presentation for consumer goods technology

Bricks MatterOctober 2012

BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation

LORA M. CECERE CHARLES W. CHASE JR.

BookPublishes December

2012

BRICKSRight Use of Assets

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

Supply Chain Process Knowledge

Supply Chain Insights LLC Copyright © 2012, p. 4

• Supply chain technology implementations have reduced inventory.

• Companies should implement supply chain best practices.

• Companies that have focused on collaboration in the supply chain have built competitive advantage.

• Supply chain excellence matters.

Three Lies and a Truth


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

122.236691097

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

Evolving Practices


Building End-to-End Value Networks

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


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


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

Trends Supply Chain: Retail

Trends Supply Chain: Consumer Products

In Search of Supply Chain Excellence

Race for Supply Chain 2020

Wrap-up


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


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


Ease of Getting Total Supply Chain Costs: Manufacturers, Retailers & Distributors

___________________________________________________________Source: Supply Chain Insights LLC, Transportation (Aug-Oct 2012)Base: Transportation Users (Manufacturers, Retailers and Distributors) (n=34)Q18. How easy is it for your company to get total supply chain costs for your operations?

Users 12% 12% 24% 24% 29%

USERS: Ease of Getting Total Supply Chain Costs

Extremely/very easy 5 Neutral 3 Extremely/very difficult

24% EASY 53% DIFFICULT


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


Agenda





Wrap-up


Supply Chain Management: Top 3 Elements of Pain for Respondent


Evolution of Supply Chain Process Excellence

Align:Market Driven

ResilientReliable

Adapt: Demand Driven

EfficientAbsorb

DemandVolatility

Absorb Supply Volatility

Right Product

Right Place

Right Time

Right Cost

Cost

Procure to pay/order to

cash


Evolution of Supply Chain Process Excellence

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


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?


Supply Network: When the supply chain is extended to a network of trading partners, it is termed a supply network.

Value Chain: When the emphasis of this extended supply chain shifts from cost to value, it is called a value chain.

Value Network: When it becomes more strategic to the company, focused outside-in to drive value-based outcomes, it is termed a value network.

Definitions

A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity

Looking at the Supply Chain as a Complex System


Growth Profitability Cycle Complexity

R&D Margin Cash on Hand C2C Cycle Altman Z

R&D to COGS Ratio Free Cash Flow Ratio Days of Finished Goods Capital Turnover

SGA 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

Pretax Margin (EBIT) Days of Sales Outstanding Return on Equity

YoY Sales Growth Days of Work in Progress

Return on Invested Capital

Operating Margin DPO/DSO Return on Net Assets

Inventory Turns Revenue/Employee

Receivables Turns Cost of Sales

Useful Ratios


• Performance better than peer group• Year-over-year improvements• Consistency in results• Leadership in managing trade-offs

What is Best in Class?


Corporate Summary


Metrics Included for Comparison


Cash-to-Cash Cycle vs. Gross Margin (2000-2003)


Inventory Turns vs. Revenue per Employee (2002-2011)SUMMARY SLIDE


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


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


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)


Definition

57

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


Connecting the Extended Supply Chain

58


Connecting the Extended Supply Chain


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


More than Just “Like”


• Newell Rubbermaid

Newell Rubbermaid Gets IT!

#Future15SB @bwdumars


#Future15SB @bwdumars

Newell Rubbermaid Gets IT!


“Kellogg’s cereal primarily in the U.S. due to an odor from waxy resins found in the package liner. Total charges were $46 million with a $.09 impact on earnings per diluted share.”

Kellogg Annual Report

Kellogg 2010


SCI Research Supply Chain Index Ask a Supply Chain Wizard Supply Chain Wiki

Blogs Videos, Webinars, and Podcasts

Share Your Own

EDUCATE


Consulting Technology

ENRICH

NEW


Job Postings Events

Salary Information Help Board

EVOLVE

NEW


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…

70


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 3350 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 for consumer goods technology

Business

supply chain bestpractices

supply chain index analysis

vision startsshared

employee revenue

vision changesource

confusionshared vision

right stuffshared vision

average days of inventory