Chapter 9
THE SUPPLY CHAIN FUNCTION
9.1 THE FOUNDATIONS OF THE SUPPLY CHAIN AND
LOGISTICS PERFORMANCE PLAN
Supply chain management emerged recently from internal issues
related to the evolution of the Altrad Group. Optimizing and
reconfiguring the industrial tool are necessarily accompanied
by working on the improvement of flows both with the client
and between the various entities of the Group (see above).
The implementation of ad hoc metrics, for example the service
rate, is a shared ambition of supply chain management and the
Industrial management which work towards a common goal:
the client and the Group.
The scope of “supply chain and logistics” is consistent with
what is most commonly accepted in industry: supply chain
management is the management of the flow of information,
products and labour to meet the needs of the client, from the
control of raw materials to the delivery of products and services
in a timely way and under agreed conditions. This is different
from the “supply chain” function whose definition is variable
in different industrial groups.
The role of the supply chain and logistics within the Group
is threefold:
• to optimize the costs of transport and logistics;
538
ALTRAD GROUP
• to ensure optimal stock levels throughout the chain;
• to ensure quality delivery flows to the Group’s customers in
more than 100 countries as well as inter-­subsidiary flows.
Supply chain and logistics issues are steered by a transverse
progress unit that relies on the subsidiaries and the work of
other progress units to identify and implement synergies. It is
based, when necessary, on a specific subsidiary that is able to
manage workflows operationally.
By its nature, the supply chain function has an interface with:
• the Purchasing Department: supplies, etc.;
• Industrial department: industrial and logistics schema, industrial planning, etc.
• sales and marketing departments: forecasts, offers of service
to win market share, etc.;
• finance department: stock, etc.;
• logistics and transport.
Like the Industrial Department, it should federate all the players
to align themselves with the Group’s strategy. However, while
the Industrial Department can work to develop a site independently, once the Group’s strategy is well-­oriented, the Supply Chain Department can only work globally to ensure that
information flows and physical flows are effective and efficient.
9.2 SUPPLY CHAIN AND LOGISTICS IN ALTRAD
Management of the supply chain and logistics has always been
poor in the Group:
• no supply chain function as such in subsidiaries;
• subsidiaries having cultures of business development* and
production, as evidenced by the monthly reports that say
very little about logistics. This theme is also addressed in
the budget sessions;
THE SUPPLY CHAIN FUNCTION
539
• because of development through external growth and subsidiarity, which is a strength of the Group, global optimization has not been conducted in this field and processes are
heterogeneous and little formalized.
The current context of the Altrad Group makes the supply
chain more critical for several reasons:
• the strong development of the service sector (rental with or
without services) for which the logistics activity is one of the
“hearts of the business”;
• the development of flows between subsidiaries (between
production companies and service companies, or between
production sites located in low-­cost countries and trading
or assembly sites);
• the geographical expansion of the Group;
• the pressure from customers wanting to minimize their stock.
9.3 THE MAJOR TASKS OF THE SUPPLY CHAIN DEPARTMENT
The Supply Chain Department has initiated mapping of avenues for improvement and the stakes involved. A supply chain
and logistics dashboard is very difficult to construct taking into
account the heterogeneity of the means and the existing situation, an analysis of which, highlights a number of key points
listed below:
• Logistics is a very important issue in service activities: it costs
30 to 40 million euros with a hundred depots especially in
France, Belgium, Spain and the United Kingdom.
• The “production + sales” component is mainly concerned
with optimization and rationalization of transport: this represents the main issue (transport costs of around 25 million
euros and physical logistics costs of around 6 million euros).
• The service rate, a key metric of the supply chain, is measured
only in very few affiliates. When it is, this rate is around
540
ALTRAD GROUP
70%, which is a poor performance. In certain subsidiaries,
commercial staff stress that Altrad’s delivery times are too
long and may lose sales.
• Stocks “production + sales” still give around seventy days of
coverage, more in the concrete mixer/wheelbarrow activities.
All things being equal, this can be reduced, (even though the
concrete mixer/wheelbarrow projects and purchases in China
increase it automatically).
• The total absence of forecasts, even in summary, is highly
punitive for service, stock levels and logistics costs.
• Logistical conditions with suppliers (internal and external)
and the associated processes are incomplete, leading to stock-­
outs, overstocking, etc.
• As regards physical logistics, few subsidiaries seem to have
a dashboard and a progress plan; over and above unit costs,
work on organizational levers would be beneficial (monitoring loading ratios, logistics productivity, choice of make or
buy, etc.). First approaches show important stakes in connection with operations and trade.
• The way the Group has developed historically and the lack
of integrated logistics and manufacturing have led to a proliferation of sites from which products are delivered (more
than forty factories and platforms, not counting the service
sector).
• Choices of transport purchasing strategies (essentially small
carriers, without a contract, etc.) need to be studied in depth:
more than one hundred suppliers costing 9 million euros
for Altrad Logistique and more than four hundred for the
whole Group. The organization of the logistics of factories
and warehouses is largely internalized: the cost is looked at
on a case by case basis, but this does not allow good variability of costs according to activity levels.
• Progress points appear to exist to ensure the macro capability
of the industrial supply chain to meet the needs in the long
term; for example, checking the consistency of production
THE SUPPLY CHAIN FUNCTION
541
capacity with internal demand, looking at the security of
supplies (e.g. make an “emergency plan” concerning Altrad
Italy’s concrete mixer provider).
9.4 THE STAKES FOR THE ALTRAD GROUP
Long-­term gains that can be identified today are as follows:
• productivity gains of approximately 3% annually on logistics
(providing there are no changes in the transport market,
volume effects, etc…). Organizational levers remain a priority (control of truck-filling ratio, reduction of deliveries by
courier service, etc.);
• gains in logistics service through specific projects (synergies,
projects in large affiliates…);
• gains in the purchase of transport and logistics and a better
variability of costs;
• gaining/maintaining market share through better service for
those activities for which it is an issue (fewer delays, over
85% minimum service rate);
• a reduction of approximately ten days of stock cover (not
counting the effect of the mix*, industrial projects and relocations and changes in stock policy);
• gains related to the reduction in CAPEX* (less rental stock
and so fewer movements) that have been requested for depots;
• the correct functioning of the supply chain in relation to
several factories that currently have a negative influence on
costs compared with defined industrial strategy (e.g. Tunisia),
stocks, the organization and productivity of factories and the
ability to deliver fully and on time.