Increasing value-added with intelligent supply chain management
Supply Chain Configuration
Ideally, a supply chain is closely intertwined with the corporate strategy. Every adjustment and decision in this area has a long-term impact on the success of the entire company due to the usually high share of fixed costs. In the process, current situations and new challenges are often confronted with the company’s structures which have grown over time. We help you critically challenge existing structures, optimize supplier and distribution networks and align your supply chain to the needs of your company, so that you can find and implement the right mix of flexibility and cost efficiency. In the scope of supply chain configuration, we support you in, for example, the following issues:
- Optimizing the number of warehouse locations/centralization vs. decentralization
- Identifying the location and size of warehouse sites
- Allocating range of products to production and warehouse sites
- Make-or-buy decisions (insourcing vs. outsourcing)
- Selecting modes of transport
- Building up inbound logistics structures
- Higher customer satisfaction and more security: Optimization of the supply chain configuration has a significant positive impact on order lead times, product availability, supply reliability and on-time delivery. Overall, this can boost customer satisfaction tremendously.
- Upturn in profit: the profit impact of supply chain reconfiguration is two-fold:
- Higher customer satisfaction leads to higher sales because satisfied customers buy more, and more frequently, and they recommend you to others
- At the same time, many of the company’s cost items can be influenced in a positive way:
- Lower material costs due to less shrinkage
- Lower personnel costs
- Lower transport and storage costs
- Lower interest expenses
- More liquidity: Ultimately, an optimized supply chain configuration also leads to higher liquidity in the company. For example, it enables the outsourcing of warehouse and transport services to release resources which are committed to investments/facilities. Optimized inventories simultaneously also result in positive liquidity effects.
Depending on the company, strategic supply chain issues differ considerably. When reconfiguring your supply chain, we individually customize the approach to your company and your challenges. Generally, the project goes through the actual analysis, target concept and implementation steps. Single activities of each project step are then performed after recording the actual status tailored to your needs.
We’d be glad to give you names of references who will convince you of the way we work.
Just contact us via phone: +49 211 - 56 38 75 - 0 or by e-mail: info@. hoeveler-holzmann.com
Sales & Operations Planning (S&OP)
S&OP is a management tool originating in the USA that cooperatively brings together the key areas of a company to establish a shared basis for decision-making. The goal is to optimally align production and procurement planning with corporate and sales planning, which particularly includes comprehensive financial planning. Performance deficits of the supply chain which result from less accurate, outdated and frequently changing sales, production and procurement plans cannot even arise in the first place thanks to the use of S&OP. In this way, challenges like hard to forecast sales volumes, high price volatilities on the sales and purchase side, resource bottlenecks and high shares of fixed costs can be tackled in a better manner.
As a general rule, it is not necessary to introduce cost-intensive software solutions. The main objectives of the implementation of integrated Sales & Operations Planning (S&OP) processes are:
- to integrate all of the know-how available in the company and beyond into the planning
- to take into account and weigh different and partially conflicting objectives
- to develop consistent and stable plans with high forecasting quality which fully comply with the corporate and financial planning
- to provide all relevant functions with the planning results in real time
- Higher customer satisfaction and more security: Enhanced supply reliability and on-time delivery, combined with short throughput times for made-to-order productions, lead to substantially improved customer satisfaction
- Increase in sales: Satisfied customers buy more, and they buy more often and recommend you to others, which can boost sales and revenues
- Upturn in profit: Integrated planning processes lead to lower inventories, fewer errors and to less uncertainty in planning. Overall, the production processes flow in a considerably smoother way. Rescheduling on short notice becomes less frequent. All these effects have a positive influence on many expense items of the P&L statement. Altogether, costs can thus be reduced tremendously.
S&OP is implemented in three steps:
- Analysis of potential: In step one, the current business practice in the area of sales and production planning is recorded and evaluated based on interviews and workshops, data analyses and existing descriptions of processes and procedures. In this connection, quantitative aspects play a role, like forecasting quality and instability in planning as well as qualitative aspects like the degree of the departments’ cooperation in the planning process.
