jonah's scv presentation (26-may-2015)
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GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 1
Conceptual Foundations29th May, SSIA Supply Chain Management Conference
Supply Chain Visibility
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 2
Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 3
Definition and Theory is Important
“Everything is vague to a degree you do not realize until you have tried to make it precise.” Bertrand Russel
“All science is either physics or stamp-collecting.”
Ernest Rutherford
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 4
A Definition for Supply Chain Visibility
“The practice of capturing and integrating data, creating intelligence, and altering decisions based on the three cross-organizational flows in the supply chain (materials, capital, and information) along with their relevant environmental details”
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 5
What are the Prerequisites to Success with SCV?
Capture Data
Integrate Data
Create Intelligence
Interrupt Decisions
Supply Chain Visibility
Technological
CapabilitiesData
Quality
OrganizationWillingness
Prerequisites
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 6
Two Vectors for Business Impacts
Information Quality Decision Mechanics
Visibility improves business decisions by either improving the information quality feeding the decision maker (timeliness, accuracy, completeness, etc.), or by changing the mechanics of the decision making process (automating it, involving more parties, documenting how it was decided, etc.)
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 7
Example: A supply of components must arrive at an OEM by Nov 22nd (capture data); the shipment it is on is re-estimated to arrive on Nov 20th (capture data). These two data points are connected by matching unique references (integrate data). A dynamic reforecast for this shipment also projects 48 hours from shipment arrival to final delivery (integrate data). This indicates the shipment will be later than the booking target delivery date (integrate data). If this is beyond the tolerance level of the OEM, an email alert is created (create intelligence) and production planners can look for expedited delivery options or agree to change the target production plan (interrupt decisions).
An Example…
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 8
Supply Chain Visibility for Physical Flows
We must re-plan in order to run a bottleneck machine 15 days straight prior to changeover
Where are the inputs for that machine? Could Something be
delayed?
WIP Status, Inventory, Inbound
Shipments, Past yield rates, etc.
Intelligent and flexible data
modelling
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 9
Supply Chain Visibility for Financial Flows
How Much Working Capital to Borrow?
What are receivables and
forecasted payments?
Orders, Shipments, Inventory,
Chargebacks, Payments, Legal
Framework
Intelligent and flexible data
modelling
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 10
Visibility Effectiveness is Measurable: Example Scoring Criteria
Score Description0 The system has no explicit input to this
business decision. It is only “optional” in the decision process
1 The system is a required information source for the decision maker. A user must look for and find the event, and then can take actions as they want.
2 The system is a required information source for the decision maker. The system asks the user to look at the event, but does not attempt to help with further actions
3 The system offers a set of action alternatives based on the event, or
4 narrows the selection down to a few, or
5 suggests one action, and6 executes that suggestion if the human
approves, or
7 allows the human a restricted time to
veto before automatic execution, or8 executes automatically, then necessarily
informs humans, or
9 informs the human only if asked, or10 The system decides everything and acts
autonomously, with no notice given to the users
Interrupt Decisions
Score Description0 Data remains in the capturing systems
with no attempt to integrate the data for later use
1 Data remains in the capturing systems, but processes allow them to be manually integrated (i.e. agreed global IDs, etc)
2 Capturing systems or their middleware render all the decision-relevant data as interconnectable. There are no solitary data objects.
3 Data is centralized but not directly available to the decision maker using the search or browse methods they want
4 All relevant decision-support data is centralized and accessible by any relevant path the decision maker could use.
5The system’s approach to integrating data is easily updatable
6 The system’s approach to integrating data is self-updating
Integrate Data
Score Description0 No data is captured to support the
target business decision
1 Some relevant data is captured, but is incomplete compared to what is needed for the business decision
2 All data is captured but the accuracy of the data is unknown or known to be low
3 Data is complete and consistently biased (i.e. low quality but predictable)
4 All data needed to support the decision is captured, complete, consistent, and measurably high in accuracy
Capture Data
Score Description0 There is no automated recognition
from the system that a business decision is needed
1 There is recognition from the system that a business decision is needed sometimes, but not for all decision-inducing circumstances
2 There is system always knows that the business decision is needed
3 The system’s approach to recognizing the need for a business event is easily adaptable by users
4 The system’s approach to recognizing the need for a business event is self-updating
5The system’s approach to recognizing the need for a business event, integrating data to support the event, and to action-taking for the event, are self-updating
Create Intelligence
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 11
Specific Example: Scoring Decision Interruption
Score Description0 The system has no explicit input to this business decision. It is only “optional” in the
decision process
1 The system is a required information source for the decision maker. A user must look for and find the event, and then can take actions as they want.
