council of supply chain - enfasis.com
TRANSCRIPT
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Council of Supply Chain
Management Professionals
Raw Material
Purchasing
Factory Manufacturer’s DC Customer’s DC Consumer
Rick D. Blasgen
President & CEO
CSCMP
March 18, 2015
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SCM = Seed to Table
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Tech
nologies
Storage Manufacturer Storage Distributor Retailer End User Supplier
A Typical Supply Chain Pe
ople
Proc
ess
es
Product
Sourcing Manufacture Storage Storage Distributor Retailer
Customer
Order
Receipt
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Functional Orientation • Purchasing • Operations • Marketing • Package Engineering • Transportation • Inventory Mgt. • Warehousing • Manufacturing • Suppliers • Customers • etc.
Logistics
Supply Chain
Management-
We became
Global!
1950 1970 1980 1990 2000 1960 Beyond
Focus
More Attention
From Senior
Management
More Attention
From Senior
Management
Evolutionary Perspective
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Logistics Costs $1.310 t $1.354 t $1.385 t 2,2%
% of GDP 8.4% 8.3% 8.2% 1.2%
Trans Costs $821 b $846 b $862 b 1.9%
Inv. Carrying $439 b $457 b $469 b 2.6%
Metric 2011 2012 2013 %
US State of Logistics
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Logistics Cost As A Percent of GDP
8
1.04
1.20
1.34 1.42
1.36
1.12
1.24 1.31
1.35 1.39
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ T
rillio
ns
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Logistics Costs have risen 110%
Average annual increase = $30b
2013 increase was $31b
Since 1990…
As a % of GDP, Logistics expense went from
11.4% to 8.2%, a reduction of 28%
Also….
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Global Comparison of Logistics
Expenditures
Asia 17% GDP
China 18% GDP
Europe 13% GDP
India 13% GDP
Japan 11% GDP
Mexico 14% GDP
Economy Higher Output--GDP
Better use of resources
Multi-use Infrastructure
Businesses Market Access
Market Integration
Cost Efficiency
Consumers More Goods and Services
Wider Availability
Lower Prices/Income
U.S.
8.2% GDP
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So what is Supply Chain Strategy?
Why is Leadership & Talent so
Important?
Supply Chain Strategy is figuring out the best way
that participants and processes should work
together to meet an organization’s goals and
objectives.
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A study by Georgia Tech showed that a company’s stock price drops 8%
when the company experiences a glitch in its supply chain.
A study at Miami University of Ohio showed that when a company adopts
a new supply chain innovation the company’s stock price increases.
A study by Bain & Company showed that companies employing
sophisticated supply chain methods enjoyed 12 times greater profit
than companies with unsophisticated methods.
Wall Street: New found respect for SCM. In one SCM MBA
program in the US, 21/32 grads received job offers from Investment
Banking firms because of the importance of SCM to their clients.
SCM Has Strategic Profit Impact
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Wal-Mart's supply chain management success is
improving productivity in the United States:
The effects of the company's supply chain
innovations on the retail industry led to a 3.1
percent decline in overall consumer prices.
Consumers spent $263 billion LESS than
they would have if Wal-Mart were not
around! That translates to $895 per
person, or $2,329 per household.
When Supply Chains Work Well
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When Supply Chains Don’t Work So Well
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The Great Companies Get It Right
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Migration from Traditional to
Holistic Supply Chains…
To (Horizontal) Integrated Supply “CHAIN”
Supplier Distribution Manufacturing Sourcing Customer
From Traditional Independent Functions
Supplier Sourcing Manufacturing Distribution Customer
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Top management is interested
in what we do!
But we must communicate
more effectively.
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Transparency!
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Leadership
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It’s much easier to solve a problem when the direction is clear!
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21
!
Take THAT hill soldier!
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But what happens when you are asked to choose
which hill you should take?……
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? Which
way do we go
George?!?
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Not only should you charge your hill with confidence, but you should start thinking about what could be waiting for you on the other side!
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Revenue
Cash Flow
Profitability
Market Share
What keeps the CEO up at night?
Shareholder Value
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Decisions
Different
Decisions?
$30
$145
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The World Has Changed
Shrinking global marketplace
Information is readily available,
Leaders have to know how to use it!
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Retail
DC
Retail
store
Here is what we have to consider just to make a bicycle
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Distribution
Center Distribution
Center
Outsourced
DC
Truck and/or
Rail
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Top Trends and Challenges
• Globalization. Growing complexity and
pressure of dealing with global
partners, suppliers and competition.
Culture and geopolitical issues.
• Multi Channel Madness!
• Macy’s, FedEx, UPS, Wal-Mart, etc.
• Big Data – How big is too big? How do
we scale?