- Definition and coordination of binding processes: In step two, the future S&OP processes are then defined together with all relevant specialist departments. In doing so, we draw on best practices for processes and procedures, roles, meeting structures and key performance indicator systems. Future processes are defined in detail in a comparison with best practice, together with the relevant organizational anchoring and relevant IT support for each process step. The key milestone at the end of this step is the binding coordination of the new processes.
- Implementation of the new processes and follow-up support: the main challenge in the implementation phase is to shape the change in a sustainable way and to convince all staff involved of the need for the new processes. We support this with comprehensive training programs, accompanied test runs, coaching of the go live and through an accompanying monitoring of implementation.
Working Capital Management
Procurement and supply chain projects are generally tightly interwoven with the issue regarding Working Capital Management (WCM). WCM is a holistic approach to improve liquidity and profitability. The analysis focuses on the company’s financial flows (financial supply chain). The paramount objective is to reduce the so-called net current assets (working capital) in order to release additional financial resources. This can, for example, then be used for continued corporate growth or rationalization projects.
The so-called cash conversion cycle (also cash-to-cash cycle) forms the key performance indicator in WCM. It specifies how long financial resources are committed in the sales process. Core components of the cash conversion cycle are the maturities of accounts receivable and accounts payable as well as the inventories. Here, the WCM aims at extending payment terms of liabilities (Days Payables Outstanding – DPO), to shorten the duration of customer account receivables (Days Sales Outstanding – DSO), and to increase inventory turnover (Days Inventory Outstanding – DIO).
The pivotal challenge for WCM is to prevent purely short-term effects and to achieve long-term reduction of the working capital based on sustainably optimized processes and procedures.
- Higher liquidity: Optimization of working capital in the company primarily leads to a significant release of liquidity. This additional liquidity results from:
- extension of supplier payment terms
- shortening of customer payment terms
- reduction of inventories
This additional liquidity is, for example, then available for growth or efficiency enhancement projects or it can alternatively be used to reduce bank liabilities.
- Upturn in profit: The liquidity released directly leads to a reduction in interest expense when this resource is used to reduce bank liabilities. In addition, optimized and high-performance WCM process have a positive impact on many other cost and revenue items of the P&L statement, e.g.:
- Increase in sales thanks to enhanced supply capability
- Less material expense due to less obsolescence of articles and fewer scrap costs
- Less administrative expenses thanks to fewer errors
- Less amortization on customer receivables thanks to improved debtor management
- Lower storage costs
- Fast payback: With a 20-30% reduction in working capital, a project already pays off in just a few months
Working capital management is optimized in three steps:
- Analysis of potential: In step one, actual processes and structures are analyzed in terms of their optimization potential in order to quickly pinpoint possible areas for improvement. Particularly important in this phase are benchmarks and checklists:
- Benchmarking the company against other companies in the same industry can quickly lead to initial findings. Advantageous here is that most of the information required can be found in the companiesʼ financial statements, and are therefore often freely accessible. However, benchmarks never provide more than initial indications.
- To determine potential in detail, not only are interview and data analyses then used, but especially also checklists, on the basis of which your current processes are compared with best practices.
- Concept development: In the second phase of the project, processes and procedures are then redesigned and the necessary measures worked out. A detailed implementation plan is developed, too.
- Implementation: Many WCM projects only achieve success temporarily because after awhile, the working capital is back at the original level again. During the implementation phase, we therefore place particular focus on sustainable success of the implementation. New processes must be firmly anchored with and internalized by the employees. Implementation is controlled by a holistic project management and through regular reporting on the essential WCM key performance indicators.
Transportation & Logistics (Inbound/Outbound)
In several industries, costs for transport and logistics make up one of the key cost items. A cost ratio of 10% and more to the total costs is not uncommon. That’s why it is of critical importance to be "absolutely precise" for this cost item. At the same time, intensive competition is under way in many areas of the freight forwarding market: ideal preconditions to sustainably reduce prices and conditions through professional and structured tenders without neglecting quality and service aspects in the process. Particular emphasis in the process is on the make-or-buy decision, because a high percentage of in-house manufacturing must especially be monitored for warehousing in many companies, and here, efficiency reserves can frequently be tapped through outsourcing.
