presentation for ism webinar april 12

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


3

Current State


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


The Long Tail: Growing Complexity

Volume

Level of PredictabilityPredictability based on forecast accuracy vs Actual Order Profiles


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


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


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 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


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 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


12

Pitfalls and Potholes


A forecast is not a forecast is not a forecast.


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


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


17

The Role of Forecasting


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


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 =


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


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


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


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


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.


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


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.

28


29

Where are we headed?


Supply Chains Don’t Play by the Rules

30

But, what if they

could?


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


Connecting the Extended Supply Chain

32

Trading Partner 1

Trading Partner 2

Trading Partner 3

Transactional Applications



Store


Evolving Supply Chain Architectures

33

Collaborative Layer

Collaborative Layer

Collaborative Layer

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





Store


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


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.


Where do you find Lora?

Contact Information:

[email protected]

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)

presentation for ism webinar april 12

Business

potholes supply chain

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