An IDC InfoBrief, Sponsored by SAP | May 2018

Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

In the Digital Era, Manufacturers Must Transform or

Be Left Behind
Competing in the Digital Age
33% of consumer products
companies will have benefited from
digital transformation by 2019
33%
of all industry leaders Changing business requirements Outdated/inflexible business
disrupted by digital-enabled and complexity — enabled by
competitors by 2019 models and processes will hold
technology — drive this trend
back the remainder

80% expect to be disrupted

by digitally enabled competitors
within 5 years
Digitally-savvy consumers Supply chains not ready to
want personalized experiences meet these changes
Traditional and established large
enterprise players will see smaller
“lateral” competitors wrest 10-15 share
Technology-enabled points away during this time as barriers
global visibility required to entry fall

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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Technology Eclipses Growth and Competition as Prime

Driver of Change in the Supply Chain
Drivers of Supply Chain Change
Technologies that Will be Important
New technology 45%
Data and analytics 50%
Growth 42%
Competition Reflects both the Internet of Things 42%
39%
potential for driving Cognitive/artifical intelligence/ 40%
Internal costs 38% transformation and machine learning
Retaining customers 32% the lack of clarity into Cloud 33%
true potential
New markets 31% Robotics, RPA and drones 28%
Supply chain disruptions 29% Augmented/virtual reality 20%
Demand variability 29% Social business and
collaboration tools 20%
External (supplier) costs 27%
Mobility 19%
Visibility/traceability 25%
Blockchain 19%
Regulatory compliance 24%
3D printing 19%
Speed of collaboration 24%
Internal complexity (new products, too 23% Digital twin 12%
many SKUs, global supply)
Selling directly to the consumer 23%
External complexity (retail requirements, 19%
channel proliferation, omni-channel)
Difficulty in finding skilled workers 18%
Lack of innovation 15%

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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Digital Business Planning Defined

Connected with IoT Comprehensive Analytics Cognitively enabled

Sense Analyze Respond

What’s happening? Why is it happening? Next best action?
Where is it happening? What does it mean? Exception based?
Who’s doing what? What is the business impact? Learning systems?

Collaborative with Supply Chain Networks

Cyber ‘aware’

Demand-aware; data-driven – Industry 4.0/IoT is at its Comprehensive analytics and cognitive technologies
core a data problem enable real-time, extensive digital business planning

Extended enterprise collaboration – enables seamless

Scaled to the network – not just within the four walls of
and low latency innovation and fulfillment to meet/exceed
the enterprise but extended to suppliers and customers
customer and consumer experiences

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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

As the Pace of Change Accelerates, Digital Business

Planning Drives Differentiating Value
Top 3 Business Priorities of Manufacturers Today Top 3 Challenges of Manufacturers

Quality Improve demand

planning/forecasting

S&OP Accelerate new-product

time to market/success rate
Inventory planning
Supply chain visibility
….. and a fourth,
Demand forecasting
which climbs to #2 in three years, based on
IDC’s 2018 Supply Chain survey results

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 Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Digital Business Planning - Functional and Process Integration

and Collaboration Paves the Way for Transformation
As you think about the future of your supply
Q. chain, what current gaps are likely to be the most
problematic if not addressed?
Q. From a business collaboration perspective, where
is the biggest opportunity for your business?

The lack of deep insight into our customers and consumers 40%
Upstream with suppliers (i.e. buy-side B2B collaboration) 31%
Inability to get products to market fast enough 40% Downstream with customers (i.e. sell-side B2B
collaboration) 26%
Inadequate pipeline of new products 37%
Within our business (i.e. between supply chain and
Lack of supply chain visibility to see necessary changes 20%
marketing, or sales)
in time to react to them effectively 35%
With external logistics providers 15%
E-commerce limitations 32%
Lack of digital competencies limits the ability to
transition the business 23%
Lack of sufficient collaboration with external suppliers
and/or customers
18% Digital business planning must
encompass the entire value chain,
not just within a company’s four walls
Integrated planning (and
execution) is not just a nice to Stop planning in silos within your company
have – it is must-have (demand planning, supply planning, inventory
planning); include multi-tiered suppliers
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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Digital Supply Chain Transformation is About Efficiency and

