Creating Resilient Global Supply Chains
Implications on Individual and Corporate Skills


       Presentation to Baltimore...
Winds of Change Across Global Supply Chains

                                            Faster, more
                    ...
Agenda


        Current State- Global Supply Chains
        Evolution- Where Have We Come From
        Key Buffers- What ...
Complexity in Managing Today’s Global Supply Chains

                                                  Customers increasin...
Supply Chain Risks Continue to Increase

Supplier Facing Risks                       Product Risks             Customer Fa...
Supply Chains Are No Longer Static


        Access new geographic markets to grow
        Become more demand, or pull-dri...
Goal- Creating Alignment to the Business
                                                  Revenue            Innovation L...
Performance Gaps Are Widening
 Order-to-delivery lead times by supply chain type
         Type            Median          ...
Agenda


        Current State- Global Supply Chains
        Evolution- Where Have We Come From
        Key Buffers- What ...
Supply Chain Evolution
                                                                                                   ...
Where Have we Come From- The Past

                                                                                       ...
How Did We Plan and Manage?
 A Serial and Sequential Process
                                                 Sales and Op...
Product Lifecycle Cost Considerations- The Past

         Planning and           Product
         Execution              L...
Today’s Reality of Life Cycle Costs

  Pre-Built Into Your Value Chain
                 100                               ...
Agenda


        Current State- Global Supply Chains
        Evolution- Where Have We Come From
        Key Buffers- What ...
Three Principal Supply Chain Buffers
                                                   Past                  Future
     ...
Creating Resilient and Responsive Supply Chains

                                                      PLAN

         SOUR...
Multi-Echelon Inventory Optimization
 Determine inventory locations and levels to achieve
 customer service at the minimum...
The Ability To Quantify Inventory by Cause


                                                   Cycle
                    ...
Simultaneous Planning and Execution
                                                 Sales and Operations Planning Process...
Agenda


        Current State- Global Supply Chains
        Evolution- Where Have We Come From
        Key Buffers- What ...
Where Are the Innovators?

In Process
     Align supply chain capability with overall business
     strategy
        Conti...
Where Are the Innovators?

In Organization and Culture
    Forster new dimensions of supply chain organizational
    capab...
Where Are the Innovators?
  In Technology
      Leverage best-of-breed technology:
        To implement industry unique, o...
What Do Best in Class Companies Do Differently?

According to a 2007 Aberdeen Group Survey
      Best in Class are 2.1X mo...
Value Delivery Approach


                                                                                            Step...
Agenda


        Current State- Global Supply Chains
        Evolution- Where Have We Come From
        Key Buffers- What ...
Implications for Overall Supply Chain Skills


        We are moving toward the information-driven /
        analytics bas...
Implications for Individual Skills

        Broad Supply Chain Fundamentals
               Broad supply chain concepts
   ...
Implications for Individual Skills

        Managing Customer and Supplier Relationships
             Integrated customer/...
Summary

 Creating Resilient Global Supply Chains is About:
      Creating knowledge, and knowledge-based organization
   ...
A Closing Quote
                    “Every morning in Africa, a gazelle wakes up.
                    It knows it must run...
Thank you for the opportunity to speak with you today



        My Contact Information:
        Office Phone: 781-944-630...
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Microsoft PowerPoint - APICS Baltimore FCG Template

