With growing demand for Beiersdorf's skincare and beauty products in the Middle East, the company's supply chain director Didier Jourdan highlights the challenges of ensuring a constant flow of products in the marketplace.
With Beiersdorf's market share increasing in the Middle East, what supply chain challenges are being faced?
As the trademark owner of the popular skincare and beauty brand Nivea, it's vitally important for Beiersdorf Middle East to ensure the constant availability of our products throughout the region. This is the task of our supply chain, which is designed to meet the highest standards of efficiency, from purchasing and production, all the way through to final delivery.
With a flourishing market in the Middle East, there is always the question of how much stock to order during the replenishment process. Such demand uncertainties arise when it's unclear how many people will purchase your product, which leads to problems of overstocking, understocking and missed sales opportunities. This flags the importance of predicting demand as accurately as possible.
How can companies such as Beiersdorf combat these issues?
The first stage is determining how to accurately predict the level of demand for our products in the Middle East. Beiersdorf has invested in a sales forecasting tool from the technology company SAP, which helps to reduce demand uncertainties.
In addition, we keep ourselves updated on market activities in the region, from competition in the skincare sector to civil disputes within the Middle East, because this impacts demand and the information should be transferred as quickly as possible to suppliers and manufacturers. It's about how we communicate, how we collaborate and how we bring velocity in the information flow.
What is the impact of inadequate planning?
The results of inefficient planning can really harm a company's operations. For example, an expiry date is mandatory for products in the skincare and beauty sector. This information is printed on the products, so it's important to make sure those goods are stocked on shelves as quickly as possible from a consumer point of view.
Of course, if the product is not sold before the expiry date, it must be taken off the shelves, which means losses for the company. It's a similar situation with products that have huge demand, because if a retailer is out of stock, the product cannot be sold and once again there is a direct impact on profitability.
Is it better to predict demand on a country-by-country basis to ensure maximum efficiency?
On the contrary, by forecasting on a regional basis, it's possible to consolidate your statistics and reduce the potential of error. The reason we actually forecast for the Middle East rather than individual countries is because the information produced is much better and this can be delivered to our production centre and supply network.
What are your recommendations in terms of purchasing relevant software solutions?
A number of systems are currently available in the marketplace. SAP is very good at providing a complete solution, although the individual parts of the software are average when compared to specialised solutions. However, despite the availability of better software for demand planning and forecasting, companies still need to integrate them into something like a warehouse management system.
On a global level, SAP gives a very good output and remains a strategic choice, rather than an economical choice. It will give you standard processes around the world when you have a global operation. At least then you manage the processes globally because they are standard, rather than every single company operating differently, which can be problematic.
How closely can you measure demand for each product?
It depends on the measure. We measure at the SKU level; the level of a single product. We even consider there to be a difference in the product when we change the label - we consider that to be two products. This way, we can predict demand at a very specific level for each product. We believe an 85% accuracy rate is a benchmark, meaning it is top of the class.
In our group we are looking at 65%+ as the objective of this year for the company's global operations, knowing that in the Middle East region in particular we are targeting much lower than that. This is because we are just implementing the SAP system this year, so we need to build up a proper history which is the basis for a true statistical forecast. Over time we will be able to improve success rate of our forecasts.