presentation at logility conference 2012

Supply Chain by the Numbers

September 2012

BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation

LORA M. CECERE CHARLES W. CHASE JR.

BookPublishes December

2012

Supply Chain Insights LLC Copyright © 2012, p. 3

Evolving Practices


Agenda

Trends Supply Chain: Retail

Trends Supply Chain: Consumer Products

In Search of Supply Chain Excellence

Race for Supply Chain 2020

Wrap-up


• Power shifting to the shopper

• Amazon seizing “center store”

• Anytime, anywhere becoming the norm

• More and more costs are being pushed backwards in the supply chain

Retail Shifts


Years 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012

RETAIL AVERAGE

17.05% 42.46% 12.89% 8.76% 5.15%

CPG AVERAGE 2.12% 0.84% 3.91% 7.26% 2.32%

FOOD CPG AVERAGE

3.68% 2.97% 8.13% 2.59% 4.27%

BEVERAGE CPG AVERAGE

12.87% 2.00% 9.59% 11.53% 4.92%

Year-over-Year Growth


1990-1994

1995-1999

2000-2004

2005 2006 2007 2008 2009 2010 2011 2012

eCommerce

NaN NaN 343.09821573893

2

455.82322184244

8

549.35711669921

7

758.40384928385

3

848.30227661132

6

1016.2521057128

9

998.48733520507

7

1073.2823486328

1

NaN

Grocery

197.66727663333

3

182.42270665714

3

424.51644165604

2

478.66342206434

8

475.07786840959

519.72557456152

9

612.0607266696

610.86592366145

2

572.42064453125

518.07959238688

3

503.89105224609

3

Mass

111.531258

6

143.587382

4

252.77049342572

2

348.13922174952

2

378.84717362577

3

616.60869811562

9

486.97209019814

8

474.46172598636

5

533.31497862844

8

463.61525573730

5

348.44249979655

Specialty

NaN NaN 295.67612169279

384.31348812580

2

413.83267235756

458.27304815738

8

478.62063006965

5

527.32440307617

3

534.01690254211

5

282.31685002644

9

312.05143394470

2

100

300

500

700

900

1100

Revenue per Employee

Re

ve

nu

e p

er E

mp

loye

e (

K$

)

Retail: Revenue Per Employee

Source: Supply Chain Index Analysis from Annual Reports 1990-2012Mean values utilized excluding outlier data


Revenue Per Store


Bar codes were first used at Marsh Supermarket in 1968


Suppliers Still Do Not Know How to Use the Data

Weather Data

Retail Warehouse Withdrawal Data

Syndicated Data POS DataLoyalty Data

Coupon Redemption

Panel Data

Social Data Distributor DataEnrichment Data

Web Click-through Data

Contract Data

Orders Shipments

Market-survey Data

Returns

T-Log DataRatings and Reviews


Mobile & Social Presence Growing


Campaign Objectives:

Reduce Out of Stocks at targeted retailers by 5%

Increase Shopper satisfaction and brand

loyalty

“Where’s My Bud” Viral Campaign

Concept:Execute a viral campaign

focused on leveraging shoppers to identify out of

stocks and potentially pricing compliance issues

Leverage a combination of consumer, internet, and in-store technical capabilities

Validation:Identify a key leader or market that wants to pilot. 50/50 shared risk in effort and resources to pursue. Keep costs to a minimum for pilot, under $75K


Retailer Experience

New text message to 612-961-7802:

A customer at Denny and Doug’s Liquor Emporium has just snapped a tag. You’re out of stock on Bud Light.

Please contact your wholesaler.


Here are some locations near you where you can find Bud Light. Be sure to use this promotion code to get your discount:

ABBL12456

http://www.budweiser.com/







Agenda





Wrap-up


A Look at History


24%

34%

18%

15%

9%

17%

36%

23%

19%

5%

Decrease Increase

Over next 12 months

Over past 12 months

Price Volatility

Decrease >50 basis pts

Decrease <50 basis pts

Increase <50 basis pts

Increase >50 basis pts

No effect

In your best estimate, how much has commodity price volatility affected your EBIT over the past 12 months? What do you expect over the next 12 months?

EBIT

Percentage of Respondents


Demand Signal

Accurate Weekly

Forecasting is ...

Delay from Purchase to

Signal

Data Latency and Distortion

Red Represents Emerging Economies with Distributor Trade

Retailer DC

Easy

3-10 Days

7-20 Days

Manufacturer DC

Difficult

10-20 Days

20-45 Days

Suppliers

Almost Impossible

20-50 Days

45-80 Days

Store

Trivial

Instant

Variable

Store


Building End-to-End Value Networks

Today

True collaboration only happens when there is a sustaining win/win value proposition.


