SAP just released its 2021 Digital Supply Chain Strategy document, so I invited Franz Hero, SAP's Head of Development, Digital Supply Chain to come on the podcast to talk about it.
We talked about the what, the why, and the what next of this document - I think you'll enjoy it.
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Yeah, a strategy document is where we are writing down our strategy and vision and I think this is important, I think for all the development organization and also representing digital supply chain so where too, we want to go with a digital supply chain. So where does we the industry go? What are the challenges in the industry? What does our customer need? And then from there derive our strategy. So how do we tackle and how do we want to tackle the opportunities, the challenges and how do we want to help our customers with our solutions to run better?Tom Raftery:
Good morning, good afternoon, or good evening wherever you are in the world. This is the digital supply chain podcast, the number one podcast focusing on the digitization of supply chain. And I'm your host, global vice president of SAP. Tom Raftery. Hi, everyone. Welcome to the digital supply chain podcast. My name is Tom Raftery with SAP and with me on the show today I have my special guest, Franz Franz, would you like to introduce yourself?Franz Hero:
Yeah, I'm Franz Hero. I'm responsible for the digital supply chain development at SAP. I'm based here in Germany. Now exactly one year in my home office. And looking forward to talk to you, Tom. Thank you, friends.Tom Raftery:
Thank you for coming on the podcast. And we're here to talk today about a new strategy document has just been released by SAP. Do you want to tell me a little bit about that?Franz Hero:
Yeah, it's strategy document, it's where we are writing down our strategy and vision fingers is important thing for all the development organization, and also representing digital supply chain so well to be want to go with a different supply chain. So where does we the industry go? What are the challenges in the industry? What does our customer need? And then from there, derive our strategy. So how do we tackle and how do we want to tackle the opportunities? The challenges? And how do we want to help our customers with our solutions to run better?Tom Raftery:
Okay, and just just to clarify, is this a strategy document for SAP? Or is it a strategy document, to educate our customers and how they should be rolling, or they should be organizing their supply chains.Franz Hero:
Now it's both so we are publishing it to our customers, to our partners, so that they know where we are going. So that we understand how we are thinking and what our vision is, but is of course, also internally. So to publish it to our employees into the different attributes we have. So we have development, we have solution management, we have our field service, our consulting organization, we have our field organization, so that we are all having the same vision that we want to go and that everybody understands also the rationale behind what we are doing. And of course, then also can explain to our customers, I think that's a very important document just to get alignment, Hoover complete ecosystem internally within SAP, but of course, also externally to our partners and with our customers.Tom Raftery:
Okay, okay. And you mentioned at the outset that you're now one year working from your home office, and you know, I'm in the same boat, and most of us are listening to this. You know, so that speaks a little bit to what's happened in the last year. So can you talk to me about some of the key points for the 2021 strategy document that we're just after releasing and how is it different from the 2020 strategy?Franz Hero:
Yeah, I think we talked already a couple of times about supply chain, what they are doing and how they the pandemic is also influencing the strategy and the type of what the influence of a pathetic is on on the supply chain processes and challenges. So, we all experienced supply chain management is a very important piece of our life. So, the last 12 months made it very clear, and we talked about that before. So, what is needed, so, one side agility is needed to react very fast to changing demand and supply simulations reveal the vaccine production vaccine distribution, and it's also very clear there is a much higher demand than we ever supply. So, now you have to come together and in sales operations planning for sales for customers and the operations have to come together to to agree on a plan to agree on allocations, volume and locations and then plan the complete supply chain according to that. So who's producing what by them and how much can we expect from the factories in the complete supply chain is known for my gradients as from the final product to to at the end to the consumer, so, very agile environment and of course, we need also to it's to react very fast. So, agility is needed. Then these plans have to be translated into execution into logistics into the supplier, world into into manufacturing plants. So we need also then increase the productivity on one side or the other. So have flexibility in production, and in execution in logistics and so forth. So, agility, productivity, the third point is connectivity, we are living in a global world, clearly and supply chain as a network business. So we need connectivity, we have to connect the companies so that they can collaborate with each other exchange information with each other, so that everybody knows what's going on. So create transparency in the first place. And transparency is the first step to drive also improvements. And then also, of course, it's not only transparency is really building an environment where customers truly can