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Agenda

1.Background

2.Supply Chains in 2014

3.Key Trends

4.Concluding Thoughts

Agenda

1.Background

2.Supply Chains in 2014

3.Key Trends

4.Concluding Thoughts

Demand Volatility

Supply Complexity

Complexity Management

Cost Control

Risk Management

Service Centricity

Balance Forecasting and Responsiveness (Agility)

Technology Pillars: Cloud, Big Data/Analytics, Mobility,

Social Business

Agile Inventory

THE Business Challenge

Information

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Platform 1 –

Mainframe to

Client/Server

Platform 2 –

Client/Server to

Internet

The Productivity Imperative

Five Critical Capabilities Enabled by the

3rd Platform

The 3rd Platform creates the underpinnings for

business process transformation…and in some

cases, business model transformation

Businesses will be able to transform:

How they engage with customers

The speed at which they deliver their products

and services

How they innovate

Their resiliency

The reliability of their operations

With such high stakes, the business is increasingly

taking a front seat in technology initiatives

©2013 IDC Visit us at IDC.com and follow us on Twitter: @IDC 9

Manufacturing Industry Performance

Sluggish exports offset by

confidence led consumption. A

virtuous cycle ahead?

Global revenue recovery, but

margin pressure

Source: IDC MI GPI, Q3, Q4 2013 Estimates

50

55

60

65

70

75

80

85

90

30

35

40

45

50

55

60

Consum

er

Confidence

PM

I

PMI

Consumer Confidence

-1

0

1

2

3

4

5

6

90

100

110

120

130

140

150

Q10

9

Q20

9

Q30

9

Q40

9

Q11

0

Q21

0

Q31

0

Q41

0

Q11

1

Q21

1

Q31

1

Q41

1

Q11

2

Q21

2

Q31

2

Q41

2

Q11

3

Q21

3

Q31

3

Q41

3

Net

Pro

fit M

arg

in

Revenue I

ndex

Revenue Net Profit Margin Actual

10

Translating Trend to Spend

© IDC Manufacturing Insights Visit us at IDC-mi.com 11

MFG

Segment

2013 2014 Change

Asset 68,819 71,799 4.3%

Brand 61,406 64,841 5.6%

Engineering 116,417 121,546 4.4%

Technology 43,319 45,546 5.1%

Region 2013 2014 Change

Asia/Pac 57,275 59,217 3.4%

USA 112,511 118,474 5.3%

Western

Europe

87,972 91,150 3.6%

Other 32,203 34,891 8.3%

“We are no longer a tier 1 automotive supplier. We are

a technology company in the automotive space” —Lynn

Tilton, CEO Patriarch Partners, addressing employees

at one of their portfolio companies.

Emerging Market to Emerging Market trade will re-

shape supply chains and product strategies - IDC

Manufacturing Insights Asia/Pacific Predictions

“What we get paid to do is consumer focused

innovation” – Keith McLoughlin, CEO of Electrolux, on

the company’s goal of getting products to market 30%

faster.

“The goal is a free market in talent, so the cream rises” -

Zhang Ruimin, Haier CEO on the company’s goal of

eliminating middle management.

Robotic equipment has increased production volume

30% and reduced headcount by two-thirds according to

Derrek Holland, President of Closet Doctor, a maker of

organizers.

Note: Amounts are millions of dollars except percentages

Agenda

1.Background

2.Supply Chains in 2014

3.Key Trends

4.Concluding Thoughts

Implications for the Supply Chain

Complex and extended global supply networks are a consequence of

globalization and the chase for "low cost" manufacturing.

Volatile demand is a fact of life. Consumers are less brand loyal, and far

more selective, than ever before — and, frankly, are willing to "leave their

wallet at home" if the value they require in a purchase is not apparent.

The accelerating pace of business is putting pressure on manufacturers

to be more "agile" and run the clock speed of their supply chains more

quickly.

Inflation and direct input costs remain a concern for manufacturers that

are seeing recent margin declines and volatility and often lack the ability to

make price increases stick or are already at a cost disadvantage versus

competition.

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Seven Years of Supply Chain Predictions

2008: Cost centric but thinking about speed, flexibility, and service

2009: Financial crisis and manufacturing slump drive efficiency in

assets, inventory … and supply chain modernization

2010: Evolving from fixed-cost-driven supply networks to variable-

cost value networks

2011: Supply chain complexity, balanced with the need to simplify

and segment

2012: Speed and responsiveness across the demand and supply

sides of the supply chain to support the intelligent economy

2013: Supply chain resiliency, with responsiveness as a first

principle

For 2014, IDC Manufacturing Insights sees a continuation of the

focus on supply chain resiliency, with operational resiliency as the

focus of supply chain strategies in the coming year and beyond.

