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Supply Chain Insights, LLC © 2012
Supply Chain InsightsDelivering Actionable Advice to the Supply Chain
Leadership Team
BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation
LORA M. CECERE CHARLES W. CHASE JR.
BookPublishes in August
2012
Supply Chain Insights, LLC © 2012
3
Current State
Supply Chain Insights, LLC © 2012
Supply Chain Pain Points:All vs. Largest
Base: Total Sample (61)Q18. What is your single largest pain point in the supply chain, at this point in time?
Q19. What other pain points, if any, are you currently experiencing with your supply chain? Please select all that apply.
Dirty data
Product proliferation
Rising commodity prices
Talent shortage
Changing market preferences
Cost of IT
Compliance and legislation
Competition
Other
67%
62%
62%
51%
33%
33%
28%
26%
28%
18%
13%
25%
16%
2%
2%
3%
5%
16%
Largest Pain Any Pain
Top Supply Chain Pain
Points
Supply Chain Insights, LLC © 2012
The Long Tail: Growing Complexity
Volume
Level of PredictabilityPredictability based on forecast accuracy vs Actual Order Profiles
Supply Chain Insights, LLC © 2012
Commodity Price Pressure
6
Jan-
97
Jan-
98
Jan-
99
Jan-
00
Jan-
01
Jan-
02
Jan-
03
Jan-
04
Jan-
05
Jan-
06
Jan-
07
Jan-
08
Jan-
09
Jan-
10
Jan-
110.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
400.00
Corn (metric Ton)
Wheat (metric Ton)
Coffee, Robusta (Pound)
Sugar (Pound)
Beef (Pound)
Crude Oil (Barrel)
Source: Index Mundi
$/LB
Supply Chain Insights, LLC © 2012
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201035
45
55
65
75
85
95
Days of Working Capital
Household Products ChemicalPharma Average
Data Source: CFO Magazine
Supply Chain Insights, LLC © 2012
2002 2003 2004 2005 2006 2007 2008 2009 201030
35
40
45
50
55
60
65
Days of Inventory
Household Products ChemicalPharma Average
Data Source: CFO Magazine
Supply Chain Insights, LLC © 2012
Supply Chain Focal Points for Next 2 Years
Base: Total Sample (61)Q23. What do you expect to be your primary focus on your supply chain over the next 2
years? Please select the one that is most important. Q24. What other supply chain elements, if any, will you be focusing on over the next 2 years?
Please select all that apply.
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 Years
Primary Total
Top Supply Chain Focal
Points
Supply Chain Insights, LLC © 2012
CostVolumeGrowth
Typical Organization10
CEO
Chief Customer
Officer
Chief Marketing
OfficerSales
Account Teams
COO
VP of Supply Chain
Customer Service Logistics
CFO
CIO Procurement
VP of Manufacturin
g
Quality
Supply Chain Insights, LLC © 2012
Supply Chain Organization
Base: Total Sample (61)Q6. How many people overall currently report to you or your staff?
Q7. Please tell us how you define your company’s supply chain organization by selecting which function(s) report through the supply chain organization. Please select all that apply.
Respondent Reports
Supply Chain Planning (Supply)
Inventory
Supply Chain Planning (Demand)
Deliver (Distribution)
Transportation
Customer Service
Source (Procurement)
Make (Manufacturing)
95%
90%
89%
77%
77%
66%
61%
39%
Functions ReportingThrough Supply Chain
6 functions reporting through the supply chain on average
Supply Chain Insights, LLC © 2012
12
Pitfalls and Potholes
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A forecast is not a forecast is not a forecast.
Supply Chain Insights, LLC © 201214
Business Planning
Forecasting
Constrained Forecast
Increasing levels of granularity
Increasing need for value network strategy alignment
A Forecast is not a Forecast is not a Forecast
Supply Chain Insights, LLC © 2012
One Number Forecasting.