  1. 1. Creating Resilient Global Supply Chains Implications on Individual and Corporate Skills Presentation to Baltimore Chapter of APICS April 2007 Bob Ferrari The Ferrari Consulting and Research Group
  2. 2. Winds of Change Across Global Supply Chains Faster, more accurate, and informed decision making, will be the single most important capability for any Significant Implications competitive supply •Process chain •Organizational Skills •Technology The Ferrari Consulting and Research Group
  3. 3. Agenda Current State- Global Supply Chains Evolution- Where Have We Come From Key Buffers- What Is Changing Capabilities of New Innovators Implication on Skills Summary and Questions The Ferrari Consulting and Research Group
  4. 4. Complexity in Managing Today’s Global Supply Chains Customers increasingly demand Manage customization Risk “I want it made for me, and I want it Reduce now!” Cost Increase “I require 30 days of firm commitment, Responsiveness and I want upside flexibility” Continuous innovation with Increase shrinking product lifecycles Profitability Product Proliferation Globalization Global sourcing Global Markets Rising transportation & logistics costs The Ferrari Consulting and Research Group
  5. 5. Supply Chain Risks Continue to Increase Supplier Facing Risks Product Risks Customer Facing Risks • The “Bullwhip Effect” • Short product life cycles • Constantly shifting markets • Cost and supply variability • New product failure rates • More demanding customers for commodity and • Value-chain cost structure • Global markets / distribution component materials • Ramp-up / Ramp-down • Inaccurate forecasts • Capacity and cycle-time constraints • Inventory risks for non- • Bundling of products conforming, obsolete, expensive • Needs for Lean-Sigma, pull- • Complex channels components driven environment What Risks are Relevant for Your Company ? The Ferrari Consulting and Research Group
  6. 6. Supply Chains Are No Longer Static Access new geographic markets to grow Become more demand, or pull-driven Shifting industry demand patterns Continuous needs for deeper collaboration Continuing quest for sourcing and/or sustaining lowest-cost/ flexible production Rising costs in global transportation and logistics Do you know the cost and benefit drivers for your supply chains? The Ferrari Consulting and Research Group
  7. 7. Goal- Creating Alignment to the Business Revenue Innovation Levers Increase service levels Contribution Product Unit/volume scalability Cost of Goods Sold Timely new product introduction New global sources of innovation Operating Profit Production Cost Reduction Levers Reduce procurement costs on Overhead Selling goods and services Reduce facility and infrastructure Administration Economic costs Value Reduce inventory Fixed Assets Assets Current Assets Risk Management Levers Cost of Capital Cost of Equity Smarter inventory deployment WACC Improve risk profile by reducing risk exposure Cost of Debt The Ferrari Consulting and Research Group
  8. 8. Performance Gaps Are Widening Order-to-delivery lead times by supply chain type Type Median Best Worst Make to 26 days 2 days 160 days Order Make to 7 days 1 day 65 days Stock Days Inventory Outstanding (DIO) 2003 2004 2005 Source: AMR Research, 2006 12 Select CPG Companies Average 38.8 41.0 41.2 Highest 65.0 66.0 65.5 Lowest 17.0 16.0 13.2 5 Select Electronic Manufacturing Services Companies Average 51.3 48.5 49.4 Highest 87.0 78.0 77.9 Lowest 34.0 32.0 31.6 8 Select Semiconductor Companies Average 55.7 52.8 49.4 Highest 78.0 82.0 62.7 Lowest 24.0 28.0 24.3 Source: Hackett-REL, CFO Magazine The Ferrari Consulting and Research Group
  9. 9. Agenda Current State- Global Supply Chains Evolution- Where Have We Come From Key Buffers- What Is Changing Capabilities of New Innovators Implication on Skills Summary and Questions The Ferrari Consulting and Research Group
  10. 10. Supply Chain Evolution Networked Collaborative Multi-Enterprise Goals Integrated Supply Chain Corporate Goals Capability / Complexity Demand Information Functional Silos, Serial Process Concept to Design Departmental Plan to Manufacture Goals Suppliers Customers Procure to Pay Order to Cash Product Management Transp / Logistics Manufacturing Procurement Supply information Planning “Integrated” “Innovative and “Traditional” Silos Supply Chain Networked” Supply Chain The Ferrari Consulting and Research Group
  11. 11. Where Have we Come From- The Past Process Control: MRP and Shop Floor Response: Maintain Safety Stock Inventory Functional Silos, Response: Reserve Production Capacity Serial Process Departmental Response: Optimize Locally Goals Response: Expedite Everything Product Management Transp / Logistics Manufacturing Procurement Planning PUSH “Traditional” Silos Supply Chains Built on Inventory and Capacity The Ferrari Consulting and Research Group
