Digitalizing the supply of household appliances in Turkey: Arcelik

How will Turkey's leading household appliance manufacturer adjust its supply chain to meet the high expectations of the new omnichannel customers? Digitalizing its supply chain is the path forward for Arcelik…

Arcelik is a Turkish manufacturer of household appliances, offering products and services in 145 countries across the globe through multiple brands like Arcelik, Beko, Grundig, Blomberg, Elektrabregenz, Defy and Dawlance [1]. Their global supply chain organisation is currently working on ways to follow digitalization trend with a focus to increase customer satisfaction by reducing the lead time and increasing speed at all stages of the chain [2].

Following the footsteps of developed economies, emerging countries like Turkey are currently going through a highly rapid digitalization across all levels and aspects of business. In today’s high customer convenience and expectation era, one important function that is a critical area of improvement for companies is the supply chain. According to Deloitte research, among 60 leading companies (including Arcelik) from a variety of industries in Turkey, 81% is already investing in technology for their supply chain management and that number is expected to reach 90% between 2016 and 2018 [3]. These high rates demonstrate how digitalization is something companies, regardless of their industries, cannot possibly ignore.

Digitization definitely disrupted the consumer products world; as omni-channel has almost become the norm and customers are increasingly demanding customized, fast, convenient and widely spread products and services [4]. These “omni-channel” customers have a great access to information and multiple options in terms of what and where to buy [4]. And this new consumer trend has left companies like Arcelik with the urgent need to be competitive in terms of how it serves increasing expectations of this new type of consumer, and enhancing supply chain capabilities, making it much more faster and precise is critical for accomplishing this task.

Arcelik has started reforming its approach to supply chain by creating a formal supply chain organisation around two main functions: planning and logistics. And ever since, with increased investments in technology, they have been doubling down on the efficiency, speed and cost effectiveness of each of the two functions by always assessing their level and progress based on internal and external benchmarks [2]. Most recently, they have reorganised the company and created Digital Transformation Directorate which will oversee the digitalization of supply chain project [5]. Going forward in the short term, they expect to be among the first companies in Turkey that invests extensively in the latest information technologies and software systems such as the latest versions of SAP demand planning, reporting, tracking modules as well as the applications and simulation tools that they have developed and is developing themselves. They will also continue to invest in “Automated Cargo Handling” systems between production and distribution warehouses, which enables shorter loading and handling times and thus decreasing overall shipping time [2]. These digital tools and systems will help them simplify their supply chain processes and allow them to create a faster and more flexible supply chain.

In the more medium to long term, in line with the Industry 4.0 movement, they will increasingly shift their plant investments towards smart factories/production facilities [5]. Also in order to enhance quantitative and data analytics capabilities, they will invest in developing engineering skills of their employees. The planned technical development will focus on simulations, demand forecast modelling, network optimization, data analytics, big data and machine learning; and it will be supported by the recently launched internal Supply Chain Academy program [2] [5]. By partnering with several consulting and educational firms for this program, they aim to boost digital progress with internal capabilities and at the same time increase both employee satisfaction.

Over time, I believe they will need to complement the effective and technology driven supply chain organisation with appropriate KPIs to track progress and ensure continued development and increased customer satisfaction. The most closely monitored of these KPIS should measure on-time and complete delivery to customer and their local and international inventory levels and costs. Furthermore, since the ability to forecast sales is highly significant for the effectiveness of supply chain, they should also make sure they have necessary checks and metrics for the fluctuations in demand and success rate in demand prediction.

In the future, as Arcelik digitalizes its supply chain more and more, I am unsure whether a point where the entire chain is fully digitalized, ever comes. And if it does, what would its implications be for the overall organisation and overarching goal of increased customer satisfaction.  Another point that in my opinion will become critical is how they think about unifying their supply chain into a global one and how digitalization can help them achieve that goal despite the varying customer preferences and demographics as well as different brand offerings in Arcelik’s different markets.

 

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Footnotes

[1] Arcelik, “Corporate Overview,”http://www.arcelikas.com/page/72/Corporate_Overview”, accessed November 2017.

[2] Prof. Dr. Murat Erdal, “Tedarik Zinciri Dönüşümü için Mühendislik Becerilerini Destekliyoruz,” Satinalma Dergisi, October 31, 2017, [http://www.satinalmadergisi.com/2017/10/31/11813/], accessed November 2017.

[3] Deloitte, GfK “Turkiye’deki dijital degisime CEO bakisi”, 2016. https://www2.deloitte.com/content/dam/Deloitte/tr/Documents/technology-media-telecommunications/turkiyedeki-dijital-degisime-CEO-bakisi.pdf

[4] Alicke, K., D. Rexhausen, and A. Seyfert, “Supply Chain 4.0 in consumer goods,” McKinsey & Company (April 2017), HBS, https://hbs.instructure.com/courses/3725/files/folder/Case%20Related/TOM%20Challenge%202017/Digitalization%20Readings?preview=247349, accessed November 2017

[5] Arcelik, 2016 Annual Report, p. 36, 62,93,94,98, [http://www.arcelikas.com/UserFiles/file/Arcelik%20FaaliyetRaporu16_14_3_17.pdf], accessed November 2017.

 

 

 

 

 

 

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1 thought on “Digitalizing the supply of household appliances in Turkey: Arcelik

  1. I agree that Arcelik needs to think about what level of digitization investment is appropriate for its goals of overall customer satisfaction and global efficiencies. Their customers want their products in stock and delivered as quickly as possible across their entire global portfolio. Assuming their initial investments achieve these goals in their primary market, Arcelik needs to think about weighing the (likely) marginal returns of increased digitization investments against the time and money saved in their secondary markets.

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