14

3D

Value

Chain

© IDC Retail Insights Visit us at IDC-ri.com

5 Year Horizon

Value of

Transformation

Now

Resilient Supply Chain and

Collaborative Commerce

Networks

Demand Oriented

Data Driven

Digitally Executed

Segmentation

Integrated Planning

Resilient SC

Optimized

Customer

Experience

Strategic

Partner

Management

Collaborative

Commerce

Networks

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Agenda

1.Background

2.Supply Chains in 2014

3.Key Trends

4.Concluding Thoughts

Operational Resiliency in 2014 ….

And Beyond

Extreme granularity both upstream and

downstream.

Further develop a ‘demand orientation’

through demand sensing and capture

Clarity around key purpose and focus

through product and service segmentation

Speed necessitates more deeply integrated

planning and execution functions

Supply and operational visibility

Digital execution, leveraging data to

broaden and extend ‘supply chain

intelligence’

B2B Commerce Networks become

anthropological "dig sites" for wealth of data

assets.

Manufacturers seek new ways to extract

data-driven value, leveraging mobile and

cloud for access anywhere, anytime.

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Political/Social instability

Conflict Minerals

Natural Disasters/

Weather

Workforce (work

stoppages, fair wage)

Energy costs

Counterfeit/Gray Market

Product Quality, Safety

Global Trade

(regulation, trading

rules)

External Forces

Just-in-Time

Forecast-centric

Globally Distributed

Supply Networks

Long lead-times

Outsourcing (blend of

owned and outsourced

supply points)

From LEAN to

BRITTLE

Supply consolidation/

rationalization

Cost obsessed

Internal Practices

Supply Chain

Risk

… with Three Key Enablers

Extreme granularity

Accurate Speed

Operational visibility

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Manufacturers Prioritize Risk and Resilience

Capabilities, Particularly in Supply Chain

Monitoring and Visibility

The opportunity to blithely ignore supply chain risk is over — do so

at your peril!

As supply chains continue to globalize, extend, and increase in

speed, the opportunity for something to go catastrophically wrong

increases geometrically.

It is not just about the big event, it is also about the hundreds of little

disruptions that occur every day that can significantly impact the

health of your supply chain.

But the devil is very much in the details!

IDC Manufacturing Insights believes that companies must improve

supply chain monitoring and visibility, with particular focus on

recognizing supply chain vulnerability to both external and internal

forces and then beginning a readiness assessment.

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Technology Investment Involves

Modernizing Existing Systems … Whilst

also Trying New Approaches

Faster and more integrated planning, both in terms of better linkages

to demand signals and deeper scenario planning

Broader adoption of cloud-based tools, both for edge applications

like transportation management but also in key orchestrating

capabilities like sales & operations planning

Supply chain risk and resiliency investments, particularly in supply

chain monitoring and visibility

Renewed interest in the ‘data management organization’ with key

participation from IT

Investments in execution excellence, notably around more

integrated supply chain execution and the delivery of ‘product-

wrapped services’.

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The Need to be Faster Requires

Manufacturers to Explore More Deeply

Integrated Supply Chain Planning … and

Fulfillment Functions

There is little question that the pressures are

growing on the supply chain to be faster, and

more nimble, while retaining accuracy and

precision.

One of the trends we began to see in late 2012,

and has continued into 2013, is the notion of

integrated planning. Moving from a set of

individual planning components into a cohesive

planning effort that ties all element together

seamlessly. We’ve articulated this in the past in

the context of planning, and specifically Sales &

Operations Planning, but it is more than that; it is

also about integrated fulfillment.

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Extracting Data-Driven Value

The reality is that data exists somewhere to facilitate just about

every decision — you just have to find it!

And it is not just about what a business knows versus what a

business doesn't know, it is also about making information available

to critical decision makers when and how they need it

Consider "event driven" analytics as a way to better manage

potential events in the supply chain that might heretofore have gone

unrecognized.

Cloud-enabled services as support for either installed applications

or exiting business process - leveraging mobile and cloud for

access anywhere, anytime.

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Agenda

1.Background

2.Supply Chains in 2014

3.Key Trends

4.Concluding Thoughts

Planning Assumptions

End-user supply chains must embrace flexibility and visibility if

they are to adapt to a global marketplace that is evolving to be

simultaneously volatile, personalized, and demanding of

quality in product and service.

2014 will see the emergence of a fully staffed technology

group focused on the line of business technology.

Investments in supply chain process and technology must

deliver against productivity goals – waste elimination,

continuity of operations and the ability to double their revenue

without adding any net-new management personnel.

Support, even facilitate, both product reliability and superior

service performance – while maintaining cost competitiveness

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Supply Chain Essential Guidance

Deliver productivity – cost remains a top priority; growth

without adding headcount

Establish operational resiliency – both known and

unknown disruptions

Upstream and downstream visibility – can’t anticipate or

quickly react to what you don’t see

Integration over functionality – both important, but world

class capability not used is not helpful

Service performance – the top priority for many

manufacturers; ‘customer centricity’

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