  12. 12. How Did We Plan and Manage? A Serial and Sequential Process Sales and Operations Planning Process (S&OP) Sales and Order Marketing Fulfillment Plans Demand Planning Supply Network Planning Budget MPS MRP Production ERP and Inventory Management Production Distribution Product Production Plans Product Scheduling Sourcing Procurement Distribution and Logistics Shop Floor Planning WMS Transportation Strategic Planning Tactical and Operational Planning The Ferrari Consulting and Research Group
  13. 13. Product Lifecycle Cost Considerations- The Past Planning and Product Execution Life-Cycle Processes Costs Mostly owned production Strategic Localized, single echelon value- chain Tactical 70% Longer product lifecycles Operational The Ferrari Consulting and Research Group
  14. 14. Today’s Reality of Life Cycle Costs Pre-Built Into Your Value Chain 100 95% Life Cycle Cost 85% Determinations 80 70% 60 40 Cost Reduction 20 Opportunities Conceptual Design Detailed Design & Volume Operations (creative, early phase) Sourcing Decisions Production And Aftermarket (engineering phase) Support The Supply Network Structure Source: DARPAConsulting Exploration and Optimization Project The Ferrari Rapid Design and Research Group
  15. 15. Agenda Current State- Global Supply Chains Evolution- Where Have We Come From Key Buffers- What Is Changing Capabilities of New Innovators Implication on Skills Summary and Questions The Ferrari Consulting and Research Group
  16. 16. Three Principal Supply Chain Buffers Past Future Forecast / Push Demand-driven Never accurate Demand scenarios Demand Little flexibility React to demand Managed flexibility Demand-shaping Past Future Fixed / owned Flexible / acquired Mostly localized Global inter-enterprise Little flexibility Managed flexibility Capacity A hard constraint A flexible constraint Past Future EOQ driven Quantified drivers Inventory Always bad Locally optimized Smartly leveraged Globally optimized Inhibitor to business Enabler to business process initiatives The Ferrari Consulting and Research Group
  17. 17. Creating Resilient and Responsive Supply Chains PLAN SOURCE MAKE DELIVER SOURCE MAKE DELIVER SOURCE MAKE DELIVER Downstream Your Company or Organization Upstream Multi- Echelon Value Chain Transformation Intelligent Supply Chain Capabilities Globally Optimized Demand Demand Shaping Demand Scenarios Capacity Supply and Demand Network Design Flexible Capacity Options Inventory Quantified Drivers of Inventory Optimal Deployment Strategy The Ferrari Consulting and Research Group
  18. 18. Multi-Echelon Inventory Optimization Determine inventory locations and levels to achieve customer service at the minimum total supply chain cost Low inventory cost to lead time ratios (just before the steepest sections in the cost accrual curve) Coordination of Cumulative Product Cost 90% Risk-pooling service times of 80% across products components 70% 60% or components 50% 40% 30% 20% 10% 0% Number of Time Periods away from Final Stage stage 1 stage n- 1 stage 2 stage 4 …… stage n- 2 stage n stage 3 The Ferrari Consulting and Research Group
  19. 19. The Ability To Quantify Inventory by Cause Cycle Demand Stock Uncertainty Pipeline Stock Stage Time Uncertainty Different types of inventory need to be addressed in different ways The Ferrari Consulting and Research Group
  20. 20. Simultaneous Planning and Execution Sales and Operations Planning Process (S&OP) Supply Chain Analytical Tools and Applications Sales and Order Scenario and What-If Planning Marketing Fulfillment Plans Demand Planning Supply Network Planning Budget MRP Production ERP and Inventory Management Production Production Distribution Product Scheduling Plans Product Sourcing Procurement Distribution Lean- Sigma and Logistics Replenishment WMS Planning From Periodic to Continuous Set of Events Supply Chain Modeling and Scenario-Building The Ferrari Consulting and Research Group
  21. 21. Agenda Current State- Global Supply Chains Evolution- Where Have We Come From Key Buffers- What Is Changing Capabilities of New Innovators Implication on Skills Summary and Questions The Ferrari Consulting and Research Group
  22. 22. Where Are the Innovators? In Process Align supply chain capability with overall business strategy Continually analyze the optimal supply chain design that can sustain efficiency as well as resiliency needs Make smarter investments in working capital to achieve goals related to service level and cost Deploy a combination of linked supply chain process strategies to complement the entire network The Ferrari Consulting and Research Group
  23. 23. Where Are the Innovators? In Organization and Culture Forster new dimensions of supply chain organizational capabilities Analytical, scenario-driven, as well as traditional planning New importance of the knowledge worker Risk management / risk contingency perspectives Collaboration across all functions, as well as partners Quicker, intelligence-based decision making across planning and execution Plan transformations in manageable increments The Ferrari Consulting and Research Group
