Why advanced supply chain segmentation is a route to profitability and competitive advantage
For manufacturers, every year brings change to the market. Change is happening faster than ever as technology trends such as IoT, virtual reality and big data are providing countless opportunities for manufacturers across the globe. Yet, the cumulative effect of new technology can be increased complexity. It will be those manufacturers who can successfully adapt to and manage this complexity that will realise greater profitability in the future. At the same time today’s manufacturing sector is a world of rapid product innovation, SKU proliferation and channel complexity; which makes aligning strategic goals a challenge. So how can manufacturers ensure their supply chain is mirroring the corporate objectives of the business? The answer is supply chain segmentation in conjunction with a best-in class Sales and Operations Planning (S&OP) or Integrated Business Planning (IBP) processes.
However, many manufacturers continue to use an outdated approach to supply chain segmentation which is more of a hindrance than a help towards their future business success. Recent research by the University of Warwick and JDA found that only eight percent of manufacturers have reached level three out of four in regards to supply chain segmentation maturity, with none of those asked reaching level four. As we move into a new age of greater complexity, manufacturers must ensure that their supply chain is operating in a way that is efficient and above all profitable - only then will they remain competitive. This is only possible when the building blocks and the initial processes are managed dynamically, through automation and predictive analytics.
Effective supply chain segmentation can underpin the advanced manufacturing capabilities promised by trends such as big data and IoT. A new approach to supply chain segmentation will help to enforce business policy from end to end, which promises to deliver greater profitability, service levels and customer loyalty. Despite the clear benefits to the supply chain, the University of Warwick and JDA study found that only 17 percent of organisations currently report a ‘business process orientation’ strategy.
Making supply chain segmentation work
Segmentation is the solution to manage the complexity of innovation, yet it seems to be a capability beyond most manufacturers. So how can manufacturers make ensure supply chain segmentation delivers profitability and competitive advantage?
1) Become more data-driven: Part of the current problem appears to be that 38 percent of manufacturers are still using a static segmentation approach, such as the basic Pareto analysis. A more worrying statistic has shown that 23 percent of manufacturers still use a ‘rule of thumb’ approach to segmentation, over any kind of data-driven methodology, whilst only 39 percent of manufacturers have a data driven segmentation approach.
2) Break down the siloes: Many manufacturers are making important day-to-day commercial prioritisation decisions based on limited criteria, due to a siloed approach to segmentation. Our research found that only 33 percent of manufacturers are utilising a single criteria to model segmentation, whilst 51 percent are just employing two. The criteria being used is often inconsistent between functions, meaning there is no end-to end strategy driving the supply chain and business decision.
3) Apply a dynamic and predictive end-to-end analytics capability: Without a predictive analytics capability, it is not possible to generate the useful information that helps to develop a strategic segmentation criteria. If the foundations are not solid, then the higher levels of the structure, including reporting, will also be on shaky ground. For example, in fast changing markets, products can rapidly accelerate through their lifecycle, during which time their profitability will be reduced. Yet only 18 percent of respondents consider past, present and future data in their planning process. It appears that more organisations are driving their supply chains forward, whilst looking in the ‘rear-view mirror, rather than looking ahead.
In an age of growing complexity, manufacturers must ensure they understand the importance of an advanced supply chain segmentation strategy. Once mastered, manufacturers will come to enjoy advanced strategic alignment in line with customer centricity, greater profitability and the ability to deliver greater performance through plan adherence. Moreover, advanced segmentation and IBP are underpinning the success criteria for launching other advanced initiatives, such as big data with confidence and commercial success.
Hans-Georg Kaltenbrunner, VP Industry Strategy for Manufacturing, EMEA at JDA
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Ultium Cells LLC/Li-Cycle: Sustainable Battery Manufacturing
Ultium Cells LLC - a joint venture between General Motors and LG Energy Solutions - has announced its latest collaboration with Li-Cycle. Joining forces the two have set ambitions to expand recycling in North America, recycling up to 100% of the scrap materials in battery cell manufacturing
What is Ultium Cells LLC?
Announcing their partnership in December 2019, General Motors (GM) and LG Energy Solutions established Ultium Cells LLC with a mission to “ensure excellence of Battery Cell Manufacturing through implementation of best practices from each company to contribute [to the] expansion of a Zero Emission propulsion on a global scale.”
Who is Li-Cycle?
Founded in 2016, Li-Cycle leverages innovative solutions to address emerging and urgent challenges around the world.
As the use of Lithium-ion rechargeable batteries in automotive, industrial energy storage, and consumer electronic applications rises, Li-Cycle believes that “the world needs improved technology and supply chain innovations to better recycle these batteries, while also meeting the rapidly growing demand for critical and scarce battery-grade materials.”
Why are Ultium Cells LLC and Li-Cycle join forces?
By joining forces to expand the recycling of scrap materials in battery cell manufacturing in North America, the new recycling process will allow Ultium Cells LLC to recycle cobalt, nickel, lithium, graphite, copper, manganese and aluminum.
“95% of these materials can be used in the production of new batteries or for adjacent industries,” says GM, who explains that the new hydrometallurgical process emits 30% less greenhouse gases (GHGs) than traditional processes, minimising the environmental impact. Use of this process will begin later in the year (2021).
"Our combined efforts with Ultium Cells will be instrumental in redirecting battery manufacturing scrap from landfills and returning a substantial amount of valuable battery-grade materials back into the battery supply chain. This partnership is a critical step forward in advancing our proven lithium-ion resource recovery technology as a more sustainable alternative to mining, " said Ajay Kochhar, President, CEO and co-founder of Li-Cycle.
"GM's zero-waste initiative aims to divert more than 90% of its manufacturing waste from landfills and incineration globally by 2025. Now, we're going to work closely with Ultium Cells and Li-Cycle to help the industry get even better use out of the materials,” added Ken Morris, Vice President of Electric and Autonomous Vehicles, GM.
Since 2013, GM has recycled or reused 100% of the battery packs it has received from customers, with most current GM EVs repaired with refurbished packs.
"We strive to make more with less waste and energy expended. This is a crucial step in improving the sustainability of our components and manufacturing processes,” concluded Thomas Gallagher, Chief Operating Officer, Ultium Cells LLC.