presentation at the chief supply chain officer conference on june 19th

In Search of Supply Chain Excellence

Lora Cecere of Supply Chain Insights

Supply Chain Insights LLC Copyright © 2013, p. 2

Supply Chain Insights is focused on delivering independent, actionable and objective advice for supply chain leaders. A company dedicated to research, turn to us when you want the latest insights on supply chain trends, technologies to know and metrics that matter.

About Us


18 Reports in 2012


Over 30 Reports Planned for 2013

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This is the new bible for all supply chain executives. It provides an insider’s perspective that will prove incredibly valuable to even the most grizzled supply chain veteran. This is the next must-have business book.

--Bruce Richardson, Chief Enterprise Strategist, Salesforce.com

Today, the worlds of social business and supply chain management have many degrees of separation. I enjoyed working with Lora to understand what the future transformation of digital marketing to digital business could look like.

--Jeremiah Owyang, Research Director, Altimeter

Second Printing of Bricks Matter: 15 Five-Star Reviews on Amazon

Book can be ordered from Amazon.com in Hardcopy or Digital Format


Publishing Two eBooks in 2013 on Supply Chain Metrics That Matter

– Consumer Value Networks– Industrial Value Networks

2013 Publications

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BRICKSRight Use of Assets

Expansion into BRIC Countries (Brazil, Russia, India and China)

Supply Chain Process Knowledge


Evolving Practices

Where are we on Supply Chain Excellence?


Perform better than peer group

Improve year-over-year results

Alignment in metrics

Delivery of performance against the business strategy

Consistency in results

Be a leader in managing trade-offs

What Is Supply Chain Excellence?

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A Look at History: Progress in Productivity

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Source: Supply Chain Insights, Corporate Annual Reports 2000-2011

Inventory Performance

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

122.236691097

869

133.699100562

175

190.147616165

968

170.986522478

989

184.342617399

859

175.550260476

877

167.799951139

247

149.815153981

283

154.915781882

591

198.663134119

976

154.313480863

244

131.819794240

294

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

86.4591727744

674

80.0497751405

437

94.2119040414

919

89.6466306197

472

87.3106543499

647

87.5375651192

192

86.9249877848

117

80.2287884953

207

80.9539454706

477

95.6407835299

941

81.5033702158

11

75.5049485600

736

25.0

75.0

125.0

175.0

225.0

Da

ys

o

f In

ve

nto

ry


Current State: Corporate Social Responsibility


Current State: Sales and Operations Planning


A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity


The Effective Frontier


Trying to Reach Balance


Cross Industry View: (2000-2011)

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Apparel


Apparel Performance


Consumer Packaged Goods Industry Performance


Three Different Strategies


Another View


Comparison


Industry Progress


Introducing the Supply Chain Index

A formulaic representation of how companies are trading off growth, profitability, cycle and

complexity performance on selected supply chain financial

metrics against market valuation.

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Selected 14 Core Supply Chain Ratios to Study

Financial Metrics

Growth Profitability Cycle ComplexityCommon Shares Cash Cash-to-Cash Cycle Altman Z

Employee Growth Cash Change in Period Days of Finished Goods Capital Turnover

Employees Cash on Hand Days of Inventory Current Ratio

Market Capitalization Cash Ratio TTM Days of Payables Outstanding Quick Ratio

R&D Margin Cash Ratio Quarter Days of Raw Materials Return on Assets

R&D Ratio Cash Ratio Year Days of Sales Outstanding Return on Equity

R&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested Capital

Revenue EBITDA DPO/DSO Return on Net Assets

Revenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per Employee

Revenue Growth TTM Gross Margin Inventory Working Capital Ratio

Revenue TTM Gross Profit Inventory Turns

SG&A Margin Net Profit Margin Receivables Turns

SG&A Ratio Operating Cash Flow Ratio Raw Materials Inventory

SG&A to COGS Ratio Operating Margin Work in Progress Inventory

OPEX Ratio

Pretax Margin

Source: Supply Chain Insights LLC

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Selected Ratios


Identified Industry Metrics

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Market Capitalization vs. Revenue Growth

Insight: For example, growth did not correlate for chemical companies.


