presentation for the australian eventful group event
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Presentation on Bricks Matter and Supply Chain Excellence for the Eventful Group Keynote in Melbourne on September 16TRANSCRIPT
Premier Partners: Supported by: Produced by:
Lora CecereCEO and FounderSupply Chain Insights LLC (USA)
Bricks Matter: Creating Supply Chain Excellence
BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation
LORA M. CECERE CHARLES W. CHASE JR.
BookPublishes in December
2012
Evolving Practices
Agenda
Supply Chain Stressors
What is Supply Chain Excellence?
Supply Chain 2020
Wrap it Up
Growth: A Tough Slog
Years Industry 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012Retail 17.05% 42.46% 12.89% 8.76% 5.15%Consumer Products 2.12% 0.84% 3.91% 7.26% 2.32%Food & Beverage 3.86% 2.97% 8.13% 2.59% 4.27%Chemical 0.40% 6.50% 13.80% 5.30% 13.80%Pharmaceutical 8.10% 14.60% 6.30% 4.60% 15.70%High-Tech & Electronics 27.30% 13.20% 11.00% 11.10% 24.00%Semiconductors NA NA 4.28% 1.30% 19.75%
24%
34%
18%
15%
9%
17%
36%
23%
19%
5%
Decrease Increase
Over next 12 months
Over past 12 months
Price Volatility Will Undercut Business Performance
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
Supply Chain Management: Top 3 Elements of Pain
Collaboration: The Right Stuff
based on J. P. KOTTER
+ ++ = CONFUSIONINCENTIVESKILLS PLANRESOURCES
+ + = ANXIETYRESOURCESINCENTIVE PLAN+ LEADERSHIP+
++ + =INCENTIVESKILLS RESOURCES FALSE STARTSSHAREDVISION
LEADERSHIP+
LEADERSHIP+ ++ =SKILLS INCENTIVE PLAN FRUSTRATIONSHARED
VISION+
++ + = GRADUAL CHANGESKILLS RESOURCES PLANSHAREDVISION
LEADERSHIP+
SHAREDVISION
+ ++ = CHANGESKILLS INCENTIVE PLAN ++ RESOURCES LEADERSHIPSHAREDVISION
Building the End-to-End Value Network
Retail
Today
Goal: Working Capital Turns
CPG3rd Party Supplier
Goal: Growth Goal: Costs
True collaboration only happens when there is a sustaining win/win value proposition.
Sale
s
Time
Manufacturing
Sale
s
Retail Warehouse
Retail StoreConsumer
Sale
s
Time
Suppliers
Time
Sale
s
Time
Inventory and Costs
Inventory data source: CFO Magazine September 2010-2004
Demand
Retailers Food Manufacturers Containers and Packaging10
20
30
40
50
60
200920082007200620052004
Days of Working Capital
Building the End-to-End Value Network
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
Source: Supply Chain Insights 2012
Average Days of Inventory by Year
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods
59 57 62 64 67 67 68 70 70 64 64 67
Chemical
71.5 71.9 78.2 75.1 62 70.3 68.1 64.3 64.3 78.6 72.9 72.8
Pharma
122.2366910978
69
133.6991005621
75
190.1476161659
68
170.9865224789
89
184.3426173998
59
175.5502604768
77
167.7999511392
47
149.8151539812
83
154.9157818825
91
198.6631341199
76
154.3134808632
44
131.8197942402
94
High Tech
93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4
Average
86.45917277446
74
80.04977514054
37
94.21190404149
19
89.64663061974
72
87.31065434996
47
87.53756511921
92
86.92498778481
17
80.22878849532
07
80.95394547064
77
95.64078352999
41
81.50337021581
1
75.50494856007
36
25.0
75.0
125.0
175.0
225.0D
ay
s o
f In
ve
nto
ry
Source: Supply Chain Insights 2012
Average Days of Working Capital by Industry
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods
-20 -8 -12 -2 -21 -23 -8 -18 -11 -10 -12 -13
Chemical
37.3 44.7 61.7 71.9 64.8 64.1 63.8 57 51.7 74.8 85.6 77
Pharma
64.13122323105
75
56.40171531995
71
48.41779078772
81
56.19153537418
53
71.83773591464
44
94.06306457185
06
92.60818057698
52
88.05425335219
4
87.11058785110
32
111.0400827200
36
115.9852979100
64
113.2239261600
93
High Tech
231.5 290.3 283.5 243.5 173.5 138.9 109.4 103 92.4 131.9 138.9 140.9
Average
78.23280580776
44
95.85042882998
93
95.40444769693
2
92.39788384354
63
72.28443397866
11
68.51576614296
27
64.45204514424
63
57.51356333804
85
55.05264696277
58
76.93502068000
89
82.12132447751
61
79.53098154002
33
Series6
0 0 0 0 0 0 0 0 0 0 0 0
-25.025.075.0
125.0175.0225.0275.0325.0
Da
ys o
f W
ork
in
g C
ap
ita
l
Agenda
Supply Chain Stressors
What is Supply Chain Excellence?
