Four Keys to Finding Certainty in a Volatile Planning and Forecasting Environment
Having an elevated level of end-to-end transparency, data intelligence and connectedness up and down the supply chain enables a company to conduct continuous, dynamic planning. (iStock.com/ipopba)
When the Danish window manufacturer VELUX began using a new integrated resource planning platform company-wide in late 2019, little did it know how quickly and how profoundly the system would be tested. Just as VELUX was getting comfortable with the digital platform, the COVID-19 pandemic took hold, jolting the company — and just about every business, industry, community, country and economy around the world, for that matter — out of its comfort zone. Customer demand in some markets (Spain and Italy, for example) dried up virtually overnight, while demand in other areas actually held or even increased.
Things were just as volatile on the supply and logistics side of the equation, as certain suppliers went dark entirely or curtailed production, and reliable transportation in specific regions became an iffy proposition. In a matter of just weeks, the monthly forecasting process that VELUX had been using was rendered “simply useless,” Philip Melchirs, the company’s senior director of global supply chain planning and logistics, explained in a recent webcast.
So the company quickly shifted to weekly and even daily “Corona” forecasts. Suddenly, having the ability to run flexible, dynamic forecasts and production plans on a condensed and fluid schedule, using current operational, demand-sensing and supply chain data, became not a luxury but an indispensable capability.
Like other manufacturers and building materials suppliers that serve the construction industry, VELUX has found a way to efficiently overcome disruptions and meet customer demand during a crisis of unprecedented proportions by relying heavily on digital planning and forecasting capabilities. Let’s look at a handful of capabilities that are proving particularly valuable to manufacturers, even as the COVID-19 crisis persists.
Intelligent Supply, Demand and Logistics
During events like the COVID-19 crisis, historical data loses much of its predictive relevance. Manufacturers thus need to rely on other capabilities to maintain a grip on their planning and forecasting, and to preserve the overall integrity of their supply chains.
Having a platform that provides real-time visibility into customer demand, supplier capacity and inventory, and transportation logistics is a good starting point. On the customer side, demand-sensing tools give manufacturers visibility into demand in individual markets, so they can plan production accordingly. Maintaining real-time communications with customers (about order timing and volumes, etc.) also helps to avert disruptions and enables manufacturers to efficiently prioritize production.
On the supply side, one outcome of the pandemic is that price will become secondary to resilience, reliability and risk-reduction along the supply chain. As a result, more manufacturers likely will re-shore production and increase reliance on local sources. The ability to easily integrate and digitally engage with multiple tiers of suppliers in real time provides the visibility that is critical during a crisis and otherwise. They can share data and collaboratively work through potential disruptions to maintain supply chain integrity.
The same approach applies to transportation management. When manufacturers are connected digitally to their logistics partners, they can find alternative delivery pathways in a pinch and collaboratively troubleshoot when an issue arises. Is road, rail or sea the most reliable, timely and cost-effective way to get a particular product where it needs to go? What if trucking capacity into an area is constrained? Having robust transportation management tools that provide real-time visibility into multi-modal capacity gives manufacturers options.
All this can be modeled within a digital representation of supply and logistics networks. Using predictive analytics, this “digital twin” can reveal risks, segment and prioritize suppliers and logistics providers, and test the viability of options to mitigate disruptions.
Intelligent Manufacturing and Assets
Now more than ever, manufacturers can ill-afford inefficiency in how they manage their factories and their assets. With an intelligent digital core to which their factories and operational assets (as well as the supply and demand chains) are connected, and through which data flows transparently across the enterprise, a company can optimize production processes to respond in real time to unexpected changes in demand and supply. The agility that comes from this end-to-end visibility serves a company well during a crisis and otherwise.
When assets inside the factory, at warehouses and across other parts of the operation are Internet of Things (IoT) sensor-equipped, connected to one another and networked with a central digital core, a manufacturer has the power to quickly gain insight from operational data and, using predictive tools, to dynamically maintain, simulate and optimize overall asset performance while minimizing operational disruption.
These capabilities also enable a manufacturer to shift their production capabilities and their supply chains to new tasks and new products. During the COVID-19 crisis, for example, building products manufacturers like Mexico’s CEMEX pivoted their factories to build modular, pre-assembled products to meet the needs of the communities they serve. CEMEX built six mobile hospital units (with 280 beds) in its home country in just two weeks.
In the long run, developing the capability to produce modular and preassembled construction products, and do so with a high level of factory automation, can open new markets and revenue streams for a manufacturer. It also helps to address worker safety, both in the factory where the products are made (automation reduces reliance on human workers), and at the construction site (products that are built and/or preassembled require fewer on-site workers). This approach applies across a wide range of industries, including metals (steel, aluminum), building materials (roofing, flooring, cement, concrete) and more.
The pandemic exacerbated a skilled labor shortage in the construction industry — and underscored how critical the people who comprise a company’s workforce are to executing production plans in a highly unpredictable business environment. Digital tools can help manufacturers keep a workforce safe and healthy, giving them the means to conduct health screenings, monitor compliance with social/physical distancing policies and track employee interactions in the workplace.
What’s more, by integrating a greater degree of automation into their factories, a manufacturer reduces risk of manual errors and keeps more workers out of harm’s way. Automation frees workers to focus on the higher-value work that ultimately drives the service and innovation that will enable manufacturers to remain viable in a challenging business environment.
Dynamic Planning Capability
During a crisis, having an elevated level of end-to-end transparency, data intelligence and connectedness up and down the supply chain enables a manufacturing company to conduct continuous, dynamic planning by synthesizing fresh supply, demand, logistics, workforce and capacity data. With a platform that digitally connects strategic and operational planning to real-time visibility and execution, they can ensure all aspects of their business are aligned to a forward-looking plan, with the ability to rapidly evaluate scenarios and adjust as conditions change.
Changing market conditions are one thing manufacturers can count on as the pandemic continues to play out. With the right digital capabilities in place, they’ll be ready.
Ursula Gruen is the global lead for Building Products Industry and global lead for Procurement in the Mill Products and Mining industry business unit at SAP. Folkert Haag is the global lead for the Building Materials Industry in the Mill Products and Mining industry business unit at SAP with a focus on cement and concrete.