- Upturn in profit: As a result of our transport and logistics tenders, savings are generally significant, often in the two-digit percentage range
- Flexibility: Enhanced flexibility is another positive result of the transport and logistics tenders. Fixed costs can, for example, be replaced by variable costs in the scope of outsourcing. Tenders boost flexibility in the transport sector too, since new, high-performance suppliers can be identified and volume newly distributed, in terms of flexibility aspects as well.
Complex transport and logistics tenders follow a five-staged approach:
- Potential analysis and concept development: At the start of the project, potential is first roughly quantified. Here, benchmarks can be used effectively in both the transport as well as in the warehouse area. A basic concept for the future operations must especially be developed in addition for outsourcing (or insourcing) decisions.
- Pre-selection: To pre-select potential providers, a so-called supplier self-assessment (RFI = Request for Information) is used. The key factor here is to involve as many bidders in the process as possible and, at the same time, to not structure the questionnaire in too much detail so that as many potential suppliers as possible submit a self-assessment.
- Tender: The actual tender document (RFP = Request for Proposal) will then only be sent to a limited group of bidders. A confidentiality statement must be signed in advance. The RFP serves two functions: firstly, a potential new supplier must credibly gain the impression that the volume of the commodity group will really be redistributed. Secondly, the tender document’s function is to already clarify as many aspects as possible of a possible contractual relationship in advance. This substantially improves comparability of the offers. At the same time, an advantage emerges in the negotiating process because the supplier now has to negotiate the best deal with his points from the contract to be concluded and not the other way around.
- Final negotiation: Until a new contract is signed, numerous activities must then be coordinated in parallel. This includes the detailing of processes and procedures, definition of IT interfaces and finalization of the contractual framework. For outsourcing projects, additional questions might need to be clarified such as employee transfer, sale of a building or sale of machines and facilities. Due to the complexity of the issues, parallel negotiations can now only be conducted with just a very small number of bidders during this phase.
- Implementation: The implementation phase can be split up into the two steps of commissioning or start-up and regular operations. In the commissioning step, IT interfaces are developed and integration tests carried out. Staff must also receive training and the new processes and procedures need to be trained. Regular operations will then be accompanied by permanent project controlling and compliance with the agreed service level agreements (SLA).
We’d be glad to give you names of references who will convince you of the way we work.
Just contact us by phone: +49 211 - 56 38 75 - 0 or by email: info@. hoeveler-holzmann.com
Quality of production planning is one of the main drivers for effectiveness and efficiency of production processes, and it therefore has a major impact on, for example, staff deployment time or the inventories along the entire supply chain. In the process, production planning must regularly meet a wide range of objectives like short throughput times, high delivery reliability and low total costs to the greatest extent possible. But in many cases, it can be observed in companies that decisions are taken based on a gut feeling without reliable and comprehensive underlying data. High dependency on individual persons frequently exists in this area at the same time.
Our approaches for improvement in production planning are therefore focused on an optimized planning result, which then leads to improved performance and simultaneously, lower total costs in the factory. Furthermore, processes are systematized, set up more transparently and comprehensively backed by data.
- Higher customer satisfaction and more security: Improved supply capability and on-time delivery, combined with short throughput times, lead to tremendously enhanced customer satisfaction
- Higher liquidity: As a result of higher planning stability, safety stocks and throughput times can be reduced, which enables capital tied up until now to be unlocked.
- Greater flexibility: Shorter throughput times allow you to respond more flexibly to changes on short notice for customer orders
- Upturn in profit: Significant savings for process costs, in cost of sales, too, are usually the result of our optimized production planning. Prevention of waiting periods and scrap/waste also lead to more efficient handling of resources.
We take a three-step approach when optimizing production planning:
- Potential analysis: To quantify potential, benchmarking against best practices is especially suitable in step one. Alongside meaningful key figures, it is also recommendable to include qualitative criteria and process comparisons based on the "stages of excellence" in supply chain management. Depending on the stage of the existing production planning’s development, we first conduct a data analysis in this phase.
