Pirelli is in the midst of a virtual transformation. This transformation aims to use knowledge, virtual ecosystems, and artificial intelligence for knowledge-based decision-making. In terms of business operations, it seeks to offer a higher price to broker consumers by offering its sales reps more actionable insights into what brokers are most likely. to order. Strengthening the sales procedure required a more physically powerful built-in sales plan procedure.
One of the key leaders in this transformation is Pier Paolo Tamma. Sr. Tamma is Pirelli’s Chief Digital Officer and oversees Pirelli’s virtual branch at the organization level. The virtual branch includes IT, big data analytics, artificial intelligence and digitalization program.
Pirelli (PIRC. MI) is a tyre customer company based in Milan, Italy. Pirelli achieved a turnover of around 6,650 million euros in 2023. This company focuses on the highest value-added segment of the market: it manufactures high-end and prestigious tires. car brands such as BMW, Audi, Mercedes, JLR, Lamborghini, Ferrari, Maserati, Aston Martin, and McLaren. In the Prestige tire segment, the company has a market share of more than 50% in the OEM channel.
This is a complex source chain. Pirelli designs an express tyre for a specific model, and even an express edition of the model, for a luxury brand. For example, Tamma explained, “for the BMW X5 model we have express adapted products ranging from 19 to 22-inch rim sizes. “Each of these diversifications constitutes a separate stock control unit. On the contrary, most of its competitors commercially offer commercially available tires that can be used in many models and brands. Consequently, Pirelli will offer a much higher number of references than its competition.
Tires installed on new cars generate additional demand. On average, these cars will upgrade the original tire with a new one after 3 or 4 years. The secondary market represents around 75% of Pirelli’s revenue.
Pirelli’s challenge is determining how many sets will need to be made and where replacement demand will come from. Demand forecasting is done automatically in collaboration with OEM customers. Two or three years before the car hits the market, Pirelli will work with the OEM to design the model’s tire. In many cases, automakers will also make percentages of their projections for how many models they expect to sell and how much they will sell in regions around the world.
These forecasts provide a starting point for the creation of production and logistics plans to cater to the OEM market. Replacement demand occurs 3 to 4 years later, followed by a second wave approximately 3 years later. Therefore, their built-in business planning procedure needed to create point-of-consumption SKU forecasts over a 10- to 12-year planning horizon.
Virtual transformations start with a vision of how the company can best serve its consumers. In this case, the consumers were resellers. Pirelli needed to avoid having to go to an army of representatives who visited dealers’ sites, showed them large catalogues and told them: “You can buy this or this or that”.
They wanted to move to a consultative sales technique where a representative could simply show the broker their exact forecast of what that broker would want to purchase to meet replacement demand. “This is a whole new way of selling,” Tamma said. Rethinking the sales process required the company to reconsider “how we plan and design tires. “
Pirelli’s virtual transformation challenge is to use a new virtual platform that can scale to meet its complex process of drawing up embedded business plans. Implement a source chain building plan solution that can be scaled to solve a challenge of this magnitude (something that is still simple, and good luck is far from guaranteed).
Supply chain projects depend on information. On the call-for-plan side, in some cases, carmakers have given Pirelli visibility of applications at the intermediary level. In some cases, the company had to acquire knowledge of the market. Pirelli also had forecasts based on feedback from sales representatives. This knowledge had to be cleansed, combined, analyzed, and held in one place.
Then it was necessary to make the request for knowledge to reach the application of source development plans. With 18 production plants in 12 countries and a sales presence in more than 160 countries, Pirelli wanted to create a sense of how factories could meet needs. Not all factories can manufacture all SKUs. This led to a huge combinatorial challenge in which the source planning solution created a scheduled assembly call and at the same time minimized production and transportation costs, as well as inventories of finished goods and raw curtains, and at the same time took into account greenhouse gas emissions.
In the end, Pirelli made the decision that o9 Solutions was the right solution. Like other PCS solutions, o9’s source chain planning solution creates a virtual dual of the source chain. But according to Tamma, o9’s graphics generation has created a deeper calling. for trends that can help complex SKUs based on call forecasts. These forecasts are then shared with the source build plans module and create scenarios for how that request can be fulfilled in the most cost-effective way. Due to its business model, Pirelli produces small quantities. This creates the desire to run many more scenarios. “So what happens if I move production of this SKU from this factory to another factory? What effect does this have on the profitability of the transaction?
The sourcing style also encompasses where the tires are stored. In some cases, tires are stored through your logistics provider, in other cases with a distributor, and in other cases with a master distributor. A number one distributor is a distributor that provides services to others. distributors. There are other forms of advertising depending on the region and the channel. “This makes our sales network very complex and full of regional particularities. All this will have to be taken into account in our long-term planning,” Mr. Tamma said under pressure.
The assignment of origin chain elaboration plans has 3 phases. Implementation began in 2020. La first phase supported the development of strategic plans, the plan covering ten years. At this level, Pirelli is interested in the expected profitability of the operation. Pirelli could simply strike a low-margin deal with the OEM to get tires for new cars coming off an assembly line if there is enough demand and aftermarket margin. If the deal is profitable, this plan also designates which factories will take the lead in producing that SKU. This component of the task is complete.
In the current phase, which covers tactical planning, the SCP engine is capable of creating a continuous monthly plan spanning 18 months. These monthly plans are subtle as the real need becomes clearer.
The last phase will be completed by the end of the year. It involves the implementation of a detailed schedule for the plant.
Pirelli has also created an ROI tracking formula that will allow them to refine their models as the effects appear.
Understanding the ROI related to developing strategic plans will take several years due to the length of the plan’s development horizon. However, with two years of effects under its belt, Pirelli used the o9 platform to monitor deviations from the original plan. Without this feedback loop, it was very difficult to understand why a specific transaction was not as successful as initially expected. This tool allows them to see what has changed. Were the higher costs of the curtains raw? More dear freight?Higher garage costs?” This is an excellent commercial price for our major shareholders,” explained Mr. Tamma.
A community. Many voices. Create a free account to share your thoughts.
Our network aims to connect others through open and thoughtful conversations. We need our readers to share their perspectives and exchange concepts and facts in one space.
To do so, please comply with the posting regulations in our site’s terms of use. We summarize some of those key regulations below. In short, civilians.
Your message will be rejected if we notice that it appears to contain:
User accounts will be blocked if we become aware that users are participating in:
So how can you be a user?
Thank you for reading our Community Standards. Read the full list of publication regulations discovered in our site’s terms of use.