Robust ERP infrastructure helps companies operate leaner supply chains while increasing profitability
It’s a fact: Data generated through smart ERP makes wiser business decisions.
Three top brands – Campbell Soup, Amway and Zara – have used data gleaned from their operations and sales to drive changes in manufacturing and distribution, positively impacting their bottom line. Which of these insights can you apply to your supply chain?
Campbell Soup: Experiment with produce-to-demand
Campbell Soup topped the Supply Chain Index in 2012 for the extraordinarily strong performance of their supply chain
As part of the overhaul of their supply chain, SVP of Global Supply Chain Dave Biegger said that the company embarked on a Total Delivered Cost (TDC) initiative eight years ago.
One core focus of the initiative was introducing produce-to-demand as an operating strategy, or the implementation of demand-driven concepts. Instead of the classic make-to-stock production model used by most consumer packaged goods supply chains, operating with smaller finished-goods inventories and creating capacity to make product on a shorter cycle help minimize supply chain costs.
Implementing produce-to-demand however requires information visibility. Customer orders and finished-goods inventories must be visible to plant schedulers as real-time as possible. ERP will greatly enhance this visibility to make the production process as cost-effective as possible.
Amway: Redesign to improve value
Processes and systems should always be reviewed periodically to see if they still provide the same value today as they did when begun.
Amway applied this rule to their supply chain, which had been largely inherited. “When we got into it, some things did not make sense,” said Amway’s Chief Supply Chain Officer George Calvert in an interview with Supply Chain 24/7.
For example, Amway was still making its own corrugated packaging on 20-year-old equipment because that had been the practice. This was outsourced so efforts could be focused on their core business of personal care and health products.
One of ERP’s strengths is identifying inefficiencies and inconsistencies that can be addressed in order to improve the supply chain. Amway readily admits that “collecting the data was not easy”, but making this a priority allowed them to put closure on what didn’t work and funnel funds into what does.
In Amway’s case it’s raising their own botanicals in three large-scale farms, the output of which goes into their products.
Zara: Integrate silos to share critical data
Zara has been the darling of supply chain case studies for a good reason: The brand’s fast fashion business model has turned clothing supply chains upside down. Parent company Inditex’s focus on agility – it can develop and deliver new product to stores within two weeks compared to other retailers’ six months – has generated revenues of $19 billion in 2014.
Key to Inditex’s business model is the integration of traditional silos for the sharing of vital data. Stores, in-house designers and factories work in tandem. Twice a week store managers send data on what’s selling, not just sales figures but anecdotal information, to the Inditex headquarters in Spain.
Information from the stores informs what orders the commercial team places with manufacturers. Identified trends are funneled to the design team who create products in small quantities to gauge demand at the stores. Products that are snapped up can then be produced in larger quantities, keeping manufacturing and inventory costs low.
One of ERP’s most powerful benefits is sophisticated reporting which better informs business decisions. In Zara’s case, getting data quickly from the frontline and to production for swift turnaround has been a huge factor in making the company one of the most profitable clothing brands in the world.