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Supply Chain Executive's Agenda for 2010: Best Practices for ... Supply Chain Executive's Agenda for 2010: Best Practices for ... Presentation Transcript

  • Supply Chain Executive’s Agenda for 2010: Best Practices for Weathering the Recession In a Global Environment Nari Viswanathan Vice President/Principal Analyst October 6th, 2009
  • Agenda 1. Aberdeen Introduction 2. Integrated Demand-Supply Networks 3. Supply Chain Executive’s Challenges 4. Best-in-Class Companies 5. Process Areas of Focus 6. Organizational Areas of Focus 7. Key Takeaways
  • Aberdeen Supply Chain Research At a Glance •Thousands of Supply Chain Executives Surveyed •In-depth Supply Chain Research Calendar •Over 25,000 Report Downloads Yearly If your email program has trouble displaying this •Over 67,000 Newsletter message, click here to view online. To ensure proper delivery of future Aberdeen Group emails, please click here. Subscribers About Aberdeen Complimentary Research Contact •Weekly Analyst Insights •Library of Research Topics •2010 SCM Summit in SFO
  • Agenda 1. Aberdeen Introduction 2. Integrated Demand-Supply Networks 3. Supply Chain Executive’s Challenges 4. Best-in-Class Companies 5. Process Areas of Focus 6. Organizational Areas of Focus 7. Key Takeaways
  • It is a whole different world now…… Lowered demand from end consumers Cash is king – credit crunch Extremely volatile financial markets High inventory levels – finished goods, raw materials & work in progress Volatile fuel prices Increasing interest on sustainability and green supply chain concerns What should companies do?
  • Today’s Complex Demand-Supply Networks Component Factory Customers Raw Material System Retail Store Distributors Factory Enterprise Suppliers • Complexity has risen in multiples • Results in loss of control and visibility • Demand-Supply Networks compete with each other rather than individual enterprises
  • Integrated Demand-Supply Networks Supply Network – Demand Network - Buyer of System suppliers, services and products Contract Manufacturers, ODMs, For e.g: Retailers, Distributors, Raw material suppliers Value Added Resellers (VARs), Component Factory Customers Enterprise – Sales, Marketing, Operations, Manufacturing, Raw Material System Retail Store Factory Procurement Enterprise Suppliers Logistics Network – 3PLs, Shippers, Carriers Flow of physical goods, supply chain data and financial information
  • Agenda 1. Aberdeen Introduction 2. Integrated Demand-Supply Networks 3. Supply Chain Executive’s Challenges 4. Best-in-Class Companies 5. Process Areas of Focus 6. Organizational Areas of Focus 7. Key Takeaways
  • Top 2 SCM Pressures Economic and financial volatility 37% Rising business complexity of managing an 36% increasingly global business network Rising supply chain management costs 35% Escalating customer service demands 32% Significant decrease in demand for our products 21% Increased supply chain risk exposure (security/ 18% environmental/ financial instability or other risks) Regulatory compliance mandates 8% Other 2% 0% 25% 50% % of Respondents
  • Top Supply Chain Disruptions over the Past 12 Months Percent of Respondents 75% 62% 50% 42% 41% 34% 25% 0% Reduction in Raw materials Fuel price Commodities customer price volatility volatility price volatility demand n = 209
  • Top SCM Actions Targeted at Combating Recession Reduced inventory at all levels 54% Restructured the supply chain organization to increase efficiencies 45% Shifted focus from strategic to more tactical, 45% short-term improvement projects Changed financial arrangements with customers 34% or suppliers (e.g. stopped extending payment terms for the customers, etc.) Laid off people from the supply chain organization 32% Closed distribution centers/ warehouse 21% Reduced SCM process improvement budget 20% 0% 20% 40% 60%
  • Agenda 1. Aberdeen Introduction 2. Integrated Demand-Supply Networks 3. Supply Chain Executive’s Challenges 4. Best-in-Class Companies 5. Process Areas of Focus 6. Organizational Areas of Focus 7. Key Takeaways
  • Best-in-Class Definition Metrics: Perfect orders delivered to customers (complete and on-time) Total landed costs (relative change over the past year) Cash conversion cycle (absolute and relative change over the past year) Forecast Accuracy Customer Service Level
  • BIC Differentiation 39% Online visibility into supply chain issues / Process 52% disruptions 67% 46% Closed-loop integration of supply chain planning and execution 57% Process 63% 40% Executive position with end-to-end SCM responsibility 51% Organization 61% 43% Drill-down capability for executives to 46% determine causes of business level challenges 58% Technology 35% Formalized supply chain risk management 36% Process 56% 0% 10% 20% 30% 40% 50% 60% 70% 80% Best-in-Class Average Laggards
  • Agenda 1. Aberdeen Introduction 2. Integrated Demand-Supply Networks 3. Supply Chain Executive’s Challenges 4. Best-in-Class Companies 5. Process Areas of Focus 6. Organizational Areas of Focus 7. Key Takeaways
  • 3 Key Process Capabilities 1. Supply chain visibility and responsiveness, leading to better risk-management 2. Closed Loop Inventory Management 3. Integrated Business Planning
  • 1. Managing Supply Chain Risks Less than one-third of companies in an Aberdeen study reported actively managing each individual risk Trade compliance Raw materials Demand fluctuations Product quality Risk profile of suppliers and customers Currency volatility Catastrophic events Logistics capacity and congestion Supply chain security, and environmental disasters
  • 1. Gaining Supply Chain Visibility and Responsiveness Network Intelligence/ Performance Management ROI Process Collaboration Data Mgmt. B2B Integration Visible Responsive Level of Maturity
  • 2. Closed Loop Inventory Management
  • 2. Setting Inventory Targets is Still Manual 43% state that they follow rule of thumb approaches Versus 57% state that they follow statistical methods 60% of companies do not include setting inventory targets as a part of S&OP process
  • 2. How to Position Inventory Management as a Strategic Area to the Financial Organization? Change customer Receivables credit policies Financing Stock the right inventory Automate at the right place AR Process Negotiate DPO extension with suppliers Cash-to-Cash Cycles = DSO + DIO - DPO Use 3rd party financing to pay suppliers faster while extending terms Reduce lead-times Adopt a for the buyer so that orders can be build to order Use 3rd party delivered quicker and model Inventory financing get paid faster While balancing other business objectives like customer service…..
