real time via these networks. The traditional point-to-point models used today to share information, such as electronic data interchanges, are dying. What’s replacing them is a concept that allows you to engage with everybody that you need to via these collaborative business networks.
SCW: It seems that this concept of collaboration will be game-changing. How else can it be applied?
Cassell: As we move away from the concept of a linear supply chain to more dynamic, collaborative ecosystems, it opens up significant value-driven opportunities for companies. Integrated sales and operations planning (S&OP) is one untapped area. The aim is to align not just the internal portions of a company’s supply chain but how this extends to customers and key suppliers, and how to identify potential issues in the chain. As key stakeholders in the global supply chain, the ability to incorporate them into the S&OP process is critical.
When a company anticipates a problem, they can quickly align on the right course of action that’s needed to remedy that problem, while making sure that important factors to them, like the financial impact and customer service levels, are all accounted for in these corrective actions.
SCW: How are companies dealing with the data implications of trends like IOT?
Lago: The ability to apply both structured and unstructured data in demand planning is another step in modernizing the supply chain. While structured data is obtained from traditional sources like demographic or sales data, unstructured data originates from less traditional sources. Capgemini is working with companies to use sensors on machines to better understand production quantities. Our clients are using sensors and cameras to gain insights into how aspects of the retail store environment are impacting the supply chain.
Cassell: Capgemini recently helped a company improve its forecast accuracy and inventory deployment through these concepts. We took a number of aggregated data feeds in social media, and also looked at Google trend data and aggregated weather data. We were looking for keywords that were searched and the locations where those searches came from. With some correlation and regression analysis, the company gained a more accurate depiction of what their demand picture truly looks like. This translates into a more accurate depiction of demand with the ability to react to social media and Google trends, and redeploy inventory to one region of the country based on that analysis. And this approach has applications across any industry.
SCW: How else are advancements in analytics making supply chains smarter?
Lago: Companies are now using advanced analytics to drive exception-based decision making throughout the supply chain. This goes beyond traditional analytics and extends to concepts with cognitive computing that allows you to take behaviors into account.
Usually, when a demand planner gets a list, they have to reprioritize orders daily because of the raw materials and production changes. But a computer can be taught to do that. It looks at all the different decisions that you would go through. You build those into cognitive computing by running through those different simulations.
This not only saves companies time but allows them to be better focused on customer service issues. As an example, companies can do real-time optimization as orders come in. This computing can see all of the different options, understand the different implications and then come back with an optimized fulfillment path. The operator can review, hit accept and boom, move on to the next one. It’s these types of innovative systems that can zero in on areas of opportunity to bring greater, smarter savings to the organization.
SCW: What should companies do first as they re-assess their supply chain strategies?
Cassell: First, make sure that any digital transformation initiative completely aligns with the organization’s overall supply chain strategy. If your strategy is to be a low-cost provider, then leverage digital technologies and capabilities that help enable that strategy. Second, understand that most digital change is a journey, not a single step, so take the time to plan. Develop a roadmap that is aggressive but realistic, and of course, drives value. And finally, make sure the organization is ready for the significant changes that any sort of digital transformation can bring. Honestly, the technology part is usually pretty straightforward; dealing with the impacts to people is often more challenging.