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SCMN 7700/7706 Demand Fulfillment Segment 02 SC&L Strategy

Link Strategies
Value for the Consumer
Efficiency, Effectiveness, and Differentiation
Shareholder Value
Demand and Supply Planning
Leverage Tools and Technology
Seamless Integration
Core Competencies
Outsourcing a Strategic Alternative
Security and Visibility
Global Mindset and Capabilities
Change and Reinvent
The 12 Essentials of SCM Strategy

Align supply chain strategies with corporate goal and plans Supply chain leaders must: Essential #1

Framework for Supply Chain Strategy

Aligning Supply Chain Strategy with Business Strategy Business Objectives Management Processes Focus of Top Management Supply Chain Objectives Supply Chain Processes Importance to Top Management Business Strategy Supply Chain Strategy

Reality lags the integration goal but some positive exceptions exist. “ The overachieving vision is that we could not survive with a fragmented approach. But we have to articulate that it isn’t just about buildings and getting to one system. It’s about enabling customers to get our products through their systems more efficiently, thereby generating more profit on our products.” Sr. VP of Logistics $14.5B Food Producer 26% Doers 27% Leaders 13% Laggards 34% Dreamers Business Strategy Supply Chain Strategy

Create value and satisfaction for the end consumer Supply chain management must: Essential #2

A Shift in Customer (Buyer) Demand Toward Integration and Customization Highly Customised Solutions Highly Integrated Solutions Stand Alone Services Level of Integration Basic Services Level of Customisation Customers Customer Demand Customer Demand Customer Demand Source: Roger MacFarlane, CEO

The Pursuit of the “Perfect Order” Requires All Supply Chain Players to Work Together Supplier Manufacturer Warehouse Distribution Centre Store Accurate receiving Improved accuracy and visibility of shipments Product recall/ Product tracking Intelligent sub- assemblies Improved manufacturing through-put Automated Shipping (reduced cost and Increased capacity) Automated Receipt, Shipping, and increased through-put capacity Automated put away and picking for increased capacity and accuracy Automated checking for less errors (crucial for mixed pallet loads). Product recall/tracking Reduced truck turn around time. Less invoice queries Increased Picking accuracy Increased picking Accuracy. Support asset (e.g. RPC’s, dollies) management. Product tracking Reverse Logistics Shrink reduction Automated Receiving Reverse logistics Asset management Increased shelf availability through splitting back and front store inventory to show need for shelf filling Shrink reduction Source: Capgemini LLC.

Creating efficiency, effectiveness, and differentiation from competitive supply chains Supply chain strategy must focus on: Essential #3

Supply Chain Value Creation Involves Three Product/Service Forms
“ Value-Added” Product/Service Form
Visibility
Information Technology
Order Fulfillment
Network Solutions
etc.
“ Tangible” Product/Service Form
Transportation
Warehousing
Cross-Docking
Freight Forwarding
etc.
“ Core” Product/Service Form
Efficiency
Effectiveness
Differentiation

Drive Shareholder Value SCM must adopt a new mindset: Essential #4

Supply Chain Success Impacts Corporate Financial Performance
Accenture/Stanford/Insead Research Indicates:
Source: Accenture/Stanford/Insead Research, 2003. Revenue Growth Income Statement Balance Sheet Supply Chain Category CAGR of Market Capitalization Above/Below Industry AVG Leaders + 7%-26% Transformers + 8% Laggards - 2%-5% Decliners - 25%

… but it’s getting more difficult to do as fuel and other costs rise.

