CP Companies Are Evolving from Supply Chains to Supply Networks

Supply chain disruptions were big news in 2021 – leading to port backlogs, raw materials shortages,
frenzied shoppers, and many frazzled consumer products (CP) industry executives.

It has become even more critical to have visibility into raw materials suppliers, service providers, external manufacturing partners, assets maintenance, logistics partners and more. That’s why many CP leaders are looking for ways to improve their supply chain operations by leveraging SAP Business Network.

It offers supply chain visibility tools and reports into where and when potential disruptions may occur at a granular and actionable level. For example, clients can identify potential disruption by country (or even the local state or region in a country), or by purchase order, or ship-to (in order to identify a particular plant or factory that may be impacted), and many other key reporting means.

Even leading CP companies need help

In my conversations with these decision-makers, I’ve been recommending an increased focus on supply chain collaboration. Effective collaboration can help enterprises, for example, gain visibility into supplier inventory and capacity. With greater insight, companies can improve their supply chain control and act faster based on informed decisions to deliver better business outcomes.

Working more closely with supply chain partners may seem like an obvious solution, but it’s one that
eludes many CP companies. Even enterprises that are enthusiastic about digital transformation – and typically proactive when it comes to supply chain optimization – have room to improve their
procurement processes.

For example, Coca-Cola FEMSA, S.A.B. de C.V. is a Mexican multinational beverage company that
operates the largest independent Coca-Cola bottling group in Latin America. The company operates in 10 countries and serves 250 million consumers. Yet, before adopting SAP solutions, each plant and distribution center purchased materials and services locally – and reactively – based on demand.

Supply chain issues are widespread – and costly

That’s not unusual. These procurement challenges are common in the CP industry – as are the supply chain issues they cause.

In a recent Oxford Economics survey of CP companies, 48% of executives say they face supply chain issues with the quality of finished goods or work in process from their direct spend suppliers. Another 48% report issues with late deliveries, and 40% experience product shortages.*

These challenges are all the more problematic when considering that 63% of executives say their
organization has one or more products that it purchases from only one supplier. That’s a practice that
can be risky in the best of times, especially for critical products.

Better collaboration with supply chain partners can help mitigate these risks. Yet only 23% of executives rate themselves highly effective at collaborating with suppliers to remediate potential shortages or overages with direct spend suppliers. And only 25% say they are highly effective at remediating product quality issues with suppliers.*

Greater visibility improves procurement

So how can CP companies improve their supply chain collaboration? Deploying SAP Business Network can help them increase visibility and supply chain control. By inviting trading partners to work with them through the network, these enterprises can tell when orders are confirmed and when confirmed orders are scheduled to arrive. They can even track and trace shipments or connect assets in manufacturing facilities.

CP companies can look into supplier capacity, inventory levels, and future demand. This information
helps procurement leaders calculate the degree of certainty that their demand will be met. And they
also know when it makes sense to switch to a different supplier. SAP Business Network also allows CP companies to both collaborate and look for new sources of supply and suppliers if one supplier is not able to meet demand or sustainability criteria.

In less than two years, Coca-Cola FEMSA signed up nearly 9,000 suppliers and realized an adoption rate of 80%. “A single, unified procurement platform gives our managers and employees what they need to make strategic decisions,” explains Jorge Martin Torres Perez, strategic procurement director of the company. “It would be impossible to achieve this level of insight without the network.”

Better collaboration enhances supply chain control

In addition, SAP Business Network offers advanced capabilities that can help CP companies extend their supply chain collaboration and control. Multi-tier sourcing features allow enterprises to screen their supplier’s supply chains – understanding not only the conditions of a company’s primary supplier but second- and third-tier suppliers, too.

These networks can also enable companies and their suppliers to share their forecasts so they can
prepare adequately for high-demand periods. What’s more, they can allow preferred suppliers to
manage the inventory of CP companies.

The most comprehensive networks extend these supply chain collaboration capabilities from materials to assets, equipment, and logistics. With these partners as part of the extended supplier network, companies can ensure they have visibility into their full value chain.

Digital procurement supports supply chain continuity

Henkel, a German chemical and consumer goods company known for a variety of CP brands like Persil, Loctite, and Schwarzkopf, deployed SAP Business Network and invited its new and existing suppliers to join.

With its unified source-to-purchase platform, the company automated 100% of its ordering processes
and connected its purchasing, supply chain, manufacturing, delivery, and sales operations. By
transforming procurement into simplified, digitalized supply chain activities, the network supports more efficient processes while reducing costs and supporting sustainability.

“The technology allows us to speak the same language across Henkel,” explains Bertrand Conqueret, chief procurement officer and president of the Henkel global supply chain. “This intelligent procurement leads to improved supplier collaboration. It also increases the resilience of our supply chains today and gives us the tools to keep our finger on the pulse of tomorrow.”

Collaborating with trading partners through the business network enables better business intelligence for CP companies. This insight helps executives make faster and more informed decisions that allow them to respond to supply and demand shifts.

The new digital transformation is encouraging many CP enterprises to shift from enterprise resource
planning to network resource planning. Evolving from supply chains to supply networks is the best way to prepare for whatever challenges and changes that 2022 has in store for us.

Learn how SAP Supply Chain Collaboration is already helping clients identify areas of potential supply chain disruption: https://sapvideoa35699dc5.hana.ondemand.com/?entry_id=1_lult4635

Visit https://www.ariba.com/solutions/industries/consumer-products for more information.

* Source: Agile Procurement Insights Research by SAP in collaboration with Oxford Economics,
https://d.dam.sap.com/a/N1AnQ66/Consumer%20Products_The%20Imperative%20for%20Procurement%20Digital%20Transformation.pdf