Zero Inventory will be a Reality in Future

Hans Thalbauer, Senior Vice President, Extended Supply Chain at SAP, discusses, among other things, the trends shaping the supply chain industry and India’s progress in the area.

What are the key business drivers shaping today's supply chain? There are three big drivers that are changing the way we think of supply chain processes. The first driver is customer centricity. This is not new as we have been talking about demand driven supply chains for the last 10 years. Today, companies are reaching customers through different channels, and it is important for supply chain professionals to be close to the sales and marketing teams to understand the market demands. There is a need to introduce speed in the supply chain.  The second driver is the personalization or individualization of products. With enterprises becoming super innovative, they are now introducing products individualized for consumers. Supply chain heads therefore need to not only have a complete understanding of product development but also be able to connect product development and sales with manufacturing. The third big driver is about gaining end-to-end visibility in the supply chain, which involves sustainability and compliance. Supply chain networks today include many supply chain partners -- customers, suppliers, the OEMs, outsourcing etc. How can collaboration be ensured at all these roles and levels so as to manage the entire supply chain? Collaboration is the key ingredient in supply chain management. It has always been difficult establishing collaboration between companies. Only about 15% of the suppliers are connected with customers for direct material collaboration. This is not a good penetration in the market. It is imperative to drive collaboration as business networks become the driving force in the extended supply chain process. It is extremely important for business leaders to effectively and efficiently meet demands. How can they have demand-driven processes? The way of thinking 10-15 years ago was to design, produce and distribute the product. However, one can be successful only if he understands the market and demand. So, the demand is triggering the processes. I think there will be a next level of demand driven aspect, partly because of multiple channels for selling products and partly because of the Internet of Things (IoT). Tomorrow, we will have signals from vending machines alerting for replenishment. 3D printing is also making its presence felt. By when will 3D printing become mainstream? There are some elements that have been introduced in the last few years that are pushing 3D printing towards making mainstream. For instance, in the aerospace industry, companies can print components to reduce weight. Traditional components with several joints can add to weight. In the mining industry, one can print a component or service part when it is needed. You don’t need to store it in some part of the world and then fly it to a particular location. Technology has evolved a lot and today it is possible to 3D print in 7 minutes and not in hours. 3D printing is not only finding scope in manufacturing but service providers and freight forwarders are also providing this as an additional service to their customers. It is completely changing the way we think about manufacturing and supply chain. For a supply chain head, is zero inventory an ideal situation? Is it possible to achieve it? I would say zero inventory is not an ideal situation. I would rather say we need to have optimized level of inventory in order to support demand situation in the best possible way. Having zero inventory is not necessarily the best thing. The key is to maintain an optimized level that varies by distribution centres. It means that we should use data to recognize buying trends and local demands such that informed decisions can be made about what stock is needed and where. In the future, we can think of getting into a situation where we can digitize inventory, and it goes hand-in-hand with custom 3D printing. We will then not have to hold any inventory in warehouses. We can simply print products when there is demand you print. But will this happen in the near-term or in the mid-term? The answer is no. Will it happen in the future? Yes, there will be a time when we will digitize and individualize inventory. However, for the next 5-10 years, the ideal situation is to have optimized  levels of inventory. China is at forefront in the manufacturing industry. It has seamlessly connected into the world economy. How is India positioned in this area? It is true that earlier this year China’s State Council has unveiled a 10-year national plan, designed to transform China from a manufacturing giant into a world manufacturing power. India is in the process of doing so. The ‘Make in India’ initiative is exciting and provides the momentum for it. There are talks about building railway connections to China, Kazakhstan and Europe. India has a strategic advantage. Its proximity to Africa, Asia and the Middle East allows India to be successful in future. The sheer population of the market makes it attractive not only to ship from here to other markets but also to sell products into the market. Please give use case examples on how SAP has transformed supply chains of some enterprises. There are many use cases. The 'Gartner Supply Chain Top 25' is published every year. It identifies global supply chain leaders and highlighting their best practices for heads of supply chain and strategy organizations. Out of the top 25 heads, 20 are using SAP solutions. Harley Davidson is a wonderful example. The motorcycle manufacturer leveraged SAP and introduced a completely new environment. The result was that it reduced its order fulfilment from 21 days to six hours. At the same time, the company was able to introduce the concept of product individualization. By ensuring proximity of suppliers to manufacturing plants, Harley was able to increase speed in manufacturing and supply chain. It also maximized IoT to automate and introduce connectivity.


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