Guy Dunkerley, Director, Procurement and Supply Chain Customer Equipment at EE - Link between finance and logistics


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Guy Dunkerley, Director, Procurement and Supply Chain Customer Equipment at EE spoke at the SCL Event July 2013

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Guy Dunkerley, Director, Procurement and Supply Chain Customer Equipment at EE - Link between finance and logistics

  1. 1. SupplyChain and Finance The Critical Link 16/04/2013
  2. 2. Agenda The Best Supply it enough? The relationship between the Supply Chain and Financial it proven? The link with Finance what does it look like •Language •Structure •Processes The best examples • Tax and Supply Chain • Cost to Serve • Total Cost of Acquisition The Call to Action
  3. 3. The Best SupplyChain bring together the worlds of Demand, Supply and Product Development 3 VMI SIOP DFx Market Research PostponementDEMAND Supply Product Development
  4. 4. 4 The Best SupplyChains work backwards…. Supply ChainProducts Industry Standard Servers Commercial Printing Digital Imaging Shared Printing Personal Printing Supplies Portables and Handhelds Business PC & Workstation Consumer PC Monitors & Options Network Storage Solutions Business Critical Servers Managed Services Solutions Customer Support Solutions Consulting & Integration Sol. Enterprise Solutions Services High value & solutions Configure-to-order (CTO) Low touch No touch Demand Chain Enterprise SMB Consumer Direct/Indirect/PartnerDirect Public Invent the future Collaborate for success Leverage size/ scale Put customer first Adaptive supply chain Invent the futureInvent the future Collaborate for successCollaborate for success Leverage size/ scaleLeverage size/ scale Put customer firstPut customer first Adaptive supply chain Adaptive supply chain Put customer first Hewlett Packard*
  5. 5. 5 The Best Supply Chains integrate…….. React Department level optimization Supply Chain Optimization Anticipate Company level efficiency Collaborate Single tier partnering Supply Chain Integration Orchestrate Multi-tier federation Supply Chain Coordination …….. And inspire…..”the moment of truth”
  6. 6. But is this enough?.....and were do we go to next? 6 VMI SIOP DFx Market Research PostponementDEMAND Supply Product Development Treasury Reporting Tax …….. Making ourselves relevant where it matters
  7. 7. 7 Can we prove a good supply chain gives good financial results..... EPS Return on Assets Profit Margins
  8. 8. And that a Bad Supply Chain produces Bad Results “Supply Chain Glitches and Shareholder Value Destruction”, Vinod Singhal, (Georgia Tech) •861 supply chain „glitch‟ announcements reduced shareholder value by 8.6% •Average value destruction per glitch - $120M •Including 60 days pre-announcement, glitch reduction of shareholder value is 20%
  9. 9. Talking the Same language ROI Gross Margin Revenue COGS Operating Margins SG&A Depreciation Cash Inventory DSO DPO Tax Direct Indirect Supply Chain Demand Variability Tax Transport Warehousing Customs Duties Supply Variability Compliance Finance
  10. 10. And Aligning ourselves Organisationally .... 16/07/2013 10 Tax Efficient Network Planning (Direct and Indirect) Transactional Integrity Tax and Treasury Compliance Supply Network Design SupplyChain Execution Finance Execution (e.g. Payables & Receivables) Finance SupplyChain Strategic Tactical SupplyChain Accounting and Decision Support Divisional Financial Reporting and decision support IT SupplyChain Management And Measurement
  11. 11. Creating Processes that Link Supply Chain and Finance 11 Demand Supply Product Direct Tax Indirect Tax Subsidy Treasury Risk Transaction Banks Tax AuthoritiesFSC Tax SC Cost accounting Auditing CTS TCA ReportingAudited Accounts and Management Reporting
  12. 12. Tax and Supply Chain......
  13. 13. 13 The Impact of Co-Optimising Tax E T R 19% 35% 0 15% 20% 25% 30% 35% 40% Profit Before Tax Profit After Tax Effective Tax Rate (ETR), in % P r o f I t Current Structure Tax and commercial advantage +59% +101% I - Actual II - Actual E T R 19% 35% 0 15% 20% 25% 30% 35% 40% Profit Before Tax Profit After Tax Effective Tax Rate (ETR), in % P r o f I t Current Structure Tax and commercial advantage +59% +101% I - Actual II - Actual (Deloitte)  A potential to reduce corporate tax rates by 40%  An additional 30-50% added to the payback of international Supply Chain configurations  A range of returns from 3.71x to 11x within twelve months  10-15% reduction in COGS gained through leveraging tax and customs  US CPG Saves $50M  Irish CPG Saves $10m  German Chemicals $80m
  14. 14. 14 Stages in TESCM Maturity
  15. 15. 15 Cost to Serve: what is it? What it is •Cost to Serve is a method for understanding the true cost drivers in a supply chain, allowing a company: • to allocate cost reduction resource in the most effective areas, • to range and price to maximum profit advantage, • to track improvements to the bottom line and balance sheet. • Cost to serve brings together, item, customer, and Channel profitability analysis to enable the client to determine what combinations are truly profitable and what are absolutely loss making It is Not • ABC: Its is less granular: it concentrates on the 20% of factors that drive 80% of the cost, and factors may not be activities, they can be behaviours (ordering patterns), requirements (Customer Service Levels) etc • IT Driven: they key is in understanding supply chains, and selecting the cost drivers, the engine itself is secondary Revenues Gross Margin Costs
  16. 16. 16 How the Business derives benefit……. Application Outcomes Part Number Rationalisation Understand true profitability of the tail Part deletion, re-allocation to alternative channels Customer Profitability Customer Portfolio management, and routes to market Re-assigning customers to distributors, and to standard products Cost Optimisation To identify true cost drivers and to ensure targeting of resource, showing the real trade-offs between costs and service Projects prioritised Supply Chain redesign Determine profitable and unprofitable routes to market Changes to the routings of goods through the network Contract negotiations Helps to understand to true total cost of acquisition, or cost to serve Ensures that new buy-side or sell side contracts will be absolutely profitable, or at least that the risks are understood
  17. 17. Total Cost Ownership 17 In order to try and understand the ‘True’ cost of device we have developed a Total Cost model to assess the costs/benefits a supplier /device brings to EE. The model currently includes elements covering both pre and post sales with service related costs being added as a related element. These can then be calculated as a value against past or future purchases. Procurement Pricing, Retro’s, MSF, ESD & Payment Term Supply Cost of Inventory & Availability After Sales Cost and Benefits of After Sales Quality Cost of Quality Conformance PTC Cost of Customer Calls
  18. 18. 18 Examples Cost This analysis helps us to optimise Ranging, and Contract Negotiations
  19. 19. 19 The Call to Action Locate your CFO/FD and take them to lunch, you have a lot to talk to them about Tax should always have a signoff in any changes to Supply Networks Build finance into your critical business processes, and reporting: think about a SC Cost accountant, integrate Finance into S and OP and run on one plan The Supply Chain transaction is not completed until the invoice is paid and taxes are recovered, all your good work in planning can die in transactional failure