2 The system is a required information source for the decision maker. The system asks the user to look at the event, but does not attempt to help with further actions
3 The system offers a set of action alternatives based on the event, or
4 narrows the selection down to a few, or
5 suggests one action, and6 executes that suggestion if the human approves, or
7 allows the human a restricted time to veto before automatic execution, or
8 executes automatically, then necessarily informs humans, or
9 informs the human only if asked, or10 The system decides everything and acts autonomously, with no notice given to the users
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 12
Typical Data Objects Collected for SC Visibility
Visibility
Invoices & Payments
Forecasted Demand
Purchase & Make Orders
Inventory
ShipmentsForecasted
Capacity
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 13
Supply Chain Visibility Impacts on Economic Value Add
Fixed Assets
Working Capital
Revenue
Assets
EVA
Operating Expenses
Selling, General & Administrative
Depreciation & Amortization
Cost of Goods
Price
Sales Volume
Returns
EVA = (Net Profit - Adjusted Taxes) - (weighted average cost of capital * Capital Employed)
Tax Adjustment
Available to Promise from Virtual Inventory Pools
Improve Service Levels Launch new products faster
Negotiate lower 1st costs via payment visibility Negotiate lower 1st costs via supplier scorecarding Chargeback Automation Improve manufacturing throughput via coordination
of material flows SKU-Level total-cost-to-serve visibility enables
product-to-service rationalization
SKU-Level total-cost-to-serve visibility enables product-to-service rationalization
More effective supply chain analyst staffing, by removing data collection, cleaning, & rote analytics
Enable advanced distribution tactics
Enable trading company for tax arbitrage
Reduce FG and raw materials, in-transit and safety stock levels
Reduce carrying costs for inventory
Improve machine utilization via material flow coordination
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 14
Typical Reported Supply Chain Visibility Benefits
1. Several days of inventory reduction from in-transit and also from safety stock
2. Reduced logistics spend
3. Reduced cost of goods sold
4. Improved staff effectiveness in planning, network design, supply chain negotiations, and so forth.
5. Multiplied effectiveness of the ERP systems landscape
60% of 1st Full Year Impact
25% of 1st Full Year Impact
10% of 1st Full Year Impact
2.5% of 1st Full Year Impact
2.5% of 1st Full Year Impact
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 15
Detailed Example: Reducing Inventory Levels via Visibility
Example: the SAP-APO is set to hold a minimum of ten days of safety stock in inventory for a given raw material, and to expect inbound lead times of 12 days transit from the manufacturer…
Are the assumptions about inbound or outbound lead-time valid? Often they are outdated or averages with buffers added.
…Right-Size the APO Settings
Are there ways to split fast from cost-effective supply chain activities? Update SOPs accordingly and shorten the lead time in SAP-APO.
…Improve Segmentation
Is lead-time variability well understood and controlled? A 95% on-time short-transit is of no use if the planning system uses the longest variability in its planning .
…Minimize Operational Variability
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 16
Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 17
Five Characteristics of the Semiconductor Supply Chain
1. Diversity of business models, leading to diversity of supply chain operations
2. Capital intensiveness: R&D, Fixed-Assets, and Process Engineering
3. Cyclical and volatile demand
4. Short product lifecycles
5. Extreme market competitiveness, leading to cost and service/quality ops. focus
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 18
Three Current Business Strategies… and their SC Counterpart
Fab-lite strategies and diversity of business models lead to blends of make-buy for almost all product lines
#1: Make-Buy Optimization
Capacity & Asset Optimization
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 19
Varying Business Models & Any Player Could Change Approach
Pack
& T
est
Pro
duct
ion
Desi
gn
In-House Mix ExternalOperating
Model
Key P
rocess
At Least Five Models:1. Merchant
Foundries2. IDMs3. OSAT4. Fabless5. Fab-lite
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 20
Visibility Data That Impacts Make-Buy
Visibility
Cost to ServeForecasted
Demand
Inventory
Forecasted Capacity
Visibility improves the make-buy decision primarily by improving the information quality inputs… faster to collect, more accurate, more complete, etc.
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 21
Three Current Business Strategies… and their SC Counterpart
Fab-lite strategies and diversity of business models lead to blends of make-buy for almost all product lines
#1: Make-Buy Optimization
#2: Early Market Share
Attaining early and definitive market share allows for stronger pricing and realization of sales during highest profit phase of the product lifecycle
Capacity & Asset Optimization
Fast & Effective Launch
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 22
Market Share vs. ROIC in 2009
iSuppli; McKinsey; Gartner
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 23
IDM Market Share vs. ROIC in 2015
IHS iSuppli Semiconductor rankings for 2013; MarketWatch; Morningstar
7% 9% 11% 13% 15% 17% 19%0%2%4%6%8%
10%12%14%16%
Intel Samsung Qualcomm Infineon NVIDIA
Mar
ket S
hare
ROIC
Returns Below Weighted Average
Cost of Capital
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 24
Visibility Data That Impacts Product Launch Success
Visibility
Invoices & Payments
Purchase & Make Orders
Inventory
Shipments
Visibility improves product launch success by making novel process, partners, and distribution channels transparent. It improves the quality of information, and automates some decisions to allow scaling up faster.
