Aligning Supply and Demand Management: Meeting summary

Thank you again for coming to the Supply Chain Resource Consortium meeting on May 1-2, 2003. Those who attended hopefully learned a lot from the industry speakers and student projects. Special thanks goes out to Mike Clem from GKN Automotive, Brandy Maranian and Tove Rasmussen from Sonoco, and Phil McIntyre from Milliken & Company for their terrific presentations that they prepared for the group.

As promised, I have attached a brief summary of some of the discussions that took place at the breakout groups during the meeting. While it is tough to be able to capture all of the ideas and thoughts that people shared, the notes provide some insights into the types of things that were on people’s minds. Several of you suggested that we try to focus these discussions to two or three major questions, and we will attempt to do so at our next meeting in December.

Several key themes emerged from the discussion, both in the breakouts, as well as in our discussions at the reception and dinner.

Aligning demand and supply management remains a highly challenging task.
Many companies noted that in terms of the maturity model, they rated very high in one area (e.g. supplier relationship management, network rationalization) but not in others (e.g. branding, capacity rationalization). As such, there often occur “disconnects” between strategic planning activities across these different functions. Most companies have a process established for some of these strategic priorities, but these often occur in “theory,” not in practice. Moreover, decisions in marketing and channel management are often poorly linked to supply strategies, especially when viewed across multiple businesses.

Even for companies who have reached high levels of maturity in strategic processes, the jump from level 4 (Leveraged) to level 5 (Optimized) is the most challenging to broach.
Some of the major challenges involved in achieving true collaboration with suppliers and customers include information sharing, as well as associated issues such as mechanics, security, and other practical elements. Some of the questions that arise when buyers and sellers collaborate include the following:

• Who owns the process?
• Who owns the information?
• How can you ensure that partners are complying with agreements to share data and forecasts in the agreed-upon manner?

• Are they sharing/acting in a manner that facilitates joint decision-making?

Leading cross-functional team decisions across global units are perceived as increasingly difficult, particularly given the complex environment in the post-Iraq era.
Cultural differences, local packaging and distribution requirements, local content regulations, energy deregulation, and a host of other issues are proving to be difficult to overcome. However, organizations are succeeding in globalization by localizing US or European suppliers who can help develop local suppliers, bearing in mind that flexibility is key.

Pricing decisions remains difficult, especially with outsourcing.
Total cost models can be constructed, but accurate cost data is problematic, resulting in unique models for different products and service offerings. Companies are also beginning to explore leasing in greater detail: One representative noted that they lease almost all of their assets from facilities to computers, etc. Another representative noted that you must understand total cost of ownership in leasing. He cited a past example that the total cost of a computer was about $8,000 even though the computer only cost $1,500. The additional cost included the software and tech support to operate the computer.

In an increasingly complex myriad of mergers and re-organizations, the issue of where supply chain management should lie within the organizational hierarchy is a challenge.
The issue of centralization versus decentralization remains problematic. Many organizations continue to ask what the “right” governance model is – for example, what is the role of corporate sourcing / marketing / distribution versus the individual business unit requirements? One representative noted that their company culture has limited governance and policy procedures to get others (especially project mangers on capital projects) to use procurement. A key element was for procurement to develop their credibility and show that they bring value to the project. Another representative noted that their CEO had issued a policy document requiring every contract to go through central procurement. Their advice, “be careful what you ask for.” They suggested that a balance needs to be achieved for procurement to select areas to focus on. They also advised that you “better deliver” when you have senior management direction mandating only company procurement use.

Other questions that arose with respect to demand and supply management included:

• How to back up branding strategies with supply chain decisions are aligned – especially with commoditization in markets?
• How to manage critical user needs for purchases of services and transportation that may have difficult to define service level specifications?
• How to standardize processes after a major series of mergers and acquisitions have occurred?

• How to address replication of services and supply base consolidation after a merger?

Additional comments from individuals led us to believe that the use of focused breakout groups is a great way to develop insights on future student projects and research. Participants also noted that more time should be devoted at the meeting to other industry speakers, as well as “networking” time between participants. We will be sure to address these issues to the extent possible in our next meeting. Don’t forget to put this on your calendars: December 4 – 5, 2003.

Have a great summer, and we’ll be in contact with you soon to plan the next set of projects!