ASUG continues its 2022 interview series with industry- and technology-focused SAP leaders in this discussion with SVP and Head of SAP North America Digital Supply Chain, Darcy MacClaren.
This interview explores the SAP perspective on customers’ current, continuing supply chain challenges, as well as the reality of continued disruption. Darcy offers recommendations to organizations on how to best respond and adapt. This discussion preceded the SAP announcement of its plan to acquire Taulia early this year, which, SAP CFO Luka Mucic noted, “strengthens our portfolio and adds value to a point that is key to every company: financial flexibility and stability. With that, they contribute to making supply chains more resilient.”
This is an edited version of the full conversation.
Q. What have you, and what has SAP, been hearing from North America customers about supply chain, current challenges, and opportunities in North America?
A. What we’re hearing, and it’s consistent, whether it’s a large company, small company, consumer company, high-tech company—it’s all the same. And it’s that disruption is the new normal. It’s going to continue. The key to success is being agile, resilient, intelligent, and sustainable to handle the disruptions going forward.
The key area that folks are struggling with, that does vary by industry, is not having key raw materials or contract manufacturing availability. The workforce is changing; there is a lack of workforce, the retirement of the workforce. That all is changing.
The big theme is that everybody wants customers who want their products how they want it, delivered when they want it, at the quality they want it; but you have to do that in a smart, profitable, optimized, and sustainable way. With the ongoing risks, that is what everybody is struggling with.
Q. Is there anything, in the supply chains in any particular industries, that is either improving or showing signs of improvement?
A. You are seeing business models changing. The visibility of what is going on in the networks is improving. It all starts with being connected; the more connected a company is with its ecosystem—with suppliers, its customers, its contractors, its logistics service providers. The more connected they are, the better their ability to respond to a disruption, to an unknown.
Companies are working on getting connected and getting visibility. After they are connected, they want to add intelligent technologies to handle the disruption and to be fully integrated in what we call the digital thread to automate processes. That is the theme we’re seeing. Disruption is massive. You need to know about it. You need to automate it. And you need to respond. The more you can do that in an intelligent, automated way, and communicate that to all involved parties, the better off your supply chain is going to be.
Q. What are the most recent SAP solutions and approaches to resolving supply chain issues and challenges?
A. Consider the network of networks. SAP learned a tremendous amount from our acquisitions—Ariba, Fieldglass, Concur—all about how to build large, scalable, secure networks. So when we look at these networks—and we created new ones ourselves, with our Logistics Business Network (LBN) and our Intelligent Asset Network (IAN)—we realized a couple of key elements. First, the networks needed to be open. So in our Logistics Network, we’ve made it open, which makes it easy to connect to other networks.
One of the most interesting technologies coming out is SAP moving to one network. It’s the idea that, when you join our network, you’ll have access to all these other networks as well, because we’re bringing them all together in a common user interface. It will be secured, it will be scalable. It will encourage collaboration, whether it’s collaborating with your product design people, knowing it’s secured, or it’s your logistics service providers. Not only can you learn how the assets are performing in your organization, [but also,] you get the benefit of learning how all these assets around other organizations are performing, around one shared, common user interface across all SAP. This is huge. With the size and scalability of SAP, you can imagine how quickly these networks will build and scale. That’s number one. To digitize an organization, you need to get everything connected, and this is a way to make it easy to get connected—not point-to-point connection, but connect network-to-network.
This is a work-in-process. The idea is to build a network of networks. It is a work-in-process to have a single unified network, but it is coming fast.
Also, with intelligent technologies, we have robust, scalable applications that can come preconfigured, such as integrated business planning. It can come preconfigured for a consumer company, for instance. You can turn it on, and as long as you use best practices, you are good to go. You could get up and running really in a matter of days if you take it right out of the box. You can roll out the basics all the way across the globe and it will hold up. In addition, our intelligent technologies go across the entire platform, not just the supply chain planning tools. You can use them and embed them in your processes across the entire SAP portfolio, including supply chain. So, if you want to use machine learning or RPA or artificial intelligence, you can put that into our Business Technology Platform (BTP). From a strategic viewpoint at SAP, our BTP is right up there with SAP S/4HANA—SAP S/4HANA, BTP, and our supply chain products are considered strategic from a Board perspective and development.
Q. Is there an SAP product and technology roadmap specific to supply chain?
A. Supply chain product developers and the SAP S/4HANA development team work as one. There is a roadmap for Design to Operate, the supply chain products. Design to Operate refers to everything you do with your product, from designing it, all the planning and the scheduling, the manufacturing, the delivery of those products, and how you operate either your plant or the asset in the field.
The five pillars—Design, Plan, Manufacture, Deliver, and Operate—of Design to Operate are connected by a digital thread, so you can tell if a machine breaks down, you know the orders it affects, to check quality, to check other orders, expedite other orders and get a contract manufacturer or perhaps a contingent worker to fix it. It’s all connected and I can do this in an optimal way and communicate to all parties involved. That’s Design to Operate. Each of those pillars has a separate development plan to keep them competitive in the market. Although the real differentiation is their connection to be nimble, agile, and real time, they still have to hold up as individual solutions. You still have to have a best-in-class warehouse system, transportation system, and planning system, but the beauty is the interconnectivity. The development teams work tightly coupled under the same group, but they have their own roadmap.
[For further information, check out SAP resources, including: Digital Supply Chain Management (SCM) Software Solutions | SAP Road Map Explorer]
Q. If you were going to single out anything of importance to the customer community regarding supply chain in 2022, what would that be?
The game-changer for SAP—because it changes the perception, what people think of us—is the Manufacturing pillar. It is Industry 4.0. It is everything we are doing to automate the plant and take that automation into real-time execution. We take that and add into it all the machine learning and artificial intelligence. We’re not just back office. We’re doing all this innovation and you see it in our innovation hubs. We’re putting in so many resources and investment. The enhancements and the new technology we’re putting into the manufacturing area is the biggest growth area.
Q. If you were to articulate a top-five list of recommendations—given issues that come up for customers in supply chain, and SAP answers to resolve them—what would those recommendations be?
My number one recommendation, when companies are looking at transforming, is to start now. When is the supply chain disruption going to stop? It’s not. So you can’t wait. You’ll never be in a good position. Start your transformation now. It can be a little “t”; doesn’t have to be a great big “T,” but start walking now. Look for quick wins, high value. You need to have an overall vision of where you want to go, with the customer in mind always. You need to have your big vision, but then you need to break it down into high-value, doable projects to get momentum. Then it’s all about getting connected—how to get connected. Then, finally you need to ready the organization. If you really want to achieve that vision, you are going to need some change management. You are going to need to change metrics. Everyone has to understand the vision and why you are doing what you are doing. Finally, it’s your people, changing the organization, getting the right people, because the jobs will change once you put these technologies in.
When you talk about supply chain practitioners, if they are going to succeed, if they are going to be supply chain executives, they are going to have to embrace technology. That’s the way it’s going. A lot of them do it with their gut. But it’s too complicated. It’s too massive. It’s too fast. Those who embrace technology and do it well are going to be the leaders, both from a company perspective and from an individual practitioner perspective.