Resiliency to Disruption
Horizon 1
Efficiency and effectiveness – do the things we
do today in the supply chain better
60% say it’s about
efficiency (ROI)
A third of manufacturers say poor analytics
means poor planning outcomes

Horizon 2
Be resilient to market disruption – have a supply chain that
can quickly adapt to disruptions in the marketplace (fast follow)
80% expect to be disrupted
within 3 years

Metrics evolve to represent

Horizon 3
?
new business models
Be the disruptor – supply chain supports new business models or dramatically Time to recovery
re-imagined ones (leader, bleeding edge) Consumer satisfaction

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 Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Digital Business Planning Takes Supply Chain to the Next Level

Use Case Current Level Goal and Objectives Technology Deployed Future Level Use cases that drive
efficiency, but also
Demand and
Although demand Comprehensive and Cloud, IoT, mobile, and Instrumenting demand reduce latency and
data feeds are near-real-time demand signals from customers
consumption common, they are and consumption data
industry cloud
creates a more enhance supply chain
signal insight incomplete, not will allow companies accurate and usable planning “intelligence”
typically in real or to improve both the representation of real-
near-real time, and fail forecast and the time demand in the
to adequately predict linkage to inventory and replenishment process.
future demand. capacity. The supply chain is key to
S&OP is an often Engage ALL planning Cloud, social, IoT, BDA, Modern, cloud-based
supporting new business
Extended insular process that constituents, both and cognitive tools integrated to models and planning
S&OP fails to adequately inside and outside the instrumented inputs
understand granular enterprise, in a timely across a broad and is key to supporting the
demand, broader
supply and the
and productive way
to both ensure that
diverse set of connected
constituents. Rapid
supply chain
constraints of existing plans are viable iteration of plans and
constituents beyond and to understand scenarios with next-gen
the narrow definitions
of demand and supply
future opportunities to optimization capabilities. Technologies like IoT
recalibrate plans.
balancing. and machine learning
Various analytic The objectives are better Cognitive, BDA, AR/VR, A closed-loop analytic enable automation of
Thinking models support allocation of resources
and risk mitigation,
and mobile model connects
portfolio, scenario,
repetitive/operational
supply chain different planning
stages, but the better optimal sales and value, and situational tasks, which leads to less
operations plans, and analysis to drive supply
models are loosely
integrated. better next best action chain performance and
planner intervention or
determination. innovation. even “touchless planning”

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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Supply Chain Transformation is NOT Just About Technology

4.35
Digital supply chain Reduce costs/eliminate waste 32%
transformation is about
solving business problems Continue to modernize/update IT related supply chain infrastructure 27%
Improve supply chain visibility/traceability/predictability 24%
Reducing costs that Respond more quickly to supply disruptions or changes (upstream agility) 23%
improve gross margins Become more customer centric/improve service performance 21%
that provide $$ for
Reduce supplier risk 21%
innovation or marketing
Enhance the cyber security of the supply chain 21%
Improve product compliance, quality, safety, or environmental sustainability 20%
Enhance customer/ Product innovation - improve the process of bringing
consumer experiences 20%
new products to market
Improve collaboration with suppliers and customers (B2B networks 18%
Respond more quickly to demand volatility or changes (downstream agility) 17%
Improve trade promotion capabilities 17%
Product quality and speed Support omni-channel fulfillment through direct-to-consumer
13%
or postponement capabilities
% of Respondents

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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Early Benefits and Future Opportunities

Superior financial performance Better service performance

IDC estimates coupling analytics and digital
technology to extract broader financial insights
will be worth 3-5 percentage points of incremental
revenue as well as 2-3 margin percentage points
for industry leaders within 3 years
Digitizing fulfillment and system inventory
may improve service by 2-3 percentage points,
say manufacturers

More effective product Less system disruption

innovation and/or better response
IDC estimates digital technology enables a 10% Digital commerce networks, advanced
systemic reduction for innovation costs and a 30% analytics, and better integration of
reduction in new product lead times demand and supply networks may cut
supply chain recovery time by 50%, say
manufacturers

