The new IDC MarketScape: Worldwide Supply Chain Planning for Process Industries 2024 Vendor Assessment (doc # US51273023, October 2024) calls out the need for better supply chain planning in process industries. The report encourages process manufacturers to be cognizant of the limits of tactical solutions and to choose business partners with strategic focus and expertise in their market segment.
Find out what IDC MarketScape recommends for supply chain leaders working in process industries in the latest report. Read the IDC MarketScape: Worldwide Supply Chain Planning for Process Industries 2024.
Unique challenges in supply chain planning for process manufacturing
Chief Supply Chain Officers across all industries face increasing constraints and complexities. They’re dealing with variable lead times, supplier constraints, and other challenges around logistics, labor, regulations, and geopolitics.
But process industries have some unique characteristics that make supply chain design and planning a bit different.
Process industries, including chemicals, pulp and paper, metals, food and beverage, and consumer goods, are often very asset-intensive, complex, and material-constrained. These companies need planning, processes, and recordkeeping systems that can keep up with requirements, such as a reverse bill of materials, material substitution, effectivity dates, and byproducts. Shipping and transportation delays significantly impact process industries due to the large volumes involved. They’re also among the first group of companies most likely to be affected by raw material shortages.
Some examples from the last few years include Sriracha and citric acid shortages. Process manufacturers often have strict, specialized quality standards or have to deal with regulatory bodies, so getting alternative suppliers up to speed is not always easy.
Improvements in supply chain planning are necessary to improve forecasting, production schedules, and optimize inventory, but even that might not be enough.
Important considerations in supply chain planning for process industries
Given how asset-intensive process industries are, it’s understandable that companies would seek software solutions that can reduce costs and improve margins. The lack of a solution that models the end-to-end supply chain of these companies contributes to fragmentation and communication breakdowns, which can result in costly inefficiencies, and reduce the speed at which organizations can respond when a disruption occurs.
Further, as companies have more access to more data than ever before, fragmented systems mean business leaders aren’t always sure whether they’re looking at the most up-to-date data. This can result in leaders misinterpreting data and making poor decisions.
Process manufacturers need end-to-end visibility of their entire supply chain along with the ability to ask business questions through scenarios. Ideally, that visibility should extend into the office of the CFO by identifying the financial impact of supply chain decisions. This is especially critical when facing rising input costs, trade uncertainties, and assessing the impact of potential government policy changes.
Benefits of end-to-end supply chain modeling for process industries
It’s not enough for process manufacturers to merely gain visibility of their supply chains. They also need to be able to run scenarios to anticipate and adapt to challenges down the road. This goes beyond supply chain planning to the design of the supply chain itself.
As companies face the impacts of climate change, trade uncertainties, and more, they may have to change suppliers, shift production hubs, create more contingency plans, and so on. When they can easily model these scenarios and play them out virtually before making changes in their physical supply chain, they can make better decisions. End-to-end visibility and modeling capabilities are essential when selecting supply chain design and planning software.
Considerations for process industry manufacturers when selecting a supply chain design and planning software vendor
Process industry manufacturers should take the following into account when evaluating if a supply chain software vendor is right for them:
- The ability to generate an end-to-end model that connects production and distribution, as mentioned above. This is especially important for navigating complex and specialized supply chain challenges.
- Demand forecasting capabilities to make accurate, data-driven decisions. Even better if these capabilities help classify demand to segment customers based on specific demand pattern attributes, such as organic or low glycemic-index requirements.
- Optimization capabilities to make production more efficient.
- Multi-echelon inventory management capabilities to ensure product availability while balancing working capital, and ensure safety stock targets for finished goods, WIP, and raw materials.
- Sales and operations planning (S&OP) capabilities that make it easier for more business users to make smarter, faster decisions from an organization’s “situation room” or “war room.”
- Data harmonization and connectedness to spend management, procurement, and finance operations. Manual data entry in spreadsheets is tedious and prone to error. Supply chain design and planning solutions that make data harmonization automatic and create harmony with procurement and finance operations provide time-saving efficiency improvements and make for more accurate planning.
Coupa’s vision for process manufacturing supply chain planning
Coupa has been positioned in the Leaders Category in the IDC MarketScape: Worldwide Supply Chain Planning for Process Industries 2024 Vendor Assessment.
According to the report, Coupa’s key strengths include risk-and-opportunity-based “causal” planning, a history of working with large data sets at scale and speed, and more. For process manufacturing, Coupa’s differentiators include:
- Ability to generate end-to-end models to focus on distribution and production modeling
- Demand classifications to segment customers based on demand pattern attributes
- Tools to assess patterns of production and sales to optimize production efficiency
- Optimized, multi-echelon safety stock targets at the finished good, WIP, and raw materials levels
- Ability to work in S&OP, inventory planning, or demand modeling to assess the bill of materials and source plans through multi-echelons across the supply chain
Coupa believes that changes are inevitable, and organizations must adapt to global complexities before they happen. Coupa enables the Adaptive Supply Chain, providing enterprises with the ability to predict and act on disruptions before they occur, enabling resiliency and optimizing efficiencies that deliver a margin multiplier effect across the entire supply chain network.
Learn more about Coupa for process manufacturing in the IDC MarketScape: Worldwide Supply Chain Planning for Process Industries, 2024.