Schneider Electric’s Supply Chain Design Journey

Over the past few years, Schneider Electric has been working to simplify its supply chain. This French multinational public company was elected to own the world’s best supply chain by a leading analytical company. Corporate Knights too recognized this company as the most sustainable company in its peer group and 7^vol overall the most sustainable company. Schneider Electric’s supply chain operations are of great interest to other practitioners. One of the primary tools used by a supply chain team is supply chain design.

Schneider Electric provides products and services related to energy management and industrial and building automation. Energy management solutions are products that utilities use to produce energy and data centers use to consume it. They also produce industrial automation solutions that allow factories to monitor and control production. Building automation is similar to industrial automation, except that instead of controlling a factory, systems control building entry, energy consumption, and lighting.

The company has a complex global supply chain. Schneider Electric employs 150,000 people and generated €35.9 billion in revenues in fiscal year 2023. Schneider Electric produces approximately 300,000 finished products. The supply chain includes approximately 190 factories and 100 distribution centers. These plants produce and ship 150,000 order lines per day.

Schneider Electric’s journey with supply chain design

Lee Botham is global director of network modeling and design at Schneider Electric. Like many companies, the French multinational corporation produces a significant amount of its products in low-cost countries. “But since the pandemic,” Mr Botham explained, “there is a big need to boost immunity. So we’ve seen a greater focus on simplifying our supply chain and bringing it closer to the region that requires it. We don’t want to be so dependent on long supply chains that can be easily interrupted.” One of the key tools they use to achieve this goal is Coupa’s supply chain design solution.

In 2012 and 2013, they began using external consultants to model their Asian supply chain. By 2014, the company purchased Coupa, built an internal modeling team, and created data extraction and cleansing procedures. It was then that the company hired Mr Botham. Currently, the team employs seven analysts, although they will employ external consultants for specific projects.

For the first few years, the company created regional models to determine how to maintain or improve customer service levels at lower costs. Initially, regions generating lower income were modeled. As modelers gained skills and projects achieved savings, the company modeled its most important regions – Europe and North America.

As Schneider Electric grew with its network design tool, it also discovered it could realize savings by consolidating supplies. Instead of shipping goods directly from a factory or distribution center to another region, they shipped them to a port hub where shipments from the region could be consolidated, allowing them to build fuller ocean containers and ship less cargo.

Collaboration is a key skill in network design

Mr Botham pointed out that not all projects deliver results. For example, at one point they modeled Brazil and included customs and tax considerations in their analysis of total transportation costs. However, given the political climate in Brazil, these tariffs could easily change within a few years, so it was decided not to implement the recommendations.

To avoid generating analysis that hasn’t been implemented, “we’re trying to get the regions involved right away to engage in the modeling process,” Botham said. If the team simply delivers something to the regional directors and they have no input, they question the results. “We started out as just modellers, did the research and handed it over. That’s not what we do anymore.”

Mr Botham wants to make sure the promised savings are realized. “I would never want anyone to trust 100% that what comes out of the model can be put into practice.” They only promise at most 50% of the savings shown in the analysis. So if the model shows that $10 million can be saved by closing some warehouses and moving others, the team will only pledge $5 million.

The top logistics, finance or business unit directors are involved in creating the business case. However, projects require a lot of cooperation. Projects include local finance, warehousing and transportation managers who help collect data on rents, transportation costs, customs duties and other marginal costs.

Resilience and sustainability are increasingly important

Finance continues to be a key stakeholder. However, achieving savings while maintaining service levels is no longer the “driver” it once was. Now we look at resilience, we look at CO2, we look at simplification,” Mr Botham explained. This involves creating global models.

When it comes to resilience, the goal is to reduce order fulfillment times and improve service levels. As Schneider Electric moves factories closer to the point of consumption, greenhouse gas emissions are reduced. While this increases costs, increasing the number of locations where safety stocks are held has also improved resilience. Interestingly, inventory analysis often shows that for slow-moving products, centralizing these SKUs in a central location increases reliability despite increased lead times.

Supply chain design can be a valuable tool in supporting sustainable development. Carbon reduction and transportation savings usually go hand in hand, unless we ship by air. Mr Botham pointed out that they are involved in reverse logistics and circular economy projects, particularly in Europe and China. “There are a lot of laws in Europe; we cannot simply wash our hands of products immediately after selling them. We need to be engaged in the end-of-life process.”