supply chain metrics that matter in market-driven world

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Supply Chain Metrics that Matter in the Market driven World

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Supply Chain Metrics that

Matter in the Market driven

World

Supply Chain Insights LLC Copyright © 2015, p. 2

Disclaimer: I am a Skeptic

Supply Chain Insights LLC Copyright © 2015, p. 3

A Curmudgeon of sorts…

Supply Chain Insights LLC Copyright © 2015, p. 4

A Fortune-teller….

Supply Chain Insights LLC Copyright © 2015, p. 5

My Point of Reference

Self-published

September 2014

Wiley

December 2014

Wiley

December 2012

Supply Chain Insights LLC Copyright © 2015, p. 6

Get Prepared

Supply Chain Insights LLC Copyright © 2015, p. 7

Today’s Reality

Supply Chain Insights LLC Copyright © 2015, p. 9

Today’s Supply Chain is Stuck

Supply Chain Insights LLC Copyright © 2015, p. 10

Progress: All Industries

Industry Snapshots (2006-2013)

Industry

Year –over-

Year

Revenue

Growth

Operating

Margin

Inventory

Turns

Cash-to-

Cash

Cycle

Revenue

per

Employee

(K$)

SG&A

Ratio

Retail Apparel Industry 18%

39%

0.39

27%

05

05%

68

26%

325

18%

27%

05%

Apparel Manufacturing Industry 14%

82%

0.12

32%

05

68%

150

08%

400

355%

27%

63%

Mass Retail Industry 09%

50%

0.06

20%

06

06%

03

148%

350

48%

23%

6%

Beverage Industry 09%

61%

0.19

16%

02

04%

53

46%

512

NC

24%

16%

Pharmaceutical Industry 08%

47%

0.23

29%

03

16%

155

47%

572

32%

27%

08%

Chemical Industry 08%

45%

0.10

10%

06

04%

87

23%

557

23%

14%

27%

Medical Device Industry 06%

38%

0.14

32%

02

13%

206

16%

351

12%

34%

04%

Grocery Retail Industry 06%

31%

0.03

37%

17

01%

10

50%

405

54%

14%

06%

Consumer Packaged Goods05%

25%

0.14

73%

08

482%

72

17%

333

14%

26%

09%

Food Industry 05%

55%

0.10

19%

07

17%

40

04%

534

55%

20%

18%

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2013

Industry Average comprised of public companies (combined food & beverage industry: NAICS 3112% where % is any number from 0-9, 311320, 311520, 311821, 311941 &

312111), (chemical: NAICS 325188 & 325998), (consumer packaged goods: NAICS 3256% where % is any number from 0-9), (medical device industry: NAICS 339112),

(pharmaceutical industry: NAICS 325412) reporting in One Source with 20123annual sales greater than $1billion

NC=no change

Supply Chain Insights LLC Copyright © 2015, p. 11

Why?

Supply Chain Insights LLC Copyright © 2015, p. 12

Demand

Signal

Accurate Weekly

Forecasting is ...

Delay from

Purchase to

Signal

What is Demand?

* Represents emerging markets

Supply Chain Insights LLC Copyright © 2015, p. 13

Consumer-driven Supply Networks: Defined by P&G in the 1990s

as a shelf-driven, outside-in process defined by successful execution

of the two moments of truth.

Demand-driven Supply Networks: As defined by AMR Research in

2004: a supply chain that senses and translates market signals in

real time.

Demand-driven Value Networks: As defined by AMR Research in

2007: A network that senses demand with minimal latency to drive a

near-real time response to shape and translate demand.

Market-driven Value Networks: As defined by Supply Chain

Insights in 2010: an adaptive network focused on a value-based

outcomes that senses, translates, and orchestrates market changes

(buy and sell-side markets) bi-directionally with near-real time data to

align sell, deliver, make and sourcing organizations outside-in.