SHARED VISION

+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE

SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION

SHARED VISION

+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY

SHARED VISION

+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =FALSE

STARTS

SHARED VISION

+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION

SHARED VISION

+ SKILLS + RESOURCES + PLAN + LEADERSHIP =GRADUAL CHANGE

Source: J.P. Kotter

Collaboration: The Right Stuff


Agenda





Wrap-up


Evolution of Supply Chain Process Excellence

Align:Market Driven

ResilientReliable

Adapt: Demand Driven

Efficient

Building Horizontal Process Connectors

ContinuousTesting

LearningImprovingIn Market

OrchestrateDemand and Supply

Sense Demand

and Supply

Shape Demand andSupply based

on Market

DemandVolatility

Supply Volatility

Right Product

Right Place

Right Time

Right Cost

Cost

Procure to pay/order to

cash


Supply Chain “Excellence” Definition


A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity


The Effective Frontier


Corporate Summary


Metric Equations


Cash-to-Cash Cycle vs. Revenue per Employee (2000-2011)


Days of Working Capital vs. Return on Assets (2000-2011)


Corporate Summary


Metric Equations


Cash-to-Cash Cycle vs. Revenue per Employee (2002-2011)


Cash-to-Cash Cycle vs. Gross Margin (2000-2011)


Value Network Strategy

Supply chain strategy

Business StrategyWhat are the right things to do to increase company value?

Value-network Supply Chain StrategyWhat are the right ways to support the business strategy?

What are the right trade-offs between value drivers for each value network?

Right productplatforms

Design the supply

response

Build organizational systems and

manage talent

Align supply relationships

Align demandrelationships

Effective Supply Networks

Execution of buy-side strategies

Continuous Improvement

Capabilities RequiredSupply Chain

Network Design

Design Networks

Innovation Methodologies

Demand Networks

Joint Value Creation Strategies

Business ProcessHow do I do the right things right?

Source: Supply Chain Insights, LLC


Demand CapabilitiesLow High

Low

High

Vol

ume

(Cas

es/W

eek)

Theory of Constraints

(TOC)

Lean

Outsource Manufacturing

Lean for Make to Order

Short Cycles

Rethinking Manufacturing Strategies


Agenda





Wrap-up


The Supply Chain of the Future

World Population

Source: “The World at Six Billion” United Nations, 2004; The World UN Population Assessment 2006; “Unsustainable World,” 04/15/08, BBC

North America

2007 2020339M 342M

Europe

2007 2020731M 722M

Asia

2007 20204.0B 4.6B

L America

2007 2020572M 660M

Africa

2007 2020965M 1.3B

Oceania

2007 202034M 40M

MARCO TRENDS


Inside-Out Inside-Out

Supply Chain Tipping Points

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

S&OP

Evolution of the PC

JIT

Theory ofConstraints

Supply Chain Organization

Re-Engineering the Organization

(Michael Hammer)

Internet/Email

eProcurement

Total QualityManagement

RFID

Vertical SiloExcellence

Efficient Order toCash Processes

+ Islands ofExcellence

ManufacturingExcellence

+

Supply Chain Excellence = Supply Chain Excellence =


Inside-Out Outside-In

Value-Based OutcomesDelivered by Horizontal Processes

+

Supply Chain Excellence = Supply Chain Excellence =

Supply Chain Tipping Points

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Y2K

Lean Six Sigma

.com

Demand Driven Concepts

Vertical SiloExcellence

Outsourcing Effectiveness

Social Responsibility

CSCO

Market-Driven Value Networks


An adaptive network focused on a value-based outcome that senses and translates

market changes (buy and sell-side markets) bi-directionally with near-real time data latency to align sell, deliver, make and

sourcing operations.

What is a Market-driven Value Network?

41


Outside-In

Value-Based OutcomesDelivered by Value Networks

Supply Chain Excellence =

Supply Chain 2020 Tipping Points

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Talent Shortage

Compliance on Safe & Secure

Orchestration

Big Data Supply Chains

Internet of Things

Learning Supply Chains

Digital Manufacturing


Current State of Planning


Future State of Planning


Scenario Planning


IT Trends Excited About (Top 3)


Evolution of Visibility

Where is My Stuff?Track and TraceQuery

Please Alert me of a ProblemAdvanced Analytics

Early WarningPredictive Analytics

Learn a Better Way

Vertical Functions

Supply Chain

Value Networks

Single Function Visibility

Supply Chain Visualization

Value Network Sense/Act/Response


Connecting the Extended Supply Chain

49


Connecting the Extended Supply Chain


Opportunity at the Intersection of the Social and Interest Graph(s)


• Newell Rubbermaid

Newell Rubbermaid Gets IT!

#Future15SB @bwdumars


#Future15SB @bwdumars

Newell Rubbermaid Gets IT!


Agenda





Wrap-up


• Tried to get precise on inaccurate data.• Been sales-driven or marketing-driven not market-

driven• Believed that the most efficient supply chain is the

most effective supply chain.• Built efficient chains, but not effective networks.• Focused inside-out, not outside-in.• Rewarded the urgent, not the important.

Historically, We Have…

55


Where is Your Opportunity?


Who is Lora?

• Founder of Supply Chain Insights

• Partner at Altimeter Group (leader in open research)

• 7 years of Management Experience leading Analyst Teams at Gartner and AMR Research

• 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA)

• 15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble.


Where Do You Find Lora?

Contact Information: [email protected]

Blog: www.supplychainshaman.com (4000 pageviews/month)

Twitter: lcecere 3300 followers. Rated as the top rated supply chain social network user.

LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (2300 in the network)

presentation at logility conference 2012

Business

supply chain index analysis

supply chainby

employee revenue

canfind bud light

retail shifts power

price volatilityin

center store

averagecpg average