THE LETTER FROM FRANCE SUPPLY CHAIN #21 - June 2022

TICKET OF THE WEEK
By Bertrand Neyret, Global Supply Chain Champion Saint-Gobain

Information sharing is the best way to absorb crises.

In an increasingly uncertain context, the organised and secure sharing of information between customers and suppliers makes it possible to better absorb the vagaries of the market.

Transparency in the supply chain is an anti-crisis remedy. If the customer regularly shares with his supplier the volumes (but not the turnover) of the products sold, the supplier can predict better... and the customer is less likely to be out of stock. If the supplier regularly shares with its customer the state of its stock, the customer is reassured and will have a more rational buying behaviour. For example, the customer of a materials manufacturer will share information about what is sold at the point of sale. The manufacturer, on the other hand, will share the quantities in stock, and even its production/shipping schedules.

For a manufacturer, having access to more detailed forecasts by product and by geographical area, with a longer time horizon, enables him to better anticipate his production. He himself can provide more forecasts to his key suppliers.

The benefits are many: greater customer satisfaction and fewer supply disruptions. More revenue: the sales effort in the field is not restricted. Lower costs with reduced stocks: when the MAPE (1), the statistical measure of the difference between the forecast and reality, is reduced from 10% to 5%, the safety stock is mathematically divided by 2.

As the relationship remains commercial and subject to competition law, it is a question of securing and organising this sharing in the customer-supplier relationship, sometimes with recourse to a "trusted third party" and a legal framework. A customer does not necessarily want to share his turnover and a producer is not ready to communicate everything about his costs... We will therefore try to limit the sharing to the quantity/volume part.

The rules of the game also need to be clarified. The customer who shares his sales volumes may be looking for a commitment from the supplier on a minimum rate of availability on the shelf in his shops. The supplier who shares his stock levels may be looking for a commitment to a maximum minimum volume limit for each order from his customer. If, despite sharing in good faith, these indicators fall outside the commitment values, what about possible bonus-malus, beyond which gaps?

The crisis makes long-term forecasts difficult, as we have seen in the automotive subcontracting or food processing sectors. To manage these hazards, the collaborative mode can be taken further with reviews and information sharing on a wider panel of supply chain actors. This makes it possible to cross-reference information from different sources: for example, for a chocolate biscuit manufacturer, the packaging supplier will share its forecasts with the cocoa supplier or the supplier of other ingredients. Collectively the information will be more reliable, and all parties can expect to win.

This practice is more developed across the Channel, with thirds of This practice is more developed across the Channel. There are nevertheless examples in France (aeronautical markets, confectionery manufacturers, etc.), but it is sometimes necessary to overcome cultural resistance, where each party defends its own turf, and also to respond to real questions about the reliability of data or cyber security.

The recent crises, and the adversity faced by customers and suppliers, can act as a catalyst. With the common goals of improving service, optimising costs and cash flow and reducing CO2 emissions along the supply chain.

(1) Mean Absolute Percentage Error


HIGHLIGHTS
The impact of inflation on stock management

It had not been forgotten since the 1980s. And now it's back with a vengeance: it's inflation! It should flirt with 6% between now and the summer break and could continue its upward course at the beginning of the new school year, stimulated by the rise in energy, transport, cereals and more generally most food products. This new situation will not fail to affect the supply chain sector: indeed, whether it is a question of real estate or transport, annual contracts are likely to be rediscussed during the year. But another phenomenon will also have to be taken into account: the cost of stock. From a purely accounting point of view, as this is included in the calculation of the result for the year, inflation produces a gap between the fictitious and the real, which will inevitably have an impact on company tax. Similarly, in warehouses, the value of fixed stock will depreciate more quickly. This will lead companies (which will not be able to mechanically pass on the increase in the sale price of products) to speed up the rotation of goods. They will try to reduce the effect of inflation by limiting the average duration of the stock as much as possible, and thus to reduce the financial loss linked to its devaluation. In this context, we can safely predict the great return of just-in-time and a particular craze for stock level optimisation tools. It will also be an opportunity for financial departments to rediscover the strategic virtues of a well-controlled stock level.


NOT TO BE MISSED
When will your supply chain be under attack?

A major issue for your supply chain, digital risk has increased in the face of more connected and integrated structures. As a follow-up to the Supply Chain x Cybersecurity White Paper produced with Wavestone, a webinar has been organised to learn how to deal with cyber attacks.


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