• Increasing “nearshoring” manufacturing
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Manufacturing “Finding a home in North America”
• Apple
• Yamaha
• Michelin
• Wham-O
• Bayer Chemical
• Caterpillar
• GE
• NCR
• Rolls Royce
• Honda
• Lenovo
• Airbus
• Toshiba
• Toyota
• Flextronics
• Siemins
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Order from Anywhere
Fulfill from Anywhere
Customer
Call Center
Tablet/Mobile
Web Site Brick and Mortar
Stores
Catalogs
Flash Sales
Pop-Up Stores
Outlet Locations
Retail DC(s)
eCommerce
DC(s) Brick and Mortar
Stores
Kiosk
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Top Trends and Challenges
• Need to update infrastructure
• Risk Management & Sustainability
• Focus on workforce and automation –
traditional 8 hour workday still make sense?
• Energy - Natural Gas reaches a tipping point
• Rise of Amazon
• 30% Revenue increases, approaching
$60B
• Added 18 New Distribution Centers
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If you've ever ordered anything
from Amazon, you will be
interested in this…
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• There are 80 warehouses located near key
shipping hubs around the world.
– Some over 1.2 million square feet (111,484 square meters)
– With over 65,000 people
• “Chaotic storage”
Amazon’s Giant Warehouses
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Organic shelving system without
permanent areas or sections.
• Organized confusion – not like what you would
find at a retail store.
– No area just for books,
televisions, etc.
– Product characteristics
are irrelevant.
• Unique barcodes
Chaotic Storage
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• Every shelf space has a barcode
• Every product requiring storage is assigned a
matching barcode
• Sophisticated database
– Tracks and monitors
every product
– Keeps a tally on shelf
space
Unique Barcodes
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• Flexibility – Free space can be refilled
immediately
• Simplicity – New employees don’t need to learn
where types of products are located
• Optimization –
database provides
employees an
optimized route to
complete fulfillment
of millions of orders.
Key Advantages
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Real Estate and Supply Chain
• The two are inextricably linked
• Real estate is critically important to the
success of a company’s supply chain
• “Buildings” should be viewed as assets
that contribute to supply chain value
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Skechers consolidated its distribution operations which was
spread out among six warehouses in Ontario, into a new 1.82-
million-square-foot $250 million facility in Moreno Valley.
It's big enough to hold 40 football fields!
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CEO / CFO’s - discovered the power of Supply
Chain Management.
Wall Street
• Watching industry dynamics
• Logistics industry represents almost 10% of the
economy
Supply Chain Risk Management is critical – think
about recent events, middle eastern uprisings, Suez
Canal, Japan, Thailand, Sandy, etc.
3PL’s – Significant growth
What does this all mean?
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Third Party Logistics Market
44
Source: Armstrong and Associates
89.4
103.7
113.6 119.0
127.0
107.1
127.3 133.8
141.8 146.4
0
20
40
60
80
100
120
140
160
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
$ B
illi
on
s
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Why is Risk Management important?
Asia is 4X more likely to be affected by
natural disasters than Africa, 25X more likely
than Europe or North America
7major cities classified as extreme risk are all
in Asia
Floods have become 3X more frequent in the
past 30 years
152 Million people in Asia are vulnerable to
natural disasters every year!
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POLITICAL CHANGE
UNIONIZATION
SHIFTING WAGES
INFRASTRUCTURE CHALLENGES
EARTHQUAKES
TYPHOONS
WILDFIRES
PROTESTS
YOUNG, MOBILE ORGANIZATION
LABOR STRIKES
Challenge as a Way of Life
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Strategically Resilient
Firms
Swink, Morgan (2012)
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Top Supply Chain Companies
• Identified from various rankings and studies
(AMR/Gardner, MSU study, Supply Chain Digest)
• From 2004 – 2007, on average these firms had:
– 58% higher ROA
– 31% higher ROS
– 41% higher ROE
– 4X stock returns
– 45% greater market value
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Are They “Strategically Resilient”? • Like others, the top companies suffered lowered sales growth, disruptions,
and other problems
• However, most top companies held or even improved their leads in the
2008 – 2010 timeframe.
400%
58%
31%
41%
9%
98%
57%
100%
52%
-10%
10%
30%
50%
70%
90%
110%
Sales Growth ROA ROS ROE Stock Returns
Outperformance
of Top Firms vs.
Benchmark
2004-2007
2008-2010
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Emerging (Emerged?)
Supply Chain Trend
Collaboration
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Emerging (Emerged?)
Supply Chain Trend
Collaboration – “To cooperate with
an enemy that has invaded your
country”
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Cultural
Barriers to Collaboration
• Tunnel vision
• “Not invented here” mentality
• Personal comfort zones - Trust
• “My business is different and its unique
characteristics demand that the status
quo must be maintained.”
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Leadership
Barriers to Collaboration
• Non-existent change management skills
• Internally focused organizational silos
• Leadership focused on wall street and
making the numbers regardless of the
impact to the long term prospects of the
company.
