logisticstechoutlook

Digital Transformation

By Gonzalo Madurga, Supply Chain Director, Coca Cola Iberian Partners

ENVIRONMENT

We are involved in a process of very significant socioeconomic changes: the explosion of electronic commerce, collaborative platforms, aging of the population, concentration in what we call the big-cities or the new generation of millennials, among others that entail a remarkable change in the consumption habits. Our companies have to progress since we are not facing a gradual transformation, but a radical and profound mutation.

Our business models must adapt to the new needs of our customers and consumers. We must review the product portfolio, bet on innovation and launch new categories of products with functional solutions to the market. A package adapted to the new social realities that make up the family unit and under sustainable business models. Processes that are more respectful of the environment with more efficient water and energy consumption, reduction of plastic materials and use of recyclable materials, improvement of the carbon footprint, which represent the present and the future of our activities in front of the society.

MARKET

To the historical difficulties derived from the volume, the number of references, the seasonality of the sales or the continuous activity in the market, it is necessary to add the new requirements of our clients to dispose of the product immediately and the adequacy of the orders of according to the characteristics of each act of consumption, which translates into a customization or change in the point of penetration of the order.

The widening of the range in the portfolio of companies, together with the application of more aggressive and particularized commercial strategies as a result of segmentation, which are translated into continuous promotions to the market, together with changes in trends, cause a shorter products life cycle. This atomization of the stock means a greater difficulty for the forecasting due to an increasingly volatile demand.

LOGISTICS

Faced with this changing environment, logistics and the entire Supply Chain become within companies in a value-generating vectors. To the classic models based on the fundamental pillars: a unique process with focus on the customer and consumer shared by the entire organization, an integrated planning and information system, as well as a clear definition of the governing model that convey decision-making, we must add the visibility and control of the performance execution of operations in real time.

We must redefine strategies, policies, organization, processes and information and control systems to optimize resources and be more efficient. It is fundamental to optimize the supply network and structure the business plan for different time horizons: strategic, operational and tactical. Consequently, it is how managing all the information flow that goes from the identification of market needs, the quantity of product to be positioned in each node of the network where the customers are assigned until define the production and supply plan that maintain the optimal levels of inventories. In the opposite direction, the physical flow that goes from the movement of materials to the delivery of orders to customers must be optimized.

Gonzalo Madurga, Supply Chain Director, Coca Cola Iberian Partners

In this environment, it is critical to improve the demand forecast that feeds all the planning of the Supply Chain to respond to the market. The more accurate the forecast is, the less noise we will introduce into the process and the better our service will be and the allocation of resources will be more optimal. On the other hand, the less accurate our forecasts are, the greater our response capacity should be. It will be necessary to provide greater flexibility to the supply chain and revamp activities in order to be competitive in responding to market fluctuations at a controllable cost.

Technological innovation allows us to automate operations and build efficient and robust processes. Agree over the needs of the company and negotiate solutions where the rights and duties of the employees will be collected, as well as establishing collaborative alliances with suppliers and customers is fundamental to react efficiently to our customers when it is not possible to plan our action beforehand .

The efficiency in the decisions in the supply chain has to be reflected in the four levers of value for the business: increase revenues through an excellent level of service, decrease the cost to serve for the entry supply chain end-to-end, improve working capital by optimizing the level of inventories and properly dimension the capacities to guarantee the growth without idleness of the assets.

INDUSTRY 4.0

What we have today called Industry 4.0 offers us enablers that help us to reduce the complexity. The increase in the processing capacity, the possibilities of the massive use of data, the generation of adjustments through simulation, the Internet of things, the connectivity between collectives and the integration of systems, augmented reality, robotization, 3D printers or immediacy for accessibility through i-cloud solutions open opportunities for us to digitize and adapt our companies.

The intelligent use of information through big data allows us to improve the root to market, the segmentation or the prediction of the behavior of our consumers. The application of forecast analytic models to improve the accuracy by machine learning; through a multivariable analysis, either internal as the orders billed by the customer or external such as temperature and others, represent an improvement in short-term forecasts. AI algorithms for simulations that seek to optimize the scheduling in the productive units or the allocation of suppliers to improve the spending in some of product categories. Real-time information systems in factories (Manufacturing Executive System) that support decision-making. The use of autonomous vehicles to feed and remove products from filling lines, robotization and automation of storage, picking or palletizing operations. The systems of control and traceability of the orders, from the allocation of the slot of the load until the delivery of the orders to the customers with the control stage of the operation by geopositining.

Industry 4.0 allows us to have immediate information for decision-making in the real time based on the connectivity of all the actors that are part of the value chain. Those are some of the levers of transformation in which I have been involved.

CHALLENGES

One of the challenges that we have to address in making decisions in real time is to work on two complementary but different levels, such as planning and execution. The centralization of the operations or control tower includes changes in the processes, in the organization and in the information systems. It is an evolutionary process that will depend on the maturity of each organization and that can be explained with the achievement of the following phases: visibility of process indicators in real time, predictability of current performance in future results, simulation of different scenarios, adaptation of fundamental facts external to the results and optimization of the response by learning through artificial intelligence.

Consequently, to the known challenges such as restrictive legislation and application of rates and taxes by governments to types of products or services and the search for alternatives that entail sustainable models, we must add the conversion of the employees’ profile our companies towards digitalization and a deeper change in decision structures that are increasingly hierarchical and centralized.

STRATEGY

The challenge for companies is to know how to adapt their critical processes, identify the most useful enablers to apply them and prioritize their actions. Not all companies have developed the guidelines for how to use information through new technologies. Only a few have their systems structures mapped. What makes it possible to detect inefficiencies and advance the renewal of those packages that will become obsolescent in the near future.

There are Companies where the Digital transformation is a priority in the agendas of the Board of Directors and that is how it has to be, since it corresponds to this body to validate the strategy to be developed by the management team. And it is not a coincidence that in the organizations where this circumstance occurs, they stand out from their competitors because of their efficiency and they are located in more developed stadiums and prepared to face the continuous changes in the environment.

We are facing a revolution and not an evolution, given the speed at which changes occur. “Digital transformation, a paradigm shift, and adaptation of our businesses”.

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