- Designing a catalog of measures: Following the analysis and evaluation of the actual situation, we define appropriate corrective measures together with those in charge to bring about the intended target situation. These measures are then prioritized, therefore constituting the implementation plan for the achievement of defined objectives.
- Implementation: The defined implementation plan will be pursued hand in hand with the staff and departments responsible for production planning. This ensures global understanding in your company and the necessary degree of buy-in for the innovations in order to leverage potential for improvement on a sustainable basis.
Supply Chain Controlling
Today, many companies do not have any transparency over their supply chain that is backed by an integrated data framework. In certain segments of the supply chain (e.g. in warehousing or procurement), single reportings are often generated which focus on isolated thematic areas. Integrated key performance indicators (KPIs) spanning the entire supply chain are not applied. A comprehensive overview of the supply chain’s performance is missing.
This is where supply chain controlling steps in: the goal is to continuously monitor the whole supply chain, including up- and downstream areas. This creates the essential basis for optimization of procurement, production and distribution processes. Problems and weaknesses can be identified at an early stage and countermeasures initiated through supply chain balanced scorecards (SC-BSC) and management dashboards.
- Security: You get more security in a two-fold way:
- Transparency: As the first and key result of setting up an integrated supply chain controlling, you receive comprehensive transparency over processes and procedures. Sources of errors and inefficiencies are identified at an early stage and countermeasures are enabled.
- Minimization of risks: Variances in processes and uncertainties in the supply chain are minimized as well, so that process stability overall increases tremendously.
- Upturn in profit: Only processes which are transparent can be controlled effectively. That’s why higher transparency over the supply chain has a direct impact on profit, too. Almost all expense items in the supply chain are influenced positively – from cost of materials, on to personnel and administrative costs, straight through to capital commitment costs.
An integrated supply chain controlling is set up in line with a three-staged approach:
- Defining key figures and building up the supply chain balanced scorecard: The starting point for all optimizations is to define meaningful key figures, on the basis of which the supply chain should be controlled. Besides the actual definition of key figures, target values and tolerances, sources of data and reporting intervals need to be defined for this purpose, too. These key figures will then be integrated into a company-specific supply chain balanced scorecard (SC-BSC). Within the framework of this SC-BSC, the overriding corporate objectives will be cascaded downward to single departments and areas to ensure alignment in the entire supply chain that complies with the target. For supply chain reporting, a supply chain dashboard will be defined as well which provides relevant information for each of the different management levels.
- Designing the concept for processes and IT support: After the initial concept for the future supply chain controlling has been designed in a first step, the second step focuses on designing the concept for processes in detail. Of particular importance here is high-performing IT support. Here, we will develop the data model, for example, and define the necessary interfaces together with you.
- Implementation: We also provide comprehensive support for the subsequent implementation – from creating reports and key figure structures, to coordinating interfaces to the ERP systems, through to defining alerts and setting up dashboards.
We’d be glad to give you names of references who will convince you of the way we work.
Just contact us by phone: +49 211 - 56 38 75 - 0 or by e-mail: firstname.lastname@example.org.
Core focus is on defining data and information as well as the systems needed in order to support all processes relevant for the supply chain in the best possible way.
- Security: You receive more security thanks to improved reliability with which decisions can be made regarding supply chain management in your company
- Upturn in profit: The use of the right IT in supply chain management enables your staff to make better decisions and it helps you perform your tasks more effectively and efficiently. This ultimately benefits the overall business success in many ways and it has a positive impact on profit.
The information technology deployed is optimized in eight steps:
- Analyze existing IT systems in supply chain management and the interfaces to other corporate divisions
- Determine the processes/tasks needed for the supply chain which are currently supported by information technology, and which should be supported in the future
- Define requirements placed on the performance of IT systems to support the tasks and processes required
- Determine necessary data granularity (→ at which detailed level are data required?)
- Define need for optimization of the existing IT systems
- Define specifications to adjust the existing systems or to implement new systems
- Potentially select an IT service provider to implement the adjustments defined in the specifications in terms of costs/benefits and joint transformation of specifications into technical specifications
- Monitor the IT service provider in implementing and reviewing adjustments from the specifications