Metrics that Matter


Consumer Value Chain

Metrics That Matter by Industry

Mass Retail IndustryConsumer Packaged

Goods IndustryChemical Industry

Operating Margin Operating Margin Operating Margin

Days of Inventory Days of Inventory Days of Inventory

DPO/DSODays of Payables

OutstandingDays of Payables

Outstanding

Return on Invested Capital Return on Invested Capital Return on Assets

Working Capital Ratio Current Ratio

Free Cash Flow Ratio

SG&A to COGS Ratio

0.89 0.68

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Healthcare Value Chain


Metrics That Matter by Industry

Medical Care Industry Medical Distribution Pharmaceutical Major

Free Cash Flow Ratio Operating Margin Free Cash Flow Ratio

Working Capital Ratio Return on Invested Capital Return on Invested Capital

Operating Margin Free Cash Flow Ratio Altman Z

SG&A to COGS Ratio Working Capital Ratio Current Ratio

YoY Revenue Growth Return on Net AssetsDays of Payables

Outstanding

Current Ratio DPO/DSO Ratio

Days of Sales Outstanding Current Ratio

Days of Inventory Days of Inventory

Days of Payables Outstanding

0.73 0.84 78


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

What is a Market-Driven Value Network?


Future Evolution

Align:Market Driven

Building Horizontal Process Connectors

ContinuousTesting

LearningImprovingIn Market

OrchestrateDemand and Supply

ResilientReliable

Adapt: Demand Driven

EfficientSense

Demandand Supply

Shape Demand andSupply based

on Market

Absorb DemandVolatility

Absorb Supply Volatility

Right Product

Right Place

Right Time

Right Cost

Cost

Procure to pay/order to

cash


A network that senses demand with minimal latency to drive a near-real time response for

demand shaping and demand translation.

What Is a Demand-driven Value Network?


Rising Price of a Barrel of West Texas Intermediate (WTI)


Commodity Price Increases and Volatility


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?


Demand-shaping Levers

New Product Launch

Marketing

Sales Incentives

Trade Promotions

Distributor Incentives

Assortment

Price

Run-out of obsolescence or mark-down strategies

Orchestration Levers

Market-driven Orchestration Levers

Price to Price Orchestration

Alternate Bill of Materials

Alternate Sourcing

Change in Assortment

Orchestration of Product Mix (Incent products with less commodity variability)

Changes in Demand Shaping Strategies

Commodity Hedging


Market-Driven Value Networks Characteristics


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

Race for Supply Chain 2020


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


Connecting the Extended Supply Chain

45

Trading Partner 1 Trading Partner 2 Trading Partner 3

Transactional Applications



Store


Connecting the Extended Supply Chain

Collaborative Layer

Collaborative Layer

Collaborative Layer

Enterprise Data Warehouse


Demand Signal Repository

Supply Signal Repository

Predictive Analytics

Key:

Inter-Enterprise Systems of Record: Transactional Adapters and Intelligent Rule Sets

Trading Partner 1 Trading Partner 2 Trading Partner 3





Store


Definition

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


Rethinking Analytics


• Outside-in• End-to-End Orchestration• Supply Chain Matters

Path Forward


Questions?


Join Us!

www.supplychaininsightsglobalsummit.com

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• July 11th: Big Data Supply Chains and the Future of Analytics• August 15th: State of Supply Chain Talent. Missing Link in the

Supply Chain

Upcoming Webinars

Each webinar is based on new and relevant research and will feature two-three industry leaders


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 3800 followers. Rated as the top rated supply chain social network user.

LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (3560 in the network)

presentation at the chief supply chain officer conference on june 19th

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