The consulting firm and solutions provider mSE Solutions helps companies to gain competitive advantages by optimizing their supply chain processes. In the following interview, Klaus Imping, COO of mSE Solutions, explains what is involved and why supply chain management is still a challenge for companies.
The term “supply chain management” (SCM) has been used in industry and retail since at least the mid-1990s. Hasn’t SCM been state of the art for a long time now? Do you believe that there is still potential for innovation?
Imping: Definitely! Admittedly, the degree of sophistication varies depending on the industry segment. The closer the market and the margin, the more companies will strive to optimize their supply networks. But true supply chain optimization is complex and deals with difficult issues. This is why supply chain-based process organization is certainly not something that can be taken for granted and the potential is still enormous. Great potential, yet little progress – that sounds contradictory.
What are the obstacles?
Imping: Don’t get me wrong – most companies have done a great deal over the past few years. But we feel that supply chain management involves the continuous organization of information and material flow processes from the client along the entire value chain to the supplier on the basis of lean principles. This “end-to-end” principle (“e2e”) requires integration across all departments, locations and systems, and therefore often across different countries, languages and cultures. This is impossible within customary, classic forms of organization and function-oriented objectives. This change marks a paradigm shift, so great that it often challenges the sacred cows of business practices. This is an uncomfortable notion and a significant obstacle. And we haven’t even got to the integration of information flows and boosting the efficiency of IT systems to support overarching decision-making processes. You see, supply chain management involves the “end-to-end” optimization of the entire value chain.
In your experience, where is the greatest potential?
Imping: Within the common organizational dimensions of function and location, processes are generally optimized in accordance with defined, isolated objectives. Everything is exaggerated and black and white, with the procurement department lowering prices, the production team looking to improve their capacity utilization rate and perform fewer changeovers, transport managers hoping to maximize freight capacity and the sales department wanting everything to be in stock. People aim to optimize local processes and are rewarded for it. However, by looking at the bigger picture by considering and configuring the supply chain as a whole, it is possible to unlock the potential found between supply chain participants and optimum local processes. Generally speaking, this results in a dramatic fall in stockroom levels and personnel costs, along with improved delivery times and reliability. Often, the supply chain can even help to improve a company’s competitive position, for example by using smart decoupling strategies to introduce a wider range of products. The supply chain not only encompasses the respective companies themselves, but also includes participants such as suppliers, which each pursue their own interests.
How is it possible to optimize the entire process in such situations?
Imping: Interests that seem conflicting on the surface do not necessarily contradict each other. At the end of the day, it’s all about the players in the process taking on their “fair share” of risk. Delivery times and minimum order quantities are a way of shifting risk. Customers often hold the power when it comes to consignments. Cooperative behavior would be to streamline the processes and to settle the supplier’s advance performance risk by means of a contract as opposed to physically using stock levels. The more a company tries to understand its supplier’s value chain, the more ingeniously the solution can generally be integrated. This is not, however, a case of simply joining the dots between the position of the buyer on the one hand and that of the seller on the other. Instead, it is imperative to call on the specialist support of supply chain experts.
Could you give an example of a supply chain project? What was achieved and which problems were solved?
Imping: Let’s take the example of a medical device manufacturer, a global player in the pharmaceutical industry with a high double-digit number of production facilities for components and finished products worldwide. Classically organized and locally optimized. With a few different IT systems. A sluggish, time-consuming, manual planning process along the supply chain. High levels of capital tied up in stock. A transformation program has created product-segmented supply chains with end-to-end responsibility for the stock, deliveries and production capacity utilization. A cloud-based IT solution has combined the existing ERP systems and enables production, procurement and distribution planning to take place and to be checked against capacity along the entire chain. This has resulted in streamlined planning, dramatically reduced feelings of unease and stock levels, and lower destruction costs due to small parts becoming obsolete.
What is important during projects like this? In your experience, what are the critical success factors?
Imping: There are many of course, but two come to mind as being essential and universal to all projects.
Firstly, supply chain process organization focusing on the creation of end-to-end systems is not an IT solution and does not require a “one-size-fits-all” approach. Supply chains are as individual as a company’s market position, product range, production network, IT and process landscape, and organizational culture. Unless the attempt at finding a solution is tailored to this, it will fail. The challenge lies in the design, which must take the process, organization and system support into account. Secondly, the company must be willing to think outside the box, tackle any thorny issues and deal with resistance, which – figuratively speaking – tends to come from principalities. This requires an extremely high degree of commitment.
As a consultant, what key services do you provide during a supply chain project? And what do you expect from your clients in return?
Imping: Companies looking to sustainably improve their supply chain on an e2e basis are generally embarking on a journey of comprehensive changes. We believe it is important for the decision-makers in such companies to have a partner that accompanies them every step of the way on this journey, from the identification of the strategic approach to the conceptual layout and the bits and bytes behind the organizational and IT system implementation. This is not a task for conventional “presentation-only consultants” or typical IT service providers. The teams of consultants at mSE Solutions, on the other hand, integrate strategy, conceptual design and implementation tasks, building close partnerships with their clients.
Consulting firm and solutions Provider mSE Solutions from Munich creates sustainable, robust and future-proof supply chain Management
solutions that go far beyond our clients’ company networks – starting with
suppliers and extending to all other participants in the supply chain process.