supply chain insights global summit 2013 - supply chain excellence with lora cecere

Supply Chain Insights Global Summit #SCISummit September 2013, p.1TM


Lora Cecere

Founder and CEO

Supply Chain Insights

What Is Supply Chain Excellence?

Supply Chain Insights Global Summit #SCISummit September 2013, p.4TM September 2013, p.4TMSupply Chain Insights Global Summit #SCISummit

Supply Chain Insights Global Summit #SCISummit September 2013, p.5TMSupply Chain Insights Global Summit #SCISummit September 2013, p.5TM

• Defining Supply Chain Excellence

• Conquering the Effective Frontier

• The Supply Chain Index

• Imagine

Agenda


Current State


Agility


Need for Strategy


Process Evolution

Align: Market Driven

Build Horizontal Process Connectors

Continuously Test,Learn & Improve

in Market

OrchestrateDemand and Supply

Source: Supply Chain Insights LLC

Adapt: DemandDriven

Sense Demandand Supply

Shape Demand and Supply

Based on Market

Resilient

Absorb DemandVolatility

AbsorbSupply

Volatility

ReliableRight Product

Right Place

Right Time

Right Cost

Efficient

Cost

Procure to pay/ order to cash


What Is Supply Chain Excellence?

• Perform better than peer group

• Improve year-over-year results

• Align internally on metrics

• Deliver against the business strategy

• Demonstrate consistency in results

• Use innovation in supply chain processes

• Balance. Be leaders in managing trade-offs





• Imagine

Agenda


Definitions

• Supply Chain Excellence: The behavior of companies working to maximize value through the setting of targets for supply chain financial ratios and aligning metrics that matter (tied to value chain strategy).

• Supply Chain Effective Frontier: The balance of growth, profitability, cycle and complexity metrics to deliver the supply chain strategy. It may or may not maximize the company’s market valuation.

• Supply Chain Index: A formulaic representation of supply chain financial ratios correlated to stock market capitalization valuation.


The Supply Chain Effective Frontier


Mining 20 Years of Financial Data


Most Interesting Patterns

• Cash to Cash versus Inventory Turns• Revenue per Employee versus Inventory Turns• Operating Margin versus Inventory Turns


What Have We Learned?

• Each industry has a different pattern of trade-offs of balancing growth, profitability, cycles and complexity.

• Companies that are supply chain leaders have very small movement with a balanced portfolio of metrics.

• It is about MUCH more than Return on Assets (ROA), growth and inventory.


Productivity in Manufacturing


Productivity in Retail


Progress in Inventory Turns and Operating Margin (2000-2012)


Impact of A Recession


0 250 500 750 1,000 1,2500

3

6

9

12

15

2002 2012

The Dow Chemical Company

Revenue per Employee (K$)

Inv

en

tory

Tu

rns

Visualizing the Patterns

Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source

Best Scenario

DOW999, 6.7

Trace the line from 2002 point to 2012 point to follow the performance over time. The diamond shows the company’s average over the period.

Ex: The Dow Chemical Company (DOW) has an average of 461 K$ for revenue per employee and 4.0 for inventory turns.

Ideally, companies are increasing inventory turns and revenue per employee, moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. revenue per employee (x-axis).

Average (Revenue per Employee, Inventory Turns)


Beverage


Cereal


Household Products


A Closer Look


Another View


Comparison Chart (2000-2006, 2007-2009, 2010-2012)





• Imagine

Agenda


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

complexity performance on selected supply chain financial metrics against

market valuation.


Household & Personal Products Equation

Y = 2.93 – 0.01(DOI) + 0.02(DPO) + 0.01(DSO) + 3.07(FCF) –

0.93(ROIC) + 0.28(SGAC) – 4.10(WC)

NOTE: Full equation is Y = 2.931928671 - 0.006302786 (Days of Inventory) + 0.019638717 (Days of Payables Outstanding) + 0.008347971 (Days of Sales Outstanding) + 3.06558272 (Free Cash Flow Ratio) - 0.929537849 (Return on Invested Capital) + 0.282841974 (SG&A to COGS Ratio) - 4.097122543 (Working Capital Ratio). We utilized adjusted which accounts for the occurrence of large p values. Outlier values were defined and excluded as those 5 times larger than IQR.

Correlation Strength

Household & Personal Products Equation


CPG Ranking 2012


Mean Absolute Percent Error & Value





• Imagine

Agenda


Digital Manufacturing

Internet of Things

Big Data

Digital Path to Purchase

CSR as a Brand Advantage

New Forms of Analytics

Business Networks

Inter-Enterprise Systems of Record

3D Printing

Collaborative Economy


imagine


Imagine


Conventional Manufacturing


Use of 3-D Printing


Yelling Listening Functional Silos T-Shaped ManagersFunctional Silos

BREADTH

DE

PT

H

Re-aligning Process & People


• Most Companies Are Stuck

• New Practices Are Emerging

• We Must Design with the End in Mind


Thanks to Our Sponsors!


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Supply Chain Insights Global Summit 2014September 10-11, 2014

The Phoenician – Scottsdale, AZ USA


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