Manufacturing View (
Units)
Sales View ($) Marketing View
($, U
nits)
Logistics View
(Units, Cases)
Ship-from Locations
Warehouses
Global
Production L
inesPlants
Global
Supply-side Views
Downstream Data
Account-LevelA
VMI C
DistributionNetwork
Supplier Supplier Supplier Supplier
DistributionNetwork
DistributionNetwork
Demand-side Views
Hole in Enterprise Architectures
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17
The Role of Forecasting
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A Supply Chain is a Complex System composed of Complex Processes with Increasing Complexity
Looking at Supply Chain as a Complex System
Inventory
Supplier Strategy
Growth
Revenue Cost of Goods
Working Capital
R&D Strategy and Investment Asset Strategy and Investment
Corporate Social Responsibility
Forecast Accuracy Customer Service
Channel StrategyProduct and Service
Portfolio
Sales Policies
Distribution Policies
ManufacturingPolicies
Procurement Policies
Logistics Policies
ReturnsBackorders
ObsolescenceFirst Pass
YieldMaterial
YieldEmpty Miles
Corporate Trade-offs
Investment Trade-offs
Supply Chain
Trade-offs
Supply Chain Waste
Supply Chain Insights, LLC © 2012
Inside-Out Inside-Out
Supply Chain Tipping Points1987 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 =
Supply Chain Insights, LLC © 2012
Inside-Out Outside-In
Value-Based OutcomesDelivered by Horizontal Processes
+
Supply Chain Excellence = Supply Chain Excellence =
Supply Chain Tipping Points2000 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
Supply Chain Insights, LLC © 2012
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?
22
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Evolution of Supply Chain Excellence
Align
ResilientReliable
Adapt
Efficient
Building Horizontal Connector
ContinuousTesting
LearningImproving
Orchestrate
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 Insights, LLC © 2012
Sell Deliver Make Source
TacticalPlanning
Category Management
Sales and Operations Planning
New Product Launch
Category Management
Trading Partner Policy
Contract Management
Corporate Social Responsibility
Revenue Management
Contract Management
Transactional Processing
Order Management
Order-to-CashProcure-to-Pay
Purchase Order Management
At a High Level: Becoming Market Driven
Supply Chain Insights, LLC © 2012
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.
Supply Chain Insights, LLC © 2012
S&OP Evolution
Manufacturing-Driven
Deliver a Feasible Plan for Operations
Sales Driven
Match Demandwith Supply
Business-planning Driven
Coordination of Plans
Demand Driven
Sense andShape Demand
Market Driven
Orchestrate Demand
Market to Market
Greater Benefit• Growth• Resilience• Efficiency
Goal
A feasible plan • Model the network• Recognize and respect
constraints• Gain plan visibility
Match demand with supply • What-if analysis• Multi-tier inventory analysis• Network design
Deliver the most profitable Plan
• Demand translation• Supply orchestration• Optimize financial drivers
Demand-driven • Sense channel demand• Shape demand• Drive the most profitable
response
Market-driven • Sense buy and sell-side market conditions
• Bi-directionally orchestrate demand
Technology
27Demand Planning Supply Planning Inventory Planning Demand Translation Platform
Key: Financial Planning Market Sensing
Supply Chain Insights, LLC © 2012
Historically, we have:
• Tried to get precise on inaccurate data.
• 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.
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Where are we headed?
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Supply Chains Don’t Play by the Rules
30
But, what if they
could?
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Big Data Supply Chains are Evolving
31
Challenges:
• Transactional• Time phased data
Structured Data
• Social• Channel• Customer Service• Warranty
• Temperature• RFID• QR codes• GPS
• Mapping and GPS• Video• Voice• Digital Images
Unstructured Data
SensorData
NewDataTypes
Volume
Velocity
Variability
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Connecting the Extended Supply Chain
32
Trading Partner 1
Trading Partner 2
Trading Partner 3
Transactional Applications
Transactional Applications
Transactional Applications
Store
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Evolving Supply Chain Architectures
33
Collaborative Layer
Collaborative Layer
Collaborative Layer
Enterprise Data Warehouse
Enterprise Data Warehouse
Demand Signal Repository
Supply Signal Repository
Predictive Analytics
Key:
Transactional Adapters and Intelligent Rule Sets
Trading Partner 1 Trading Partner 2 Trading Partner 3
Transactional Applications
Transactional Applications
Transactional Applications
Enterprise Data Warehouse
Store
Supply Chain Insights, LLC © 2012
Demand planning is the largest gap in supply chain planning
To fix it, we have to redesign the process to focus end-to-end and outside-in
This requires a re-implementation of most architectures
Wrap-up
Supply Chain Insights, LLC © 2012
Who is Lora?
•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.
Supply Chain Insights, LLC © 2012
Where do you find Lora?
Contact Information:
Blog: www.supplychainshaman.com
(3500 pageviews/month)
Twitter: lcecere 2900 followers. Rated
as the top rated supply chain social
network user.
Linkedin:
linkedin.com/pub/lora-cecere/0/196/573
(2300 in the network)