SCM Philosophy: Supply Chain Integration

Fundamental 2: SCM Philosophy

Supply Chain Integration.

There are no doubts that the concept of integration is the core of SCM philosophy Christopher (1992). Firstly, in order to understand this concept, every material or service which flows along the chain until the final consumer, pass through a complex process between companies and people. A weakness in any of the steps can compromise the chain as a whole. Sweeney (2002) claimed that the phrase “supply chain” is used to indicate that the chain is only as strong as its weakest links. As is noticeable in the figure above, the product flows from the raw material, through every single part until the customer, and the money flows back until the raw material supplier, in other words this means

The challenge in managing this flow consists in delivering the final product at the lowest cost, in the right time and right quality. The money flow comes from a final customer and goes backwards until the source of the raw material.

Different from the other two, the information flow is bidirectional, which makes it even more complicated, once it influences the other two flows. Christopher (2005) noted that an effective exchange of information is directly linked to optimization of the costumer service as a whole, in order to combine customer demand with inventory levels. In other words, increasing the product’s availability and reducing the inventory.

In order to manage the material flow, Ambev has a recognized Environmental Management System (SGA). It establishes the goals and monitors to develop an eco-efficiencent manufacturing system, in order to mitigate the environment impact as well as increase the productivity. The basis of this system is a continuously well-trained team.

With the aim of the “eco-efficiency” philosophy was created an Engineering Center (CENG). It is specialised in numerous stages of beverage production and the supremacy of the new technologies. The purpose of the center is (Ambev, 2013):

• Improve the manufacturing

Within this scope they introduced SAS (Supply Chain Intelligence) for the demand-driven forecasting, inventory optimization, service and Supplier Intelligence, so that the time of demand forecast generation was reduced from 30 to 4 hours (ComputerWorld, February 2004). Tiago Rino (Demand Planning Specialist at AmBev) outlined that “In short, there is no point to produce too much or too little, otherwise the result is too much capital invested in inventory or a shortage of products in stores”.

SAS generates weekly sales goals, production levels and distribution plans by combining data from forward-looking analytics and their current SCM system. This allowed them to review production and distribution and fully use their logistics chain. (SAS, 2010). This resulted in the 50% increase in turnover, cut costs and reduced the overall production cycle from 14 to 8 days (Richardson, 2013).

Fundamental 4: Relationship Management

Supply Chain