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 25
Three Current Business Strategies… and their SC Counterpart
Fab-lite strategies and diversity of business models lead to blends of make-buy for almost all product lines
#1: Make-Buy Optimization
#2: Early Market Share
#3: Market Selection
Attaining early and definitive market share allows for stronger pricing and realization of sales during highest profit phase of the product lifecycle
Semiconductors feed in to a large variety of markets, with various growth and profit potentials. Outperforming peers requires identifying a target market and matching their operations to it.
Capacity & Asset Optimization
Fast & Effective Launch
Supply Chain Segmentation
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 26
Importance of Market Selection
Examples:o Texas Instruments divested over 15 companies in 15 years, leaving markets like DRAM and defense-controls in
order to focus on wireless and medical device sectorso Qualcomm focused on licensing of its wireless communication technologieso Applied Materials shifted away from implants and towards solar
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 27
Market Selection Leads to Segmentation of Supply Chains
1
Phase Business Strategy
Supply Chain Focus
Visibility Tactics
#1- Prototype / Public Proof of Capability
Claim a defensible niche
Network Design to align capacity and costs to product profile
• Total cost to serve • Capacity-forecast
alignment
#2- Introduction Book all available orders and gain market share
Agility… rapid changes to products, channel, & partners
• Advanced distribution• Supply-demand pooling• Supplier payment
visibility
#3- Peak sales Maintain market share and profit margins
Reliability… defend market share and focus on capacity alignment
• WIP & In-Transit Visibility
• Supplier scorecarding
#4- Commoditization Control price erosion and rebalance capacity to other lines
Costs… these supply chains have to be super-lean, but have little risk from assets
• Virtual inventory pooling
• Total cost to serve• Supplier payment
visibility
#5- End of Life Support selected lines for spare parts and avoid inventory exposure
Assets… the product will sunset and any inventory left is a loss
• Virtual inventory pooling
• Total cost to serve
2 3 4 5
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 28
Summary of Industry Challenges, Strategies, and Link to SCVC
orp
ora
teD
epart
menta
l
Stated Strategy
KPI to Measure this
Strategy
What is Success?
Related Supply Chain Strategy
Visibility Solutions
How to Measure the Supply Chain
Fab-lite
Make-Buy Ratio
Book-to-Bill Ratio for Company compared to
Industry
Capacity & Asset
Optimization
• Supply coordination• Forecast-capacity
visibility• Supplier
scorecarding
• Make cycle time• Source cycle time• Cost of Goods
Sold• Throughput &
Capacity Utilization
First to Market
• Sales from products released within 12 months
• Market Share
Long period without viable competitors,
leading to high market share and prices
Fast & Effective Launch
• Supply-demand pooling
• WIP & In-Transit Visibility
• Advanced distribution tactics
• Make cycle time
• Source cycle time
• Cost of Goods Sold
Market Selection
• Total Addressable Market
• Market Share
Shifting resources to the best market they can be
in 1st or 2nd place
Segmented Supply per
Product Line
• Total Cost to Serve• Virtual inventory
pooling• Supplier
scorecarding
Cost, Reliability, Agility, and Assets… depends on the segment
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 29
Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 30
Five Trends Impacting Supply Chain Visibility
1. Internet of Things… immense, complex, and hands-free data acquisition and consumption
2. Big Data… particularly external & unstructured data
3. Machine Learning… intelligence monitoring and assessment is changing the human role
4. UX Engineering… changing expectations and knowledge about human-software interaction
5. Control Towers… emerging standard for combining tech, process, and people
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 31
Five Trends Impacting Supply Chain Visibility
Capture Data
Integrate Data
Create Intelligence
Interrupt Decisions
Control
Towers
Big Data
The Internet of Things
UX Engineering
Machine Learning
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 32
Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 33
For More Information…
1. Blogosphere (www.supply-chain-visibility.com), (www.supplychainshaman.com/the-journal/)
2. Advisors… McKinsey, Accenture, Deloitte, Cap Gemini
3. Analysts… Gartner, Aberdeen, Supply Chain Insights
4. Professional Associations… APICS, CSCMP
5. Technologists… GT Nexus, E2Open, Elementum, SAP, JDA
GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 34
Thanks…
Jonah McIntireSenior Director, Innovation & Strategy
Zürich, Switzerland
Company Website: www.gtnexus.comBlog: www.supply-chain-visibility.comLinked-In: https://ch.linkedin.com/in/jonahmcintireEmail: Jonah.Mcintire@GTNexus.com
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