Three supply chain archetypes in action
This article first appeared in Supply Chain Management Review
Three organizational archetypes are crucial to redesign of any supply chain: performance-led, connectivity-led, and agility-led. Here are glimpses of what can be achieved by acting on those archetypes.
Cargill typifies the performance-led mindset. The food conglomerate’s main boiler at a packaged food plant in Brazil was running at only 30% of capacity. Engineers knew they had to get more out of the boiler, but they were drowning in data. With up to 100 screens to watch, boiler operators couldn’t track the parameters that mattered most.
So, Cargill built a digital twin of its production process, tapping thousands of production data points, allowing engineers to tweak food production online and observe the outcomes without halting operations. Analytics tools enabled the team to identify operating parameters they hadn’t previously considered. Using this analysis, Cargill’s process experts were soon able to pinpoint ways to increase and stabilize steam output. In the first year of using the digital tools, plant engineers saw substantial savings in boiler operating costs and boosted production of different food recipes from one a week to as many as five.
Connectivity-led thinking is at work at Caterpillar. The construction equipment company couldn’t accurately gauge inventory levels so it couldn’t reliably convey order information to customers. The challenge was formidable: Caterpillar can have 1.2 billion pieces of inventory in transit a day. Transit times were creeping up, costing CAT at least $500,000 extra daily. To discover what was causing delays, the company relied on software that connected key data points across its supply chain. Caterpillar was able to see when inventory was idle, when it would ship, and where it was in transit. Now, live tracking turns dots on a map into actionable insights about the performance of suppliers, carriers, and third-party logistics. The widely available tracking data has reset the bar for Caterpillar’s relations with customers.
Estee Lauder is a standard-bearer for the agility-led archetype. The cosmetics company had been using manual processes to manage sales and operations planning, relying on each planner’s personal knowledge to estimate the effects of marketing initiatives, and new product introductions. It wasn’t easy to get a picture of consolidated demand, and actual production was often quite different from plan. Estee Lauder’s supply chain professionals knew they needed the agility to be able to respond to fast-changing consumer markets, and they identified real-time collaborative planning as a solution. Using a digital collaborative S&OP platform, they reconfigured the information supply chain to enable sales and marketing, finance, supply chain, and business unit executives to collaborate on plans, forecasts, initiatives, and resources. Now that each business unit can react rapidly to market shifts Estee Lauder has cut inventory costs by about $400 million.
Cargill, Caterpillar, and Estee Lauder are in the vanguard of the companies that are racing toward a truly resilient, data-driven supply chain. They recognize the value of digital tools and techniques. Supply chain executives everywhere should take note.
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