collaborate. The fourth topic, not to forget is sustainability. I think, you know, Mister, remember the World Economic Forum. More than a year ago, when sustainability was all over and Friday's for future in the last year, it was a little bit on the back burner. But of course, sustainability is a is a big topic. So that are the the four trends of our needs, what you're seeing now, to be the strategy document, we also describe now how we react to it. So on one side, agility to build resilient, agile supply chains. So our initiative is here, the synchronized planning, because planning is the brain of the supply chain, to match demand to supply, but also then make sure that this plan is executable. It's a really high level planning, integrated with also be execution planning. So production planning, detailed scheduling, is transportation planning, but also reach out to the supplier. So to the capabilities, synchronized planning. The second one is productivity, how can we increase productivity come from synchronized planning to synchronized execution. And here, we launched our industry 4.0 program, we call it auto industry for now. It's really making the next step in automating the business processes in execution through the capabilities of the Internet of Things. But it's not only in manufacturing is also across all the execution exercises, it's also logistics, so the supply to the line to to the manufacturing plants, and then from the plant, of course, to the distribution channels to the consumers. So that's the industry 4.now initiative, we have. The third initiative, is our unified Business Network program, because we have, so we only are people that SAP enterprise resource planning vendor. So the focus of earpiece systems was on the automating and optimizing the business processes within a company but we have to leave the four walls of a company and expand the RP principles to the network, moving from an ER p vendor to NRP network resource planning vendor. So when we started the unified business program last year to bring all our network activities together really to enable our customers to connect with each other. And then of course, the sustainability initiatives we have. And we we build that all on our designed to operate framework. So on our portfolio from designing products, manufacturing, logistics, the operating solutions, and of course, also the planning solutions.Tom Raftery:
Okay, what are the big differences between this 2021 strategy and the 2020 strategy?Franz Hero:
The good thing is there are no big differences, I think, important is that strategy and vision. Yeah, sustainable and resilient. Because otherwise it's not a good strategy if you change your strategy every year. It's certainly not a good one. So it's, it's I think, we are building on the strategy of 2020. And but of course, we do focus topics also almost the same, but it's of course, we are we moved ahead or one year we are explaining also what we have achieved already and what still what we still have on our roadmap to achieve resilient agile supply chain so we are not major differences. But of course, nuances here they are. Certainly the sustainability topic is coming out back stronger, because the supply chain and supply chain we have a big influence on sustainability. If you think about transportation, if you think about the manufacturing plants, specifically impromptus industry now consuming a lot of energy. If you think about circular economy, packaging material, really design the product. From the beginning, so that they are sustainable, so that they include components that are recyclable, that are ethically sourced, and so forth. So it's really in our strategy here is sustainability must be built in, it cannot be just on top of something and monitoring and reporting. We need a tool, of course, but at the end, it must be every process must be a sustained, it must become a sustainable process. And of course, effective supply chains are also sustainable supply chains, if you can avoid an empty truck waste and waste, its men, that's always a contribution to sustainability.Tom Raftery:
And why is sustainability becoming important? Now, I mean, aren't people kind of busy with other things,Franz Hero:
Of course they're still busy coming over the pandemic, the thing we are seeing now light at the end of the tunnel is the progress of vaccination. And in this, the effect out of that will be of course, an acceleration of digitalization of the supply chain. or via the other side, if you follow the newspapers and so on. Also, you feel it that sustainability topics are coming back. So the carbon footprint reduction, I think it's one of our biggest challenge we have as a mankind, the pandemic, I think we all understand now I think we will, in about half a year, perhaps and then it will be much better. But the says sustainability topic will stay. And specifically, specifically the carbon footprint production is it's a huge challenge for all of us. And be in also reduction of waste and plastics. Perhaps on a personal note, I did a social sabbatical in in Ghana. So an ARCA Utley, our capital, and when I was running in the morning at 6am, in the morning, it was the second day I was there and was running towards the ocean. Because it's always nice to see the ocean and the beach, and then I was a little bit shocked about the beach, because it was really, there was only plastic use only plastic bottles at the beautiful beach. And and then it's very clear that we have a problem here. And it's not only it's not gonna, because they cause it's the origin is global, and Bo producing this, these things, and we have to do something here certainly.Tom Raftery:
