“Croatia’s ascension into the European Union is a compelling event for Sales and Operations Planning. We started planning a year ago. For those that have not begun planning, the pending events will overtake them.”
“Why are consumer products companies not more willing to collaborate with us in retail? We see the most progress with Coca-Cola and Nestlé, but we expected to see more from Procter & Gamble and Unilever. Is this unusual?”
Tidbits from Discussions in Croatia
“When I think about my supply chain journey, I want to be sure that my legs are not longer than the step.”
“Whatever I chose to implement, I want to be sure that it does not take as long as the Duomo to build.” (The Duomo is a lovely cathedral in Milan that took 600 years to build.)
Tidbits from Discussions in Milan
London. Milan. Zagreb. Barcelona. Madrid. This week, I added stamps to my passport.
I am traveling Europe on a book tour to discuss and share insights from my writing of Bricks Matter. As I travel, I find I am surrounded by beautiful brick buildings wherever I go. They are testimonials that bricks really do matter.
It has given me great pleasure to hold up my book and share insights with groups hosted by the Chartered Institute of Logistics and Transport (CILT) in London, the Italian Association of Logistics and Supply Chain Management (AILOG) in Italy, Infoarena in Croatia, and CSCMP in Barcelona/Madrid. By the end of the tour, I will have met with approximately 450 supply chain leaders in Europe. Tonight, I sit in Milan, fighting jet lag, reflecting on the events.
Many of the events have been attended by mid-market European manufacturing supply chain leaders (less than €500 million in annual sales). Italian and Croatian audiences were filled with mid-market manufacturers. They are trying to figure it out.
The mood is reserved. Uncertainty reigns. They are feeling the economic impact of the world economy. Here I share the answers to the most frequently asked questions on the book tour:
What are the differences between European and North American supply chain organizations? I find it interesting that this question is asked so frequently on my tour. The attendees are curious. Since most of my work is with global multinationals, I no longer feel the stark distinction between the continents that I felt five years ago, but it is top of mind for the audiences that enter the rooms on the book tour.
The first time the question was asked, it surprised me. I had to think about the answer, and pause and reflect on the dialogue leading to, and happening after, the meetings. Here is my answer, broken into three parts:
- One of the first differences that I have encountered between the two continents is that the European supply chain leaders are not feeling the pinch of the talent crunch that is being felt in the United States. The focus of most supply chain leaders that I meet here is logistics. The continental schools are pumping out talent and the needs are being met.
- In general, the planning processes, and the use of planning optimization in demand and supply planning, are not as advanced in Europe. Most supply chain leaders that I talk to are looking for simple, easy-to-use solutions. There is less of an appetite for cloud-based planning applications or advanced analytics. There is more of a focus on practical processes that work. They are far more pragmatic and there is push-back from the overhyped and expensive supply chain planning market of the last decade.
- The groups are more functional than the teams in the United States. They are not as far along when it comes to understanding horizontal processes.
Why have we not made more progress on becoming demand driven? The next question also surprises me. From an audience that is less mature in planning, the group will usually ask me why we haven’t made more progress on demand-driven concepts. I find that most don’t understand the principles of demand-driven value networks. As I explain the concepts of demand sensing, demand shaping and demand translation, most in the audience have not thought about the fact that the order does adequately reflect demand, and that all of our traditional supply chain systems are based on orders. Walmart’s presence in Europe has had less of an impact. RetailLink exists only in the United Kingdom, and the retail sharing policies of European grocers for point of sale data are not nearly as advanced as in the United States.
Most in the audience think about it as a consumer packaged goods/retail process, and have spent less thought on the impact of the Internet of Things and Machine-to-Machine (M2M) interaction. The Europeans’ use of mobile devices is much greater than in the US and with the population density in the cities, I think that they are primed to do great things in the area of demand-driven supply chains. However, I think that it will be less about point-of-sale sharing and more about the direct automation of machine-to-machine connectivity. Just as the Europeans have automated taxi calls to be based on need, not based on a formal queue, I think that Europe will move forward on demand driven based on the convergence of mobility and M2M connectivity. For example, while in London. I encountered a case study of Costa Coffee in London. The firm is competing with Starbucks. To better service their stores, they have installed Barista machines that enable automated signaling on coffee usage. The data is hourly data received hourly. They are using this connectivity, and the Internet of Things, to drive replenishment. I love this story of a small company redesigning their supply chain from the outside-in. This is the promise of becoming demand driven.
Are market-driven concepts applicable to small and medium-sized companies? There is also a pervasive belief that the concepts of demand driven, and market driven, are only applicable to large companies. When I hear this, I laugh. I think that they are a wonderful opportunity for the smaller company. In fact, I think that a smaller company is more likely to be successful in market-driven concepts than a very large company that is hampered by politics and a large organization.
I liken it to the technology step change that happened with the telephone. You will never find people in emerging countries with a “landline.” The technology adoption curve skipped a step. I think that market-driven value networks could be analogous.
I think the concepts of market-driven value networks are a wonderful opportunity for a mid-market European company. With high commodity and demand volatility, I think that it makes it even more important to take this step to connect the planning and execution processes through synchronization and orchestration outside-in.
Market-driven concepts build on the concepts of demand-driven value networks. Companies should not undertake a demand-driven journey without ensuring supply chain process reliability. In the design, there are five demand-shaping levers and market-driven orchestration levers as shown above. While demand-driven automates demand sensing, demand shaping and demand translation, the concepts of market driven takes it one step further to align the value network based on volume, mix, risk, uncertainty and price. This orchestration happens in near real-time through horizontal processes from market to market.
Standing in front of six excited European audiences of supply chain leaders talking about a book that I wrote, is the chance of a lifetime. I am thankful and appreciate all of the people who organized the trip and to those that have submitted reviews (there are now twelve five-star reviews) on Amazon. THANKS!