Supply Chain 2020
Wrap it Up
Evolution of Supply Chain Process Excellence
Align
ResilientReliable
Adapt
Efficient
Building Horizontal Process Connectors
Continuous Testing
Learning
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
Base: Total Sample (61)Q14. How does your company define supply chain “excellence?” Please select all that apply.
Right product, right place, right time at the right cost.
A responsive supply chain that can adapt as markets change.
A resilient supply chain that can withstand the shocks of demand and supply volatility.
The Efficient Supply Chain. Lowest cost per unit.
Right product, right place, right time.
70%
57%
52%
38%
20%
How Companies Define Supply Chain “Excellence”
Most Mature
A Supply Chain is a Complex System
with Complex Processes with Increasing Complexity
The Effective Frontier
Growth Profitability Cycle ComplexityR&D Margin Cash on Hand C2C Cycle Altman ZR&D to COGS Ratio Free Cash Flow Ratio Days of Finished Goods Capital TurnoverSGA Margin Gross Margin Days of Inventory Current Ratio
SGA/COGS Net Profit Days of Payables Outstanding Quick Ratio
COGS as Percent of Net Sales Operating Margin Days of Raw Materials Return on Assets
YoY Sales Growth Pretax Margin (EBIT) Days of Sales Outstanding Return on Equity
Operating Margin Days of Work in Progress
Return on Invested Capital
DPO/DSO Return on Net AssetsInventory Turns Revenue/EmployeeReceivables Turns Cost of Sales
Useful Ratios
Corporate Summary
Metrics Included for Comparison
Metric Equations
Cash-to-Cash Cycle vs. Gross Margin (2000-2003)
Cash-to-Cash Cycle vs. Gross Margin (2004-2007)
Cash-to-Cash Cycle vs. Gross Margin (2008-2011)
Inventory Turns vs. Revenue per Employee (2004-2007)
Inventory Turns vs. Revenue per Employee (2008-2011)
Inventory Turns vs. Revenue per Employee (2002-2011)SUMMARY SLIDE
Building Value Network Strategies
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
Manufacturing Asset Strategies
Volume, demand variability, technology and of life cycle clusters
High
Low
HighLowDemand Predictability
Volume LifecycleShort Long
Technology
Commoditized
Specialized
6 5
8 7
LifecycleShort Long
Technology
Commoditized
Specialized
2 1
4 3
LifecycleShort Long
Technology
Commoditized
Specialized
LifecycleShort Long
Technology
Commoditized
Specialized
13
16 15
10 9
12 11
14
Quadrant IResponsiveness
Quadrant IIEfficiency
Quadrant IVAgility
Quadrant IIIEfficiency
Supply ChainProducts
Industry Standard Servers
Commercial PrintingDigital ImagingShared Printing
Personal PrintingSupplies
Portables and Handhelds
Business PC & WorkstationConsumer PC
Monitors & Options
Network Storage Solutions
Business Critical Servers
Managed Services SolutionsCustomer Support Solutions
Consulting & Integration Sol.
Enterprise Solutions
Services
High value & solutions
Configure-to-order (CTO)
Low touch
No touch
Demand Chain
Enterprise
SMB
Consumer
Dir
ect/
Ind
irect/
Part
ner
d
irect
Public
High-tech Company
What is Agility?
Base: Total Sample (117)Q11. How would you define what it means for your company’s supply chain to be “agile”? Please select the one that fits best.
49%
38%
10%3%
How Define Supply Chain “Agility”Shorter supply
cyclesFlexibility to make
and deliver whatever is
ordered
Ability to adapt to
variations in demand and
supply
Most Mature Definition:Ability to recalibrate plans in the face of market, de-
mand and supply volatility and deliver the same or
comparable cost, quality and customer service
Importance Performance
89%
27%
5%
32%
6%
40%
Agility Importance vs. Performance (7-Point Scale)
Low (1-3)
Middle (4)
High (5-7)
Agility Importance vs. Performance
Base: Total Sample (117)Q12. How important is it for your company’s supply chain to be “agile” in 2012? Please base your answer on however your company defines agility. SCALE: 1=Not at all important, 7 = Extremely importantQ13. How would you currently rate your company’s supply chain in terms of being “agile”? SCALE: 1=Not at all agile, 7 = Extremely agile
Agility Performance is 62
% Points Lower than Importance
Scenario Planning
Agenda
Supply Chain Stressors
What is Supply Chain Excellence?