Okay. Coming back to the strategy document. What kind of input did we get from other stakeholders in the space to produce this document? I mean, no, I'm thinking now in terms of, you know, customers, partners, analysts, etc.Franz Hero:
Yeah, important is that a strategy is not an inside out document. That's obvious. And we are in constant dialogue, first of all, with our customers. So we have, we have three executive advisory boards coming up in April again next month, that you really want to high level, discuss our strategy and also get the input from our customers or what's going on with the what do they need, what they are working on, what are their challenges, and how we are tackle them, we have also dedicated customer groups for this specific area. So customer Coordination Group in manufacturing, in in the design and logistics and so forth. To discuss a little bit more in more focused discussion in different areas. The discussed Of course, also the strategy paper with them. And also in one to one conversations with with our closest customers. We are discussing it also with the user group. So we have a DSG with the ISOC American SAP user group, we are discussing a lot of analysts. So we shared the strategy document also with leading analysts to get their feedback. And we got very valuable feedback. We put them into our strategy document. And of course, also internally, we are talking to the different areas within SAP to get there to get their input. So it's really we try the other 360 degree approach here to look to really get the right picture about what's going on and what's needed. The lastTom Raftery:
12 months, as we said at the outset, have, you know, brought massive changes to supply chains globally and the importance of supply chains. I mean, we're seeing things like problems getting semiconductors affecting supply chains globally. We're seeing ships off the coast of Long Beach, California. We're seeing massive container shortages and all kinds of weird things like that going on. What What do you foresee in the next 12 months for supply chains what what changes Do you think we're going to happen there?Franz Hero:
I think the the chip shortages? It's it's a good example about, and that's a result of an overreaction, actually, the the overreaction was, so everybody was stopping, let's say the the demand or the purchasing and they said, Oh, no, we don't need so many chips at the moment. And then some chip manufacturers also shut down plants. So the the cap capacity was going down and been in there now the demand was spiking again. And now we have a shortage sciences, the typical supply thing that it's cyclical effect and the problem of ships is that it's not so easy to produce them. So you need some, it's really complicated poses, I also talked to a company last week, they are producing the machines to produce the ships. And they have that huge demand. Now they don't know how to fulfill it, and they're getting a lot of pressure from their customers, because they need to fulfill their obligations. riccar manufacturers really sell for manufacturers and so on and so forth. Yeah, and, and of course, that's, that's one thing. And of course, of course, digitalization is now everywhere, and it has a much higher demand on what So, so one thing is also to overcome this bucket effects. And, and here, we see also that networks are becoming more important. And one example we are working with the leading OEMs. So the car manufacturers here, and we started in Germany, to build up an automotive network with the OEMs, but also the first tier suppliers. And of course, the idea is to expand it also to the second tier suppliers and so forth. And just to really get transparency in to the network, that it's not only a one to one relationship, one to many relationship. It's for this demand collaboration supply collaboration processes, but it's also for tracking part so serial number traceability so that you that you know which parts are going into which parts and if you have a problem with the parts, Are you clear, the recall is much more specific, much more focused, it's one thing that you're getting also on the other side, the feedback loop, tech loop tech tool, the the supplier, so that they know, understand the performance in the different car types, and they can improve the quality of their product. So so the network, the network effect, I think they'll become much more, much more stronger. That's one thing. And of course, now everybody understands that extra based supply chain planning doesn't work specifically included clover in global companies, we have to establish really tools to support the planning process is really establishing also very structured sales and operations planning process. So that from high level planning really to to execution planning, service synchronized planning concept to make sure that really the the plan and the the sensor demand very early and then also can plan accordingly. So the network effect the digitalization and planning but also digitalization, of course, in the manufacturing, in the logistics in the execution area. So it's it's also reflecting I'm repeating myself a bit. So what I also said at the beginning, it's because this is also core of our strategy. And besides the sustainability topic, it's really to at the end of the day, it's it's about the digitalization of the supply chain from designed to operate, to automate to automate processes where it's possible. So we, let's say the, the regular tasks have to be automated. So let me the employees and the supply chain specialists can really concentrate on these exceptions, because at the end of the day, supply chain management is also exception management and you need to create visibility to see what's coming on to see an exception. And then you can of course, React earlier to that. So the digitalization of the supply chain to improve planning capabilities. It's a huge it's a huge topic yesterday, I also talked to a customer, they are producing airplanes. And of course, they hit hard last year, but they see very clearly that the demand will go up again. And they are using the time now really to change their planning process to become much more agile to digitalize the planning process. And that's an extreme example because they are really producing a lot size of one on the other side here for you consumer products companies, but they have the same challenge but they have of course not a lot size of one. It's more mass production area.Tom Raftery:
We recently announced the I got to make sure I get the nomenklatur of this right because it's it's important, but it's always complicated. But we recently announced the sap digital supply chain edition for SAP s4 HANA DSC edition. I had to read that off, I haven't learned it off but can you tell us what is it and why should people care?Franz Hero:
Yeah, I thought I named it the S4 Digital supply chain edition. It's a little bit simpler. But of course, we need official names that are that are also on the price list. That are also correct. Yeah. correct name. So ps4 Digital supply chain edition, what is it so what customer need also more flexibility also how they implement the solution. And and take an example, we have a synchronized planning for synchronized planning you need now I'm talking about the product, we need our product integrated business planning, site operations planning, demand supply planning, response management, but we need also the execution piece and the interface to the execution is production planning, detailed scheduling to manufacturing execution. This is part of our is for product, because that's the execution is our customer said I cannot wait until I went through my s for transformation. Until I implemented Kronos planning. What we did is, this is the DSC edition. So now you can implement PDS standalone production planning details getting standalone side by side with your your current your P or ECC system. And when you're integrating at all, of course, also with ibp, so that we can do synchronized planning. So let's say the first step into will is for transformation to be more flexibility. But it's not only to accelerate this whole transformation, it's also of course, later on, you have flexibility, you can say, Okay, I leave it outside format for so that a different upgrade cycles there and so forth. And we of course, delivering results in the cloud as a cloud solution and as an on premise solution. So the customers may have choice. So flexibility, not only in my business from the business perspective, but also from an IT perspective, because it has to support businesses and to give to, to give them the chance to accelerate the transformation. That's one example. Other areas that are part of the DC addition is transportation management or transportation management in a standalone warehouse management standalone. So if you would like to run also, let's say high volume distribution centers, and you don't want to put it on an on and combine it with an earpiece system. Of course, we need to give customers the choice to run it standalone. And also POV production engineering and operation. So the manufacturing piece of it as well, is also part of as their school edition. So this is a big step forward to bring more agility, more flexibility into our customer base. And we are very excited about that offering. It's it's part of our overall modularization strategy. So we are modernizing our suites that I step you solutions are getting built on our cloud platform or business transformation platform. Like we name it now. Like digital manufacturing cloud, for example. And but also we are working on the core on ps4 basis to bring more flexibility into our customer base.Tom Raftery:
Okay, super. Franz, we're coming towards the end of the podcast now. Is there anything I have not asked you that you wish I had any topics that we've not talked about that you think it's important for people to be aware of?Franz Hero:
Yeah, no, I think we covered it all. Perhaps you could ask who is becoming the European champion in football in summer.Tom Raftery:
Go for it, who is becoming the European chamFranz Hero:
I think it will be not Germany. But perhaps Spain. So you're living in Spain, right? Yes.Tom Raftery:
So hopefully,Franz Hero:
that will take place will take place and will be certainly fun. At least for you. European folks. Yeah, exactly.Tom Raftery:
Exactly. Okay, Franz, that's been great. If eople want to know more about ourself or about the strategy ocument or about any of the ther things we've discussed on he podcast today. Where would ou have me direct them?Franz Hero:
Yeah, so we published it and on the their social media channels like LinkedIn, my LinkedIn account, but also on sap.com, of course, witter and so forth. And as lways, customers can also ontact direct me via LinkedIn r on my email account.Tom Raftery:
Okay, and I have a link to the document in the show notes for this podcast as well. So if anyone wants to find it there. Cool. Franz been great. T anks a million for coming on t e podcast today.Franz Hero:
Tom, thank you very much was fun as always.Tom Raftery:
Okay, we've come to the end of the show. Thanks, everyone for listening. If you'd like to know more about digital supply chains, head on over to sa p.com slash digital supply chain or, or simply drop me an email to Tom firstname.lastname@example.org. If you'd like to show, please don't forget to subscribe to it and your podcast application of choice to get new episodes as soon as they're published. Also, please don't forget to rate and review the podcast. It really does help new people to find the show. Thanks. Catch you all next time.