  24. 24. Where Are the Innovators? In Technology Leverage best-of-breed technology: To implement industry unique, or individualized supply chain capabilities Enhance or better leverage previous investments in ERP/APS systems to address uncertainty and risk Target specific processes to enhance decision- making To speed-up the planning process, and overcome information latency To overcome challenges of too much data and not enough information The Ferrari Consulting and Research Group
  25. 25. What Do Best in Class Companies Do Differently? According to a 2007 Aberdeen Group Survey Best in Class are 2.1X more likely to use multi-echelon inventory optimization Best in Class are 2.1X more likely to have a supply chain visibility system Best in Class are 1.9X more likely to have a demand management system that supports customer- level forecasting Best in Class are 2X more likely to have cross-functional teams for inventory mgmt Source: Aberdeen Group, 2007 The Ferrari Consulting and Research Group
  26. 26. Value Delivery Approach Step One Total Supply Chain Cost Focus on policy “right-sizing” with current structure, policies and parameters Starting Step Two Point Identify, prioritize, and implement high impact, short-term opportunities Step Three Current Fundamental changes to Efficient Frontier New the supply chain structure Efficient Frontier or strategy New Strategy Current Target Service Level The Ferrari Consulting and Research Group
  27. 27. Agenda Current State- Global Supply Chains Evolution- Where Have We Come From Key Buffers- What Is Changing Capabilities of New Innovators Implication on Skills Summary and Questions The Ferrari Consulting and Research Group
  28. 28. Implications for Overall Supply Chain Skills We are moving toward the information-driven / analytics based companies Contextual information vs. data Information with relevancy- integrated across organizational barriers Historical / forward-looking / predictive Orchestration of the supply chain to meet or anticipate business needs Form and re-form networks of opportunity Risk balanced Scenario based Multi-skilled and self-contained The Ferrari Consulting and Research Group
  29. 29. Implications for Individual Skills Broad Supply Chain Fundamentals Broad supply chain concepts Supply chain key performance indicators (KPI’s), aligned to corporate objectives The key supply chain buffers Managing and planning across a global supply chain Continuous improvement (Lean / Sigma) Analytical as well as management skills Compliance and regulatory issues Building Competitive Processes Design for supply chain and time-to-volume In-depth understanding of the core value-chain Inventory deployment strategy in push-pull environment A scenario and analytical planning based S&OP process Global risk management Logistics and distribution The Ferrari Consulting and Research Group
  30. 30. Implications for Individual Skills Managing Customer and Supplier Relationships Integrated customer/supplier relationship management Strategic commodity management Collaboration for win-win Change management / program management Supply network design Leveraging technology Leveraging IT to enhance supply chain performance Knowledge of various advanced technologies / SCM applications strengths/limitations Leveraging the Internet and other enabling technologies General knowledge of IT concepts and trends (J2EE, SOA, .NET, Appliance….) The Ferrari Consulting and Research Group
  31. 31. Summary Creating Resilient Global Supply Chains is About: Creating knowledge, and knowledge-based organization Knowing all of the characteristic /needs of your value- chain Driving alignment and direct linkage to overall business performance Faster / accurate/ holistic / predictive decision making Selective and leveraged use of advanced applications and technology Resulting in the ability to respond to continuous business change, uncertainty, and risk The Ferrari Consulting and Research Group
  32. 32. A Closing Quote “Every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion or it will be killed. Every morning a lion wakes up. It knows it must outrun the slowest gazelle or it will starve to death. It doesn’t matter whether you are a lion or a gazelle. When the sun comes up, you better start running.” African proverb- Translated into Mandarin and posted in Chinese auto parts factory The Ferrari Consulting and Research Group
  33. 33. Thank you for the opportunity to speak with you today My Contact Information: Office Phone: 781-944-6308 Mobile Phone: 617-686-6317 Email: bob.ferrari@theferrarigroup.com The Ferrari Consulting and Research Group
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