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Digital Business Planning is at the Heart of Supply Chain Transformation
SAP Case Studies
Goal to harness a demand-driven S&OP process to
improve service performance
Leverage SAP Integrated Business Planning for S&OP to
bring discipline, collaboration visibility to the supply chain
Implement an integrated system that drives customer
demand through all the nodes of the demand network
Achieved end-to-end supply chain management and supply
and demand balancing in 18 months
Developed an inventory forecast to identify ways to both
recue pressure on the overall supply chain and increase
customer service levels
© IDC Visit us at IDC.com and follow us on Twitter: @IDC
An IDC InfoBrief, sponsored by SAP
Link strategic business planning with detailed planning
and execution, provide transparency, agreement and joint
decision-making on how to balance demand and supply, and
increase collaboration between sales, supply, manufacturing
and distribution
Implemented the SAP Integrated Business Planning to
increase planning process transparency, offer an easy
to use user interface, and enable collaboration between
different organizations enabled via JAM
Established the definition of an aligned plan between
different organizations (sales, logistics, planning etc.)
Drove faster profit-based decision-making via
collaboration while providing an unique source of
information for all departments contributing to the
S&OP process
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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

SAP Case Studies

Lennox International was in search of a solution to better

manage demand across multiple channels

The company chose to deploy SAP Integrated Business

Planning for demand to optimize supply chain demand-
planning activities, take advantage of integration with the
existing SAP ERP powered by SAP HANA and enable a fast
implementation using the SAP Best Practices package.

Lennox International has a comprehensive overview of its

supply chain, combined with strong capabilities, allowing
the company to be agile and highly responsive to customer
needs with higher transparency across supply chain activities
and extremely flexible reporting that allows detailed, ad hoc
reports to be generated in seconds

Other benefits include real-time health scorecard and

dashboards for managers and executives, and a reduction
in configuration efforts and duplicate work

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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Technology Enables Critical Business Capabilities

Shopping Journey Starts Individual Customer Networked – Managing Complexity

Resiliency and Speed with Digital Business Planning
in Any Channel & Consumer Focus Wherever, Whenever

Personalization Elimination of latency

The consumer drives the industry Omni-availability requires flexible,

real-time planning

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Digital Business Planning is at the Heart of Supply Chain Transformation An IDC InfoBrief, sponsored by SAP

Digital Business Planning is at the Heart of Supply Chain

Transformation Optimized

Managed

Digital business planning is foundational to broader Repeatable

supply chain transformation efforts Proactive
Digitally enabled, thinking
Opportunistic supply chain is part of
Resilient enterprise-wide functional
engagement, to both
Cross functional
Digital supply chain transformation is still early …
anticipate/ respond to
Ad Hoc alignment drives the external supply chain
adoption of digital disruptions and drive
Connected
but major progress is already being made Some digital capabilities
competencies, efficiency
is maximized and the
new, disruptive supply
chain approaches.
are in place, and the supply chain is resilient
beginnings of resiliency to external disruption.
Reactive are established, but Business Outcome
The importance of tools are underutilized
digital transformation and while business Supply chain digital
in the supply chain is alignment is promoted, transformation allows
It’s not yet too late, but it soon will be Resistant
Businesses that are
understood, but there
is still a predominant
disconnects still exist. Business Outcome business to shape the
market as a digital
Supply chain digital
focused solely on focus on efficiency leader and gain market
transformation begins
functional metrics and and the ability to move share.
Business Outcome to drive competitive
performance, without beyond functional advantage, both
due consideration of silos or ‘fire fighting’ The supply chain is against traditional
Digital transformation is present and necessary
the potential for the is limited. largely at par with players but also as a
disruptive potential of competition. The ability way to neutralize
digital technology. to assess digital
across all industries, whether discrete or process Business Outcome emerging, digitally-
opportunities is based competition.
Limited ability to assess improved, but still not
manufacturing, and manufacturers that don’t Business Outcome and identify digital
opportunities and risks
comprehensive,
resulting in average
Company is resistant
transform will struggle to grow, or worse, find means that disruptions performance versus
to changing the supply are often a ‘surprise’ competitors.
chain operating model resulting in sub-
themselves out of business putting current market
position at risk.
optimized responses.
Lack of sustained
momentum.

50% of manufacturers think supply chain planning

is critical to their transformation efforts
12% 29% 9% 37% 13%

© IDC Visit us at IDC.com and follow us on Twitter: @IDC Source: IDC 2018 Supply Chain survey with 200 supply chain professionals Home pg 14