SAP Supply Network Collaboration: Improve margins amidst uncertain growth in recessionary times

Globally, businesses have realized that the current economic recession is here to stay in the near to mid term future. Hence, companies are designing compelling measures to steer the business through these tumultuous times with minimal impact on long term business objectives. Companies have already begun cutting costs across the board as margins are under pressure.

Most companies view technology investments as discretionary spending that can be deferred. But cost cutting has to be supplemented by an investment strategy into focused initiatives that will have an immediate and positive impact on bottom-lines. Companies need to focus on technology initiatives with low initial investment, and short payback period, to ensure that the returns justifies the spend during these tumultuous times.

Reduce inventory and improve liquidity
SAP's Supply Network Collaboration (SNC) solution is one such initiative that will help companies reduce inventory and improve liquidity which is currently in short supply. Global companies with extended supply chains are under pressure to extend payables and expedite receivables i.e. shorten cash-to-cash cycle time. Limited automation and collaboration between manufacturers and their suppliers hinder timely analysis, detection and resolution of supply chain constraints.

Lean connection with web based browsers
SAP SNC enables greater collaboration by delivering a consistent view of supply and demand information to the company's suppliers, contract manufacturers, third party logistic providers, and customers. Interestingly, it does this while eliminating the need for all the suppliers to be on SAP systems by allowing them to use lean connection with web based browsers. This encourages the suppliers to operate on a data sharing collaborative mode with reduced investments on IT infrastructure on their part.

Supplier collaboration supports the exchange and visualization of purchase orders, release schedules, kanban signals, advanced shipment notifications, different plans and inventory on the web. Suppliers can update the client's MRP with real time accurate commitments. Customer collaboration supports adaptive Vendor Managed Inventory (called responsive replenishment) focusing on data quality, separation of turn and promotional demand, and optimal shipment creation.

Higher capital productivity
This improved supply chain efficiency can impact margins in more ways than one-to begin with it significantly lowers unit costs and ensures higher capital productivity. The extended visibility created using the internet will also lower cost of ownership. More importantly, especially considering the current economic slowdown, the payback period is significantly lower due to lesser investments required to adopt SAP SNC and the greater savings realized through inventory optimization and accurate forecasts.
For the business, this means reduced stock levels, shorter time-to-market, lower costs and higher efficiency. This, in turn, translates into greater customer satisfaction, improved scope for customer retention, and thereby more revenues for the company.