Improving the Supply Chain

Source from:  tobaccojournal.com 05/10/2004

The new web technologies in particular have favoured the development of innovative logistics concepts. Supply chain management holds great potential for manufacturers, suppliers and consumers alike, leading to enhanced cost-efficiency. Logistics solutions which are based on the use of information and communication technologies are getting more and more popular. Logistics experts agree that supply chain management (SCM) has become the driver of business excellence in their field. SCM solutions may help companies cut costs considerably by offering often significant manufacturing rationalisation potentials, merely by the modification of workflows and processes; on the customer's side these systems optimise the service. There are different fields where using an SCM solution makes sense. As a co-operate logistics concept, it may enhance the co-operation between a manufacturing company and its supplier. SCM tools, however, are also useful in the internal logistics processes of multinational manufacturing companies which service diverse markets from more than one production site. Both areas of use of supply chain management solutions have already been employed in the cigarette industry. On the co-operative logistics side, the SCM project initiated two years ago by Austrian cigarette paper manufacturer Trierenberg and the world's leading cigarette manufacturer Philip Morris was so successful that it was even awarded the Innovation Manager Award 2002. An analysis of the supply chain between Trierenberg and Philip Morris had shown for example that 60 per cent of orders were changed at least once, although demand was comparatively stable and in many cases these changes were not necessary. A joint project team found this and other aspects holding cost-saving potential; consequently, an IT infrastructure was implemented. The customer portal was set up for joint sourcing planning works as a so-called vendor managed inventory, meaning that the supplier administers the inventory for the manufacturer and takes care that the customer's stocks do not exceed or fall below previously determined amounts. Quality control data and other data also enter the platform directly from the paper-making machine. All pre-defined targets are compared regularly with actual figures. If deviations are likely, the persons in charge are automatically contacted by e-mail, even before deviations actually occur. Many advantages The advantages of the new system are obvious on both sides of the supply chain. Trierenberg was able to reduce its administrative work, while Philip Morris reduced storage and logistics costs and receives faster and more qualified information about the flow of production. The solution was introduced in Philip Morris' operation in Bergen-op-Zoom in the Netherlands in spring 2003 and has been rolled out to other production sites since then. Mutual confidence and openness were the precondition for this project, just as much as technically consolidated data, which enable e-business in the first place. By facilitating processes, e-business helps complex and heterogeneous companies become leaner and more transparent, a factor that is also important with regard to internal processes. For the major international cigarette manufacturers, manufacturing rationalisation, which is leading to markets being serviced from more than one location, is increasing the challenge of global planning and means that the ability to make flexible sourcing decisions is becoming ever more vital. British American Tobacco, which manages a large number of world-wide supply chain networks from its Southampton facility in the UK, embarked on a value chain initiative using i2 solutions to increase costumer service, support global planning and optimise inventories and lead times. Recently, Philip Morris International, based in Lausanne, Switzerland, decided in favour of an SAP solution. In this special feature, TJI takes a look at how PMI introduced this tool and at the challenges and opportunities involved. To show a completely different, much broader approach to the improvement of the supply chain, this feature will also investigate a new programme initiated by one of the world's largest independent tobacco merchants, Universal Leaf. Enditem