Evolution of Demand-driven Concepts

Supply Chain Insights LLC Copyright © 2015, p. 14

Fallacy #1: Functional Excellence

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 15

Fallacy #2: A Project-based Focus

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 16

What We Expected

Supply Chain Insights LLC Copyright © 2015, p. 17

A Supply Chain

is a Complex System

with Complex

Processes

with Increasing

Complexity

What we Learned….

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 18

The Supply Chain Effective Frontier

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 19

Correlations to Market Capitalization

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 20

Orbit Chart: Wal-Mart

(Inventory Turns and Operating Margin)

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 21

Orbit Chart: Apple

(Inventory Turns and Operating Margin)

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 22

Orbit Charts: Dow Chemical Company

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 23

Orbit Charts: Mattel, Inc.

(Inventory Turns versus Operating Margin)

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 24

Orbit Chart: Procter & Gamble

(Inventory Turns and Operating Margin)

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 25

Overall Network: Inventory Turns versus

Operating Margin 2006-2012

#sciwebinar

Supply Chain Insights LLC Copyright © 2015, p. 26

Measuring Supply Chain Improvement

Overall Ranking per Company

• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)

• Strength: Inventory Turns & Operating Margin Vector Trajectory (30% of score)

• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)

Supply Chain Insights LLC Copyright © 2015, p. 27

Supply Chains to Admire Methodology

PerformanceBeats the industry

average for operating

margin, inventory turns

and ROIC for 2006-

2014 and 2009-2014

ImprovementRanks above peer

group average on

The Supply Chain

Index for 2006-

2014 or 2009-2014

+

Supply Chain Insights LLC Copyright © 2015, p. 28

An Example: Food

Supply Chain Insights LLC Copyright © 2015, p. 29

Automotive

Supply Chain Insights LLC Copyright © 2015, p. 30

Annual Study: Supply Chains To Admire

Supply Chains to Admire 2015 to be Announced at the Supply

Chain Insights Global Summit on September 9th and 10th

Driving Results

Supply Chain Insights LLC Copyright © 2015, p. 32

• Leadership

• Building of talent

• Outside-in processes

• Horizontal process focus

• Active and intentional design

• Supply chain planning

What Makes a Difference

Supply Chain Insights LLC Copyright © 2015, p. 33

Right Stuff?

Supply Chain Insights LLC Copyright © 2015, p. 34

Growing Talent Gap

Supply Chain Insights LLC Copyright © 2015, p. 35

Losing Ground

Supply Chain Insights LLC Copyright © 2015, p. 36

What does this Say to You?

Supply Chain Insights LLC Copyright © 2015, p. 37

State of IT Systems

Supply Chain Insights LLC Copyright © 2015, p. 38

The Role of ERP

Supply Chain Insights LLC Copyright © 2015, p. 39

IT Systems: Importance & Satisfaction by Role & Supply Chain

Supply Chain Insights LLC Copyright © 2015, p. 40

State of Planning

Supply Chain Insights LLC Copyright © 2015, p. 41

Get Prepared

Supply Chain Insights LLC Copyright © 2015, p. 42

Supply Chain Insights LLC Copyright © 2015, p. 43

• It is not an evolution

• We are defining new

practices

• Learn, to unlearn, to relearn

Get Prepared

Supply Chain Insights LLC Copyright © 2015, p. 44

Questions?

Supply Chain Insights LLC Copyright © 2015, p. 47

Founder: Lora Cecere

• Founder of Supply Chain Insights

• “LinkedIn Influencer”

• Guest blog for Forbes

• Author of 3 books: Bricks Matter (2012), Shaman’s Journal (2014)

and Supply Chain Metrics That Matter (December 2014)

• 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.

Contact Information: • Email: [email protected]

• Blog: www.supplychainshaman.com (6000 pageviews/month)

• Forbes: http://www.forbes.com/search/?q=lora+cecere

• Twitter: lcecere (5900 followers)

• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (42,000 followers)