Presentation from Elemica's reveal2014 Conference

1. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in
any form without Gartner's prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on
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or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research
organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a
discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its
shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these
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From Out-Sourcing to Optimization:
Making Sense of Processes in the
Chemical Industry
Paul Lord
Research Director
Gartner Supply Chain

2. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Inventory: The Window Into Supply Chain
• No permission or grand strategy are needed to
eliminate inventory waste
• Lower inventory does not necessarily reduce cost
• Metrics benchmarking and strategic declarations
are not enough
2
Ref: “Supply Chain Research Roundup for Inventory Management, 2013 “

3. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Inventory Alignment and Determination
Occurs at Multiple Levels
Optimized Policies
to
Reduce Costs and
Improve
Efficiencies
Optimized
Inventory Levels
Physical Structure
and Sourcing
Decisions
• Capital
investments
• Mergers &
acquisitions
• Sourcing
relations
• Stocking levels
• Stocking
locations
• Service levels
Tactical
Strategic
• Inventory, transportation, policies
• Product flow: Consolidation,
routing carbon footprint
Operational
Ref: “The Journey to Successful Supply Chain
Inventory Management Requires a Sequenced Plan”

4. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Architect Decision Process Layers With Carefully
Selected Frequencies & Time Horizons
Sell Deliver Make Source
Strategic/Long-term
Planning
(2 Years to 5 Years)
Strategic Planning and Forecasting
Network Optimization, Strategic Risk Evaluation
Tactical/Mid-term
Planning
(3 Months to 24 Months)
Sales and Operations Planning
Demand
Planning
Supply Planning
Inventory Configuration
Supplier Mgmt.
Contract Mgmt.
Operational/
Short-term Planning
(1 Week to 12 Weeks) Vendor Mgmt.
Inventory (VMI)
Distribution Req.
Planning ( DRP)
Inventory Policy
Transportation Mgmt.
Factory Scheduling Material Req.
Planning (MRP)
Sourcing
Execution
(Order Duration to Shipment)
Order to Cash Manufacturing
Execution Systems
(MES)
Procure to Pay
Note: Planning Horizons Differ by Industry Depending on Product Life Cycle and Asset Investments
“Five Chemical Industry Supply Chain Insights From 2013”

5. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Supply Chain Optimization:
Model-based prescriptive analytics for decision support
"Optimization is the ability to minimize cost or maximize profit subject to
existing constraints such as …"
— J.Paul Dittmann, Supply Chain Transformation:
Building and Executing an Integrated Supply Chain Strategy
• Conscious
design tradeoffs:
• Networks
• Processes
• Incentives
Alignment
• Without
constraints,
supply chain is
easy…..and
expensive
Constraints
• Analysis
improves
judgment
• Speed allows
postponement
Decisions
“Supply Chain Optimization in Process Manufacturing Requires More Than Analytics”

6. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Value Chain Orchestration:
Scaled and Sustained With Enabled Processes
Demand Supply
Product
Global
Optimized
Efficient
Strategic
Operational
Digitized
Collaborative

7. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Outcomes, Tactics, Features & Benefits
• Outcomes:
- Profitable growth, customer delight, reliable supply,
joint value creation
• Tactics:
- Standardization, Integration, Outsourcing,
Collaboration
• Features & Capabilities:
- Global, Automated, Digital, Responsive, Visibility
• Benefits
- Cost reduction, Working capital reduction, Service
improvement
7

8. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Procter & Gamble’s Burning Platform
Winning the Moments of Truth
Big countries
Big brands
Big customers
A.G. Lafley
A.G. Lafley, Proctor & Gamble
• “First Moment of Truth” - the first
interaction between a shopper and
a product on the store’s shelf.
• The second moment of truth is when
the consumer uses the product.

9. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
9

10. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Research Insights: Demand Fulfillment
• Desired Outcomes Are Clear
- Customer Satisfaction & Experience
- Reliable Supply (Perfect order)
• Tactics & Process Features
- Integration, Segmentation, Collaboration, Responsive
• Metrics and Justifications for Improvement Don’t
Always Align
- Digitization
- Productivity / Scalability
10

11. 11
Integrated Global Supply Chain
Vision & Guiding Principles
Be the reason customers do business with
Eastman
The Integrated Global Supply Chain:
• Is all in for safety
• Is reliable and provides creative solutions to our customers
• Translates market insights from customer and suppliers into
profitable business responses
• Is demand driven
• Is an organization that provides opportunities for professional
growth and development
• Demonstrates excellent performance in revenue growth, total
cost management, return on assets, inventory optimization,
and targeted levels of service

12. DuPont Process Performance
World Class Performance Requires Eliminating
Process Defects Across the Value Chain
Suppliers Customers
Requisition to Pay Order to CashRecord to Report
Demand
Mgt
Supply
Mgt
Material
Money
Information
Transactional Processes

13. BPM Supports the Elements of
Value Chain Transformation
Develop and Maintain
Cross Functional
Standard Processes
Standard KPIs
for Integrated
E2E Supply
Chain
Behaviors to
Support
Change
Standard System &
Data Architecture
Standard Governance,
Accountability and
Centered Teams
Business
Processes
Capabilities
Strategy &
KPIs
Systems &
Information
Flows
Structure
Culture
(M & B)
Mindsets, Behaviors &
Organizational Liquidity
Reference: “DuPont Applies Business Process
Management to Deliver Supply Chain Performance
Breakthroughs”

14. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Concluding thoughts
• Prioritize inventory visibility, defined supply
processes and waste reduction
• Align physical networks, decision processes and
metrics/incentives
• Distinguish features and tactics from outcome
and benefits
• Different ‘metrics’ types….KPI’s and PPI’s
• Beware the efficiency trap…pursue strategic
alignment and higher value
• Avoid isolated attention to a single process
layer…. connect operations with strategy
14

15. © 2013 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in
any form without Gartner's prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on
gartner.com. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness
or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research
organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a
discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its
shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these
firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on
the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity."
Paul Lord
Paul.lord@gartner.com
QUESTIONS?