Tuesday, October 2, 2012

Data Mining and Supply Chains: How SAP BI Products keep the beer flowing!

Beer is serious business. The 2011 sales for beer in the US were almost $100 billion. Unlike the supply chains for FMCG, technology or automobile products, beer has a relatively simple supply chain. What makes beer different from the other products is its highly seasonal nature. Beer sells far more in summer and December than in other months. This makes its prediction of its demand difficult. What further complicates this is the fact that one never knows which beer the consumer may start consuming more. Technology or automobile products have tags for individual products and sales patterns can be tracked and appropriate changes can be made relatively easily in the production. Beer industry faces two obstacles in doing this – time lag and PoS data.
Time-lag: Since a beer bottle starts in a farm, it takes a lot of time to adjust the production in response to a change in demand.
PoS data: The PoS data for beer is not tracked in detail and not easily sharable across the supply network as compared to other industries like FMCG or tech products.

What was interesting for me was to know how the industry has overcome the PoS data obstacle. However unnatural it may seem on the face of it, there is a strong relation between SAP Business Tool providers and Brewery companies. Large brewery companies have been tracking where their cases of beer are going using SAP products. Another facet of this relationship was that SAP solutions providers are innovating everyday to come up with sharper applications customized for the beer industry.

Consider this success story involving the Molson Coors Brewing Company (MillerCoors in the US). Molson Coors used to track their global sales data using SAP NetWeaver Business Warehouse. However, the use of this tool was esoteric. They had to employ a full-time team of 21 people who were adept at using the software and generating meaningful reports out of it. These reports were then used by different managerial levels mainly as guidance for their next steps – or strategy. 

However, one major problem that the company faced was that these reports were static and got old too soon. Thus, you couldn’t act in June on the basis of the report in May and the report for June (provided by the over-worked 21 member team) would be available only by July! SAP provided them with a new tool[i] which was: easy to use, uniform (throughout the supply chain) and gave instantaneous reports. The key take away was how the PoS data thus turned from simple data into information – information on which strategic decisions could be taken. Thus, Molson Coors is able to better track the consumer patterns, make better distribution decisions (according to geographic regions, demand etc.) and ultimately better and quicker production decisions.

Do you think low-tech industries, such as brewing, need such sophisticated IT tools? What other technologies do you think would hold the key to track/optimize the supply chain in the near future? What factors do you think would be a hindrance for industries to adapt to these technologies?

[i] Albright, Evan. “Seasonal Sales and Supply Chain Successes at Molson Coors”. Web. Accessed 9/30.

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