  • 3. Traditional S&OP Outdated? Old concepts may be too supply chain focused: The Sales and Operations Plan is a managerial tool used for manufacturing planning and control. Its fundamental objective is to reconcile sales forecasts with production plans in terms of volume[1]. To do so, the S&OP has to coordinate planning efforts among the various departments involved in the process. Time for the Next Generation S&OP? “Traditional sales and operations planning (S&OP) processes and supporting technologies are no longer sufficient in today’s high-pressured business environment. Sales and Operations Planning has evolved to become Integrated Business Planning. It is a truly cross-functional, multi-dimensional process that includes all elements of demand, supply and financial analysis in relation to the business goals and strategy.” - “Technology Strategies for Integrated Business Planning”, June 2006
  • Elements of Integrated Business Planning Business Goals IBP Levers Financial Planning Levers Product Differentiation Pricing Boost Customer Service Demand Forecasting Shareholder Demand Shaping Value Cost Reduction Results Rough Cut Capacity Planning Working Capital Inventory Optimization New Product Introduction Revenue Expansion Profit Optimized Supply-Demand Planning Metrics: Return on Net Assets, Profit Margins, Cash-Cash-Cycle, Customer Service Levels, Forecast Accuracy Source: Upcoming article in Supply Chain Management Review
  • Agenda 1. Aberdeen Introduction 2. Integrated Demand-Supply Networks 3. Supply Chain Executive’s Challenges 4. Best-in-Class Companies 5. Process Areas of Focus 6. Organizational Areas of Focus 7. Key Takeaways
  • Who Participates in S&OP Processes? Best-in-Class Average Laggards Percentage of Respondents 100% 91%92% 94% 78% 82%84% 80% 72% 72% 72% 66% 61% 59% 60% 40% 20% 0% Manufacturing Finance Logistics / Sales Supply Chain n = 214 BIC companies are 1.5 times more likely to have the sales organization drive S&OP process
  • Skillsets for the new Supply Chain Organization Best-in-Class Average Laggard Percentage of Respondents 50% 41% 42% 40% 38% 34% 31% 30% 27% 25% 22% 23% 20% 16% 17% 14% 13% 11% 9% 10% 0% "What-if" Manage Exception Understand Statistical scenario critical Management the business analysis and analysis to relationships process to strategy, fact based determine through the identify and products, and decision alternatives end to end manage processes making supply chain exceptions n = 214
  • Agenda 1. Aberdeen Introduction 2. Integrated Demand-Supply Networks 3. Supply Chain Executive’s Challenges 4. Best-in-Class Companies 5. Process Areas of Focus 6. Organizational Areas of Focus 7. Key Takeaways
  • International visibility from satellites and cloud technology Global DC Home Delivery Customers Retail Store Raw Materials Supplier Component Global DC Supplier Retail Store Global DC Component Supplier Raw Materials Supplier 10 Key Takeaways for Succeeding in the Global Supply Chain
  • Top 10 Takeaways for Competing in the Global Supply Chain 10. Develop and Deploy Sustainability Strategy 9. Have a single point of contact for Supply Chain 8. Think creatively Working Capital Optimization – Supply Chain Finance 7. IT is not the fix it is the enabler 6. Think FAST – flexibility and agility * - Supply Chain Summit 2009
  • Top 10 Takeaways for Competing in the Global Supply Chain 5. Embrace “AND” – matrix management + dotted lines 4. Extend metrics across the supply chain – use it enable accountability 3. Engage the customer 2. Business as usual does not work 1. Supply chain is a concept and not an organization * - Supply Chain Summit 2009
  • Aberdeen Supply Chain Management Research Team: Nari Viswanathan, VP/Principal Analyst Viktoriya Sadlovska, Researcher Nari.Viswanathan@aberdeen.com Viktoriya.Sadlovska@aberdeen.com Bob Heaney, Senior Analyst Scott Pezza, Research Associate Bob.Heaney@aberdeen.com Scott.Pezza@aberdeen.com Additional Information: Supply Chain Management Practice Blog Aberdeen SCM LinkedIn Group