Supply Chain 2020
Wrap it Up
Supply Chain Focal Points for Next 2 Years
Improving demand planning
Saving costs
Shortening cycles
Network design
New product launch effectiveness
Channel sensing
Revenue management
Other
74%
70%
66%
62%
48%
30%
26%
18%
23%
21%
21%
8%
10%
3%
7%
7%
Supply Chain Focal Points for Next 2 YearsPrimary Total
Top Supply Chain Focal Points
IT Systems: Importance & Satisfaction
Demand Planning
Enterprise Re-source Planning
Order Man-agement
Tactical Supply Planning
Price Man-agement
Production Planning
Transportation Planning
Product Life-cycle Man-agement
Manufacturing Execution Sys-
tems
Warehouse Management
-70%
-60%
-50%
-40%
-30%
-20%
-10%
0%
86% 83% 80%76% 75% 73%
65% 63%59% 58%
30%24%
35%
20%28%
15%
42%
11%
25%
38%
-56%-59%
-45%
-55%
-47%
-58%
-23%
-52%
-34%
-21%
IT Importance vs. SatisfactionImportance (6-7) Satisfaction (6-7) Gap (Sat - Impt)
Base: Have System
57 59 60 49 36 55 43 27* 44 48
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
Common Practice Market-driven Focus
S Ask salesFocus on market drivers:How do we best shape demand?
& Direct integration to supply
Design of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demand
OP Manufacturing plan Trade-offs between make, source and deliver
Getting to Letter Perfect
S&OP Evolution
Manufacturing-Driven
Deliver a Feasible Plan for OperationsMatch Demand with
Supply
Sales Driven
Match Demandwith Supply
Business-planning Driven
Maximize Profitability
Demand Driven
Maximize Opportunity Sense and
Shape Demand
Market Driven
Maximize Opportunity and Mitigate Risk. Orchestrate
DemandMarket to Market
Greater Benefit• Growth• Resilience• Efficiency
• Benefits Received from S&OP Processes
Source: Supply Chain Insights, 2012What benefits have you received from your work with S&OP processes?
Increasing revenue
Improving forecast accuracy
Reduction of inventory
Improving asset utilization
Determining outsourced manufacturing
Determining procurement requirements
Improving new product launch
Transportation and warehouse management
Capital planning and asset management
Improvements in the perfect order
59%
57%
50%
42%
38%
36%
34%
32%
32%
30%
▲ 2%
▲ 5-7%
▲ 3-7%
▲ 3-6%
▲ 3-6%
▼ 10-15%
▼ 2-8%
Putting Together the Pieces
Mastering Supply Chain Management with SAP 2012 | 45
S&OP Process
An Athlete Needs:
What is Agility?
S&OP Balance
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
US Retail Mobile & Social Presence
Source: Intel
Big Data will be the NEW Foundation of the Future
Supply Chain
Definition
Challenges:• Transactional• Time phased data
Structured Data
• Social• Channel• Customer Service
• Temperature• RFID• QR codes and GPS
• Mapping and GPS• Video• Voice and Digital
Unstructured Data
SensorData
NewDataTypes
Volume
Velocity
Variability
Big Data: What is it all About?
Downstream DataCold Chain
GeolocationRFID
Social
Ratings & Reviews
T-Log Data Twitter
Call Center Logs
Video Photographs
Warranty Information
ReturnsWeblogs
eCommerceEDI
Data Mining
Forecasting
Sentiment Analysis
What-if Models Hadoop
Rules-Based Ontology
Constraint-based Planning
Data VisualizationLearning Systems
R
Text Analytics
Scorecards
Sensors
Map Reduce
Digital Path To Purchase
Mobile Applications
Newell Rubbermaid
Newell Rubbermaid
Definitions
• Demand Sensing: Shortening the time to sense “true” market data to understand “true” market shifts in the demand response. This is in contrast to the use of order to shipment data that can have 1-3 weeks latency in translating “true” market demand.
• Demand Shaping: The use of techniques to stimulate demand. This includes new product launch, price and revenue management, assortment, merchandising, placement, sales incentives and marketing programs.
• Demand Translation: The translation of demand outside-in from the market to each role within the organization. Recognizing that the requirements for distribution, manufacturing and procurement are different.
• Demand Orchestration: The process of making trade-offs market-to-market based on the right balance of demand risk and opportunity.
• Demand Shifting: The shifting of demand from one period to another through advanced shipments, and moving more products into the channel without stimulating base demand.
BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation
LORA M. CECERE CHARLES W. CHASE JR.
BookPublishes in December
2012
From: To:Digital marketing Digital BusinessMarketing driven Market drivenSell-in Sell-throughInside-out Outside-inAsking the Question we Know to Ask To Listening to Hear the Questions that we do not
Know to AskVertical Process Excellence Horizontal Process OrchestrationMeasuring Business Complexity To Managing a System of Complex Trade-offs
The Most Efficient Supply Chain The Most Effective Supply ChainNear Real-time Real-time
Looking Forward
Evolving Practices
Premier Partners: Supported by: Produced by: