Gma Tyagi

582 views
446 views

Published on

0 Comments
0 Likes
Statistics
Notes
  • Be the first to comment

  • Be the first to like this

No Downloads
Views
Total views
582
On SlideShare
0
From Embeds
0
Number of Embeds
7
Actions
Shares
0
Downloads
3
Comments
0
Likes
0
Embeds 0
No embeds

No notes for slide

Gma Tyagi

  1. 1. TAKING MANUFACTURING BEYOND WORLD CLASS ALOK TYAGI Goa Management Association Panaji 20 September 2003
  2. 2. If you ride the tiger… you can neither slow down nor stop… without getting eaten up
  3. 3. Agenda Beyond world class principles What will it need to take manufacturing beyond world class Supply chain: Strategic design considerations Drivers of complexity in global manufacturing The paradoxes of complexity
  4. 4. Agenda Beyond world class principles What will it need to take manufacturing beyond world class Supply chain: Strategic design considerations Drivers of complexity in global manufacturing The paradoxes of complexity
  5. 5. Beyond world class ( BWC) <ul><li>What does becoming ‘ beyond world class’ mean ? </li></ul><ul><li>Strategy towards “ beyond world class’ </li></ul><ul><li>Covenanting </li></ul><ul><li>Seeing the customers’ future </li></ul><ul><li>The character of the ‘beyond world class’ company </li></ul><ul><li>Implementing ‘beyond world class’ principles </li></ul>
  6. 6. The paradigm shift World Class Beyond World Class <ul><li>Profitability </li></ul><ul><li>Shareholder value </li></ul><ul><li>Market position </li></ul><ul><li>ROS/ROI/RONW </li></ul><ul><li>Creating intrinsic value </li></ul><ul><li>Long term employee retention </li></ul><ul><li>High retention rate of suppliers </li></ul><ul><li>Retaining best customers </li></ul><ul><li>Emerge long-term winners </li></ul>
  7. 7. Some key questions <ul><li>Q.1 Are BWC principles mutually exclusive from other business </li></ul><ul><li>models ? </li></ul><ul><li>Yes – they de-emphasise low-end targets, which are actually consequences </li></ul><ul><li>Key point: success is the proven outcome of hard work </li></ul><ul><li>Q.2 Is it difficult to become a BWC company ? </li></ul><ul><li>Although it is not difficult to achieve, it is often difficult to start </li></ul><ul><li>Like several transformational processes, it needs the CEO’s thinking aligned to it, and a leadership cascade all the way </li></ul>
  8. 8. Some key questions <ul><li>Q.3 Will the change to be a BWC company worth it ? </li></ul><ul><li>Yes, BWC companies achieve the lower level outcomes – profitability, market share, shareholder value- as consequences </li></ul><ul><li>To realise intrinsic higher order results, in addition </li></ul><ul><li>One mindset this needs is that the current leadership is committed to prepare, mentor, and empower the leadership of the generation next </li></ul><ul><li>Q.4 How do we change to BWC ? </li></ul><ul><li>By applying these basic principles </li></ul><ul><li>- being customer focussed </li></ul><ul><li>- distinguishing between external and internal customer </li></ul><ul><li>- seeking continuous solutions development </li></ul>
  9. 9. Strategy towards BWC <ul><li>A commitment to excellence </li></ul><ul><li>Establishing covenantal relationships </li></ul><ul><li>Value plus – aligning a horizontal delivery system </li></ul><ul><li>Storm clouds – withstanding tests </li></ul><ul><li>A question of character – setting a character culture </li></ul>
  10. 10. Building covenantal relationships <ul><li>From contracts to covenants: moving from “what is permissible” to “what is possible” unleashes both individual creativity and collaborative progress </li></ul><ul><li>Vision and covenant alignment </li></ul><ul><li>Covenantal relationships cover customers, employees, suppliers </li></ul>
  11. 11. Seeing the customer’s future <ul><li>The problem with assumptions </li></ul><ul><li>We cannot assume that our customer know where they are going </li></ul><ul><li>We cannot assume that our customers’ industries are stable and consistent just because they have been stable and consistent in the past </li></ul><ul><li>We cannot assume that our customers want our help </li></ul><ul><li>Four key questions to ask the customers: </li></ul><ul><li>What changes must you make to meet the needs of your customers in the future ? </li></ul><ul><li>What are the most significant threats – long term and short term – to your strategy ? </li></ul><ul><li>What are the three most significant opportunities that you have to serve your customers in the future ? </li></ul><ul><li>How will you meet the challenges in your industry ? </li></ul>
  12. 12. The character of a BWC company <ul><li>Humility : The ability to focus more on the needs and situation of others, without thinking less of ourselves </li></ul><ul><li>Sponsoring champions : “Show how”, not “know how” </li></ul><ul><li>Integrity : The complete, end-to-end alignment between the goals and objectives of the company, and the personal destiny of its employees </li></ul><ul><li>Modelling : Employees, customers and suppliers should see covenantal behaviour modelled across the organisation , standing with leadership </li></ul><ul><li>Fairness : People who are treated fairly are more likely to support the decisions of leaders who ask them to move outside their comfort zones </li></ul><ul><li>Caring : The most powerful tool for employee encouragement and growth </li></ul>
  13. 13. Implementing BWC principles <ul><li>Phase One: Alignment audit </li></ul><ul><li>VMV </li></ul><ul><li>Structure, competencies </li></ul><ul><li>Culture, communications </li></ul><ul><li>Follower commitment to shared vision </li></ul><ul><li>Phase Two: Shared vision and guiding principles </li></ul><ul><li>Destination </li></ul><ul><li>Mutual impact </li></ul><ul><li>Impact on customers </li></ul><ul><li>Impact on suppliers /other departments </li></ul><ul><li>Phase Three: Strategic initiatives </li></ul><ul><li>Giving meaning to the vision </li></ul><ul><li>Serve customers </li></ul><ul><li>Develop solutions for increasing customer competency </li></ul><ul><li>Develop solutions for increasing internal competency </li></ul><ul><li>Create interdependence between employees </li></ul>
  14. 14. Implementing BWC principles (contd.) <ul><li>Phase Four: Vital objectives </li></ul><ul><li>Specific, measurable, observable, time-sensitive actions </li></ul><ul><li>Assign responsibility to single person </li></ul><ul><li>Tactically implement the strategy </li></ul><ul><li>Maintain implementation focus </li></ul><ul><li>Phase Five: Alignment feedback and mutual accountability </li></ul><ul><li>Review results </li></ul><ul><li>Adjust methods </li></ul><ul><li>Celebrate successes </li></ul><ul><li>Teach / learn from experience </li></ul><ul><li>Share the BWC impact </li></ul>
  15. 15. Agenda Beyond world class principles What will it need to take manufacturing beyond world class Supply chain: Strategic design considerations Drivers of complexity in global manufacturing The paradoxes of complexity
  16. 16. Supply Chain: Strategic design considerations <ul><li>Achieving strategic fit </li></ul><ul><li>Expanding strategic scope </li></ul><ul><li>Facilitates decisions in supply chain design </li></ul><ul><li>Framework for network design decisions </li></ul>
  17. 17. Uncertainity spectrum The first step in achieving strategic fit between competitive and supply chain strategies is to understand customers by mapping where the demand is located on the implied uncertanity spectrum The implied uncertanity spectrum Low implied demand uncertanity Purely functional products: gasoline Somewhat uncertain demand Established goods:Crest toothpaste Somewhat uncertain demand New models of existing goods: Ford Taurus High implied demand uncertanity Entirely new products: the introduction of the Palm Pilot
  18. 18. The responsiveness spectrum The second step in achieving strategic fit between competitive and supply chain strategies is to understand the supply chain and map it on the responsiveness spectrum The responsiveness spectrum Highly efficient Integrated steel mills: production scheduled weeks or months in advance with little variety or flexibility Somewhat efficient Hanes apparel: a traditional make-to stock manufacturer with production lead time of several weeks Somewhat responsive Most automotive production: delivering a large variety of products In a couple of weeks Highly responsive Dell: customer made PCs and servers in a few days
  19. 19. Establishing the responsiveness-efficiency frontier High Low High Low Cost Responsiveness Cost- Responsiveness efficient frontier
  20. 20. Finding the zone of strategic fit The final step in achieving strategic fit is to match supply chain responsiveness with the implied demand uncertanity in the zone of strategic fit. All functional strategies in the value chain support the supply chain responsiveness Certain Demand Efficient Supply chain Implied Uncertanity Spectrum Uncertain Demand Responsive Supply chain Responsiveness Spectrum Zone for strategic fit
  21. 21. What is the right supply chain for your product ? Greater reliance on responsive modes Greater reliance on low cost modes Transportation strategy Select based on speed, flexibility, and quality Select based on cost and quality Supplier strategy Aggressively reduce even if the costs are significant Reduce but not at the expense of costs Lead time strategy Maintain buffer inventory to meet unexpected demand Minimize inventory to lower cost Inventory strategy Maintain capacity flexibility to meet unexpected demand Lower cost through high utilization Manufacturing strategy Higher margins as price is not a prime customer driver Lower margins because price is a prime customer driver Pricing strategy Create modularity to allow postponement of product differentiation Maximize performance at the minimum product cost Product design strategy Respond quickly to demand Supply demand at the lowest cost Primary goal Responsive Supply Chain Efficient Supply Chain
  22. 22. Framework to analyze supply chains Competitive strategy Product Development strategy Supply chain strategy Marketing strategy Suppliers Manufacturer Distributor Retailer Customer
  23. 23. Intercompany scope Competitive strategy Product Development strategy Supply chain strategy Marketing strategy Suppliers Manufacturer Distributor Retailer Customer The intercompany scope of strategic fit is essential today because the competition has shifted from company v/s company to supply chain v/s supply chain. The company’s partners in its supply chain have the casting vote on its business success !
  24. 24. Deciding facility type Offshore Facility Type Lead Source Server Contributor Outpost Purpose of facility Low cost – for export Low cost – for global production Regional production Regional production with Development skills Regional production, built to gain local skills Leads in development and Process technologies
  25. 25. Determining number of facilities Relationship between Number of facilities and Inventory costs Number of facilities Inventory costs Number of facilities Transportation costs Relationship between Number of facilities and Transportation costs
  26. 26. Determining number of facilities (contd.) Relationship between Number of facilities and Facility costs Number of facilities Facility costs Variation in logistics costs and response time with Number of facilities Total logistics Cost Number of facilities Response time
  27. 27. Framework for network design decisions COMPETITIVE STRATEGY INTERNAL CONSTRAINTS Capital growth strategy, Existing network PRODUCTION TECHNOLOGIES Capital growth strategy, Existing network COMPETITIVE ENVIRONMENT PRODUCTION METHODS Skill needs, response time FACTOR COSTS Labour, materials, site specific PHASE I Supply Chain Strategy PHASE II Regional Facility Configuration PHASE III Desirable Sites PHASE I Supply Chain Strategy GLOBAL COMPETITION TARIFFS & TAX INCENTIVES REGIONAL DEMAND Size, growth, homogeneity, Local specification POLITICAL, EXCHANGE RATE, AND DEMAND RISK AVAILABLE INFRASTRUCTURE LOGISTICS COSTS Transport, inventory, coordination
  28. 28. Agenda Beyond world class principles What will it need to take manufacturing beyond world class Supply chain: Strategic design considerations Drivers of complexity in global manufacturing The paradoxes of complexity Agenda
  29. 29. Drivers of complexity in global manufacturing The profitability imperative: cost focus The growth imperative: pursuit of markets The value imperative: product innovations
  30. 30. The cost squeeze To reduce costs, many companies are being forced to relocate or outsource parts of their supply chain Outsource manufacturing functions Use outsourced engineering services Close production facilities to shed excess capacity Outsource distribution & logistics functions Move production to lower cost geography 0 20 40 60 80 Percentage of companies with some or more implementation
  31. 31. The phenomenon of hollowing out
  32. 32. Exploiting country advantage Top destinations for engineering outside home region for North American and Western European manufacturer over the next three years (percentage of companies indicating entry and expansion plans) Western Europe (10) India (8) Mexico/Central America (10) Central Europe (14) South East Asia (10) Eastern Europe (15) Eastern Europe (11) India (12) China (16) United States/Canada (16) China (22) Western Europe (percent) North America(percent)
  33. 33. The pursuit of markets Top 5 market destinations for North American and Western European companies outside home region over the next three years (percentage of companies indicating entry and expansion plans) Companies increasingly look at markets all over the world, given the escalating cost of developing new products and services Going for growth South America (29) Central Europe (41) US/Canada (43) Mexico/Central America (42) China (44) Eastern Europe (42) Central Europe (50) Western Europe (47) China (48) Eastern Europe (60) Western Europe (percent) North America(percent)
  34. 34. Product innovation No other strategy for driving the top line is more important than developing innovative new products and services (Percentage of companies indicating moderate to high importance) New products & services launch Economic turnaround Industry market growth rate Developing new market channels Entering new geographical markets 20 60 80 100 Percentage of companies with some or more implementation 89 85 80 72 66 Top five revenue drivers – next three years
  35. 35. The unrelenting push for innovation: new product revenue expected to exceed 30% in 2006 Note: # Based on Deloitte Research, Global Report – Vision in manufacturing (New York:Deloitte Research, 1998) ## Expected # ##
  36. 36. Supply chain: The traditional order penetration points The three main penetration points Inventory management Purchasing Ship to order Pack to order Make to order Retailer’s demand chain Retailer’s demand chain Retailer’s demand chain Manufacturer’s supply chain Manufacturer’s supply chain Manufacturer’s supply chain Distribution Packaging Manufacturing Inventory management Purchasing Distribution Packaging Manufacturing Inventory management Purchasing Distribution Packaging Manufacturing
  37. 37. Tweaking supply chain to create value The three main value-offering points Offer to purchasing Retailer’s demand chain Manufacturer’s supply chain Manufacturer’s supply chain Retailer’s demand chain Assortment planning Assortment planning Warehousing Offer to inventory management Manufacturer’s supply chain Retailer’s demand chain Assortment planning Warehousing Retailing Offer to planning Distribution Packaging Manufacturing Distribution Packaging Manufacturing Inventory management Purchasing Inventory management Purchasing Distribution Packaging Manufacturing Inventory management Purchasing
  38. 38. Tweaking supply chain to create value – an example The conventional demand-supply chain: College textbooks Bookstore’s demand chain OPP:Ship to order VOP:Offer to purchasing Tailor book to its course (instructor) Place order for course (instructor) Review standard Textbook (Instructors) OPP:Settle copyright with publisher VOP: students taking the instructor’s course buy only the material they need The new demand-supply chain: College textbooks Publisher’s supply chain Supply chain Demand chain Warehousing and Distribution Printing of booking Assortment planning (campus bookstore) Purchasing (campus bookstore) Course reading lists(Instructors) On-demand Printing (campus bookstore) Electronic Textbook repository (publisher) Use textbook For course (student)
  39. 39. Agenda Beyond world class principles What will it need to take manufacturing beyond world class Supply chain: Strategic design considerations Drivers of complexity in global manufacturing The paradoxes of complexity
  40. 40. The paradoxes of manufacturing complexity <ul><li>The paradox of optimisation </li></ul><ul><li>The paradox of customer collaboration </li></ul><ul><li>The paradox of innovation </li></ul><ul><li>The paradox of flexibility </li></ul><ul><li>The paradox of risk </li></ul>
  41. 41. The paradox of optimisation Despite the huge economies from designing global supply chain most manufacturers optimise locally <ul><li>Why are most companies optimising their supply chains from a local, rather than a global perspective ? Why aren’t executives focused on cross-functional or cross-enterprise collaboration ? </li></ul>Issues <ul><li>What supply chain improvements should companies invest in to gain competitive advantage ? What should they do to optimise costs and profitability globally ? </li></ul><ul><li>How are the role models overcoming the barriers to network improvements ? What benefits are actually being realized ? </li></ul>
  42. 42. The paradox of customer collaboration Despite the need to be much more responsive to customers, few manufacturers are collaborating closely with them <ul><li>What are the obstacles to customer collaboration ? Why aren’t more manufacturers investing in this area ? </li></ul>Issues <ul><li>How do successful manufacturers overcome the obstacles to customer collaboration ? </li></ul><ul><li>How can SCM and CRM strategies be deployed to support customer collaboration ? </li></ul><ul><li>What are the main benefits for customers ? For manufacturers ? </li></ul>
  43. 43. The paradox of innovation While product innovation is accelerating, few manufacturers are preparing their supply chains for faster new product introductions <ul><li>What must manufacturers do to their supply chain to support accelerating product innovation ? </li></ul>Issues <ul><li>How can product lifecycle management principles be applied to greater advantage to manage products and offerings ? </li></ul><ul><li>What are the main barriers to making supply chains ready for accelerating product innovation ? How are the industry leaders addressing them ? </li></ul>
  44. 44. The paradox of flexibility Flexibility is a key priority, but is being sacrificed to cut unit costs <ul><li>How are manufacturers keeping their supply chains flexible in the face of poor visibility ? Will visibility ever be good enough given global market demand fluctuations ? </li></ul>Issues <ul><li>How can techniques be honed to improve flexibility and visibility ? How do manufacturers de-risk themselves when forecasting approaches are inaccurate or unsupportive ? </li></ul><ul><li>How important is supply chain collaboration to increasing visibility and flexibility ? </li></ul>
  45. 45. The paradox of risk Keeping supply chain quality is critical, yet manufacturers risk of supply chain failures keep growing <ul><li>What new or accentuated risks for product quality and service delivery arise from outsourcing and locating supply chain activities across the world ? How are the successful manufacturers addressing them ? </li></ul>Issues <ul><li>How does the acceleration of new product introductions increase these risks ? </li></ul><ul><li>Does collaboration with customers and suppliers reduce quality risk ? </li></ul>
  46. 46. Agenda Beyond world class principles What will it need to take manufacturing beyond world class Supply chain: Strategic design considerations Drivers of complexity in global manufacturing The paradoxes of complexity
  47. 47. What will it need to take manufacturing beyond world class <ul><li>Choose appropriate model </li></ul><ul><li>Walk the talk </li></ul>1. Create a culture of business excellence <ul><li>Business strategy realignment </li></ul><ul><li>HR / Culture setting intervention </li></ul>2. Align Vision-Mission-Values with BWC principles 3. Create a climate of dissatisfaction with status quo; promote innovations
  48. 48. What will it need to take manufacturing beyond world class (contd.) 4. Commence journey towards effective covenantal relationships with employees, customers, suppliers 5. Position yourself as an enhancer of your customers’ success in their markets <ul><ul><li>6. Pay attention to the rigours of supply chain design to strike the </li></ul></ul><ul><li>right balances </li></ul><ul><li>Efficiency vs. responsiveness </li></ul><ul><li>Suiting the life – cycle </li></ul><ul><li>Scope </li></ul><ul><li>Facility decisions </li></ul>
  49. 49. What will it need to take manufacturing beyond world class (contd.) <ul><ul><li>7. Innovate value-creating options by tweaking demand and </li></ul></ul><ul><li>supply chains </li></ul>8. Balance paradoxes to provide the value edge <ul><ul><li>9. </li></ul></ul><ul><li>Optimisation </li></ul><ul><li>Customer collaboration </li></ul><ul><li>Innovation </li></ul><ul><li>Flexibility </li></ul><ul><li>Risk </li></ul>Innovate innovate innovate!
  50. 50. THANK YOU

×