Integrate demand with supply planning Supply chain partners must collaborate to: Essential #5

Supply-Demand Misalignment: The Need for Demand Management Channel Orders
True End Customer
Demand
Production
Channel Fill and
Phantom Demand
Real
Shortage
Returns/
Cancellations
Over-Supply
Launch Date End of Life Units Per Period

Leverage available tools and technologies to meet and exceed supply chain objectives Supply chains must: Essential #6

Suppliers Mfg. Plant Mfg. DC Retail DC Store Consumer Supply Chain Visibility is Essential to Becoming Demand-driven Seamless Supply Chain Visibility
Accelerate the Supply Chain
Gain a Competitive Advantage
Real Time Visibility
Replace Inventory with Information
Lower Supply Chain Costs
Improve Forecast Accuracy and Increase Perfect Orders
Forecasts Suggested Orders Source: Logility, 2005

Seamlessly integrate through collaboration across processes and organizations Supply chain managers must strive to: Essential #7

Effective Supply Chains Should Strive for “ Full ” Collaboration Manufacturer #1 Retail Store #1 Distributor #1 Supplier Network #1 Retail Store #2 Distributor #2 Manufacturer #2 Supplier Network #2

Understand core competencies and build ‘brand equity’ for all supply chain participants Supply chains partners must perform a reality check in order to: Essential #8

Example Functions Being Questioned for Core Competency
Manufacturing
Transportation
Warehousing
Information Technology
Order Management
Integrated Logistics Services
Business Process (BPO)
Core Competencies: Three Questions Each Supply Chain Organization Should Ask Itself Do We Have The Skills We Need? If Not, How Do We Get Them? Expertise Consistent With Organizational Mission? Is It a Good Use of Our Resources? Strategic Fit Ability to Invest Is the ROI Attractive? What’s The Best Way to Do It?

Meaningfully consider outsourcing as a key strategy Supply chain leaders should: Essential #9

3PL Customer Perceptions of Provider Roles 3PL’s Mostly thought of as “ Tactical Service Providers” Source: 2004 3PL Study , Georgia Tech, Capgemini, and FedEx.

Next Generation of Logistics Outsourcing Models? Source: 2004 3PL Study , Georgia Tech, Capgemini, and FedEx. Insourcing Basic Services (Logistics Service Providers) Value-Added (Third Party Logistics) Lead Logistics (4PL) Advanced Services Evolutionary Migration Knowledge Innovation Relationships Integration Information

Achieving security and visibility throughout the supply chain Supply chains must focus on: Essential #10

Security Requirements Increase Complexity and Need for Information Visibility
Security Assistance Act of 2002
Customs-Trade Partnership Against Transportation Terrorism (C-TPAT)
Food & Drug Administration’s Bioterrorism Act of 2002
24-Hour Advance Container Manifest Rule
Security Objectives
Enable All Parties to Participate in Process Improvements
Eliminate Duplicate Efforts
Enhance Supply Chain Security
Source: CLM, 15 th Annual State of Logistics Report , June 7, 2004.

Develop and rely upon global mindset and global capabilities Supply chain leaders must: Essential #11

Global SCM: Key Areas of Greatest Need
Managing the Geographic Evolution of Supply Chain Activities
Need to take advantage of “core competencies” of specific geographies
Focus on “lowest net landed cost” for the customer/consumer
Transformation or Redesign of “Best” or “Proven” Practices to Global Supply Chain Setting
Recognize challenges unique to global objectives
Achieve end-to-end process integration and shipment visibility
Design for supply chain agility
Involvement of capable facilitators to achieve desired success
Leverage Global Supply Chain Strategies to Significantly Impact Overall Business Strategies

Change, reinvent, and transform … every day if necessary Supply chain leaders must adopt an agility mindset in order to: Essential #12

Not understanding customers’ needs
Lack of synchronization and collaboration upstream/ downstream in supply chain
Absence of visibility throughout supply chain
Too much focus on meeting objectives of individual supply chain organizations
Lack of integrated information technologies
Continued existence of “functional silos” within supply chain organizations
Insufficient senior executive attention to logistics and supply chain issues
Reluctance to search for and implement innovative, creative customer-focused solutions
Challenge of dealing with supply chain complexity
Inability or unwillingness to change
Ten Impediments to Getting ‘Change’ from Supply Chain Management

Getting Change from Supply Chain Management: Concluding Thoughts of a Few “All-Stars”
“ If you can’t change, you will find it impossible to improve” (Jack Nicklaus)
“ Consider how hard it is to change yourself, and you’ll understand what little chance you have of changing others.” (Albert Einstein)
“ It is not the strongest of the species that survive, nor the most intelligent, but those most responsive to change” (Charles Darwin)

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