The importance of the Supply Chain function, walking the line between forecasts and Sales & Operations Management04 March 2021
A conversation with Stefano Ferrazzi, Head of Supply Chain & S&OP
Spotting problems earlier and therefore having more time to address them: this is how Supply Chain is an IBSA function with both eyes trained on the future. Every day, the supply chain managers look ahead to anticipate what will happen over the next 12/18 months, trying to coordinate all logistics, procurement and deliveries so those who need the materials and commodities and those who distribute or deliver the product are always well stocked. And all this not in real time, but it in a fairly remote future that is not always easy to predict. Heading supply chain management and explaining how it all works is Stefano Ferrazzi, Head of Supply Chain & S&OP at IBSA.
What is Supply Chain and what does it do?
The Supply Chain function can be considered a body with three souls: Procurement, Logistics, Sales & Operations. Their common denominator is a focus on the future. The innovation – at least for IBSA - is S&OP, Supply Chain’s relatively new soul, whose purpose is to spot problems earlier and therefore gain more time to address them: this is how Supply Chain has both eyes trained on the future. If we were to use a metaphor, it would be a little bit like an airplane that hits turbulence and stays the course to reach its final destination. Practically speaking, the objective is to set guidelines for the planning of operations, in order to balance out the frenzy of markets with production capacity of the highest quality. It is a business function not to be confused with the more commonly known production planning, which is the organisation of production lines with a time horizon of one to three months. Instead, we are forced to plan 12/18 months ahead. So we are not merely gathering data, but interpreting it on a forward-looking basis, because we use the data for long-term planning. It is our job to deliver this bird’s eye view. In fact, we are the link between two different worlds (Sales & Operations) that excel in their respective fields. To do this, we must always keep a close eye on the future, staying up in the air despite the turbulence.
How do you manage it all based on data that is, at the end of the day, “forecasts”?
Let’s take the current moment as an example. We are in a truly delicate time in terms of exogenous and endogenous situations. Efforts have naturally multiplied and Supply Chain has been called in to lend a hand. We have managed it thanks to our ability to spread information and, above all, through continuous collaboration with all business functions. To be able to plan and manage highly complex situations, in addition to having learned from those who’ve been around much longer than we have, we recognise that listening to everyone’s suggestions and needs is crucial.
In addition to planning and meeting needs, what does the function do?
Another key aspect of Supply Chain is managing procurement and suppliers. Often, procurement is seen as a cost centre, whereas it can be a profit centre. We need to move past the notion of this function being responsible for “haggling”, i.e., simply bargaining. Procurement negotiates, and that means analysing every aspect of a supply, not just the financial terms. And this is fundamental at a company like IBSA, which embraces quality and respect for people throughout the organisation. In a nutshell, a good buyer must interact with suppliers as if they were his best customers. It is another area in which cooperation between the various functions is vital. In industry jargon, we talk about basing the IBSA/supplier relationship on TCO (total cost of ownership). Specifically to support these decisions we have rolled out a portal where every supplier can upload their information (products, certification, etc.), which significantly shortens the amount of time spent scouting. Additionally, we are working with a third party to verify the sustainability of our suppliers.
We haven’t mentioned logistics, but in the end, Supply Chain must ensure that our products are always available, in any circumstances. In pharmaceutical terms, it’s called ‘guaranteeing the continuity of care’, but for us it is merely our mission. And it is not always easy to ensure that everything you need for production comes in on one end and everything people need for their care goes out on the other. This is also Supply Chain’s job, although it might seem trite and reductive for me to say it.
What is the next challenge that awaits Supply Chain?
We will soon open a “single” warehouse in the Canton of Ticino (Switzerland), which will replace our structures scattered throughout the area. Pending completion of the Cosmos project, we have created a modern, central, indoor warehouse spanning over 30,000 cubic metres to serve as our hub for in-house distribution. We are waiting for the final clearance before the hub becomes operational. This is another of Supply Chain’s excellent achievements, made possible by the cooperation of everyone, without which the plane would not even take off.