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Structural
Barriers to Collaboration
• Misalignment of goals
• Compensation that promotes a silo mentality
• Legacy systems
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Relationships are critical
The essence of SCM is collaboration – it is not
an option.
involves all key participants
working toward common goals. Absent collaboration, the supply chain will
be nothing more than a collection of firms, each
following their own pathways.
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The Setting: Global Economy; Supply Chain
Transformation = Big Change
Leadership is Essential!
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Wh
y?
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Supply Chain
Transformation:
• Process
• People
• Infrastructure
• Sustainability
• Technology Wh
at?
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Ho
w?
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Continuous Improvement
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Characteristics
One step at
a time
Internally
managed
Operating
budget
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Low risk Low priority
Takes a long time
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Discontinuous Change
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Characteristics
Huge change
all at once Project with
dedicated
resources
Project
budget;
capex
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Transformation
now!
Commitment High risk
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Unintended Consequences
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The interconnectedness of everything
Process
Technology
People
Infrastructure
Sustainability
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Processes
Technology
People
The Dimensions of Change
• All three dimensions of change are always present
• Benefits only
accrue from the intended dimension
• The consequential
risks are present in all dimensions
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Some-
times
things
go
wrong…
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The interconnectedness of
everything
Process
Technology
People
Infrastructure
Sustainability
Supply chain Transformation
• What do you want to do?
• Why do you want to do it?
• Where are the benefits coming from?
• Where are the risks?
• How: Which are the appropriate change mechanisms?
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What skills will be required for
success?
Art or Science?
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What are the skill development needs of
companies today?
• Leadership
• Collaboration
• Communication
• Teamwork
• Multi-cultural perspective
• Relationship management
• Creativity & Innovation
• Forecasting and planning
• Project management
• Problem solving
• Modeling
• Data analytics
• Technology
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Traditional Supply Chain
Functional Career Path
Demand/Supply
Planning Global Logistics Manufacturing Procurement
Executive
Level
Senior
Level
Advisory
Level
Staff
Level
Entry
Level
Fulfillment
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Corporate
Executive
Level
Leading Edge SCM
Career Path
Demand/Supply
Planning
Global Logistics Manufacturing Procurement
SCM
Consulting
Level
SCM
Sr. Level
SCM
Advisory
Level
ISC Staff
Level
ISC Entry
Level
Fulfillment Supply Chain
Management
Exp
eri
en
ces o
uts
ide o
f IS
C
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The Future of Supply Chain
Professionals
Inventory
Management
Transportation
Warehousing
Materials
Planning
Production Planning
& Manufacturing
Customer
Service
Procurement
Proficient competencies
Technical
Managerial
Leadership
Must have excellent interpersonal skills
Ability to sustain collaborative relationships
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Supply Chain
Passion
To Supply Chain Mastery
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Building Organizational
Excellence
• While there may be an abundance of talent in an
organization, a new style of leadership may
unleash the potential, both individually and
organizationally, enhancing career growth and
total capabilities.
• Consistent credibility breeds investment. If
we’re credible and operate with integrity, the
company with invest in us.
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The Fundamentals:
• Set clear expectations: performance and
development
• Provide feedback and coach for
improvement
• Measure results - Inspect what you expect
• Build bench strength – backfills for key
positions
• Celebrate successes – have fun!
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Misconceptions / Reasons Supply Chain
Initiatives Fail. . .
• Need Senior Management commitment versus support
• Manage the Change, systems are enablers
• Why are you doing this to me?
Bunker mentality emerges
Supply chain champion viewed as empire builder
Resistance groups spring up
Veil of misunderstanding is drawn - discontent grows
• SCM is viewed as too easy or too complicated
• Financial implications are not understood
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Misconceptions / Reasons Supply Chain
Initiatives Fail. . .
• Systems are old - inflexible
• Company is mired in successful way of doing business -
hasn’t learned to forget
• Technology is the enabler - people are the roadblocks
• Compensation / rewards are not aligned
• Customer service goals are not assigned throughout
• Customer is not considered part of, or a beneficiary of, the
supply chain
• SCM simply is not viewed as a core competency
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Supply Chain Concierge Service
CSCMP’s Evolving Role
• Goal
Connect, Educate and Develop the
world’s Supply Chain Professionals!
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Procurement
Marketing
Manufacturing
Information Tech
Suppliers Customers
SCM Pro
SCM Conducts a Symphony
We matter!
Sales
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Summary
This discipline is a corporate necessity, yet can be a growth vehicle – a revenue generating engine.
We improve the financial position of companies and economies.
Our stature and credibility is increasing.
Supply chain professionals need to develop cross functional skills and a global mindset to maximize opportunities in the world.
To prosper, to tackle these challenges, to take advantage of the opportunities, we need leadership and the right talent!
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Peter Drucker
“If people are committed to
maintaining yesterday, they are
not available to create tomorrow”
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Sometimes, we
have to learn to
forget
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Innovation!
Be Creative in your Response to
Supply Chain Problems
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You think you’re having a bad day!
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Our Challenge……..
It will not be easy, but . . .
It can happen.