Your SlideShare is downloading. ×
Supply Chain Management for Competitive Advantage
Upcoming SlideShare
Loading in...5
×

Thanks for flagging this SlideShare!

Oops! An error has occurred.

×
Saving this for later? Get the SlideShare app to save on your phone or tablet. Read anywhere, anytime – even offline.
Text the download link to your phone
Standard text messaging rates apply

Supply Chain Management for Competitive Advantage

1,804
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
1,804
On Slideshare
0
From Embeds
0
Number of Embeds
0
Actions
Shares
0
Downloads
83
Comments
0
Likes
0
Embeds 0
No embeds

Report content
Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
No notes for slide
  • Today we’ll spend some time providing a general overview of SCM concepts. For some of you, this may be a review, while these concepts may be novel for others. Next, we’ll identify factors driving organizations to consider SCM strategies, and discuss the challenges facing these efforts. We’ll also provide some examples of companies we’ve identified as leaders in this area. Finally, I’ll conclude with some key pointers for you to consider as you go out to different schools and recruit people, as well as training requirements that Milliken University may need to include in the future.
  • A supply chain is the global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution and cash (APICS article 1/99). It looks at the enterprise as a whole , including not only relationships with other functions in the firm but also with all trading partner relationships outside the firm. Objective of competitive supply chain design is to weave each of the trading partners into a seamless fabric of information flow, physical distribution flow and cash flow for the benefit of the end customer. One of the techniques for SC mgmt is integrated supply whose intent is to ensure that all the pieces of the supply chain work together to achieve a common objective. When left alone a function’s natural tendency is to optimize its own performance, often at the expense of others in the supply chain.
  • Because SCOR is does not represent organizations, but rather activities, it is ‘boundaryless’. This is intentional. When you are considering how a supply-chain operates, you don’t want to ‘stop’ describing it when you must look at the activities of some participants. You can, in effect, look all the way from a grain of sand to a finished computer. In looking at various ways to describe this, you can use an anecdote that SCOR looks from “Cow to Cone” for Ice Cream, or if you feel particularly humorous, “from Stump to Rump” for toilet paper. Different trainers use different anecdotes, but you need to get across to the audience that by using Standard names Standard interconnects Boundaries only defined by process start/stop points You have the ability to truly optimize the performance of very, very large systems, cutting waste, cycle time, and improving cash consumption. This is a second unique feature of the SCOR model.
  • A supply chain is the global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution and cash (APICS article 1/99). It looks at the enterprise as a whole , including not only relationships with other functions in the firm but also with all trading partner relationships outside the firm. Objective of competitive supply chain design is to weave each of the trading partners into a seamless fabric of information flow, physical distribution flow and cash flow for the benefit of the end customer. One of the techniques for SC mgmt is integrated supply whose intent is to ensure that all the pieces of the supply chain work together to achieve a common objective. When left alone a function’s natural tendency is to optimize its own performance, often at the expense of others in the supply chain.
  • KEY POINTS: Why not a PIPE or NETWORK? A supply chain represents a CHAIN of events – a series of connected activities and physical processes. A chain is only as strong as its weakest link. Activity in each link will cause a chain reaction in the other links. A chain brings value only when it is LINKED together.
  • Kevin’s slide: where is Woerth, where is FTL?
  • Supplier Facing looks at the network of suppliers, their markets and their relationship with the “company”. Customer Facing looks at the network of customers and intermediaries, their markets and their relationships with the “company”. Internal Facing looks at the company, their network of assets, processes, products, systems and people as well as the company’s markets. In all cases, a Global Perspective is essential.
  • Additional research suggests that the new processes we are setting into motion are directly aligned with these benefits. How? In the early stages of improvement, we will deploy strategic sourcing processes, that will reduce the number of suppliers. This is a key ticket to heaven – you can’t deploy some of the more advanced strategies, until you reduce the number of people you’re working with, leverage your spend to the extent possible, and partner with the right group of people. Note that not every relationships will be a “partnership” – but we need to really understand our markets, and make better decisions that reduce our risk exposure. As we do so, we will save money – the next benefit. This will impact our COGS, and we will be able to cut prices for all business units. The majority of people working in SCM at Suncor today are doing manual paperwork – non-value added work. As we become more efficient – we can grow the company, without having to dedicate people to non-value added transactional work – and instead train our people to become more strategic – in working with suppliers to find additional opportunities to improve delivery, quality, cost, technology, and ways of working. Some of these benefits will accrue from Cornerstone – but the majority are a function of the new processes we will put into place. Finally, the greatest opportunities occur once we have established our supply chain network, and have designed the supply chain to be able to deliver. In the words of Dave Balsom: “The biggest opportunity for savings occurs after the ink on the contract has dried.” Moreover, by working on managing the relationship with our suppliers, collaborating and sharing ideas and innovation, we can find ways to take cost OUT of the supply chain – in a way that mutually benefits both parties, and which would not occur otherwise. Think of it as exploiting the human capital and intellectual property that resides in our supply base – and putting those ideas to work for Suncor. That is the most advanced level of supply chain maturity, and one that we aspire to, and which we have set our sights on. We project that at level four, we can move the needle on ROI from 16.5% to 20%, and ROCE from 16^ to 19.5%. How (see notes below): SCENARIOSROIROCE 1. No Action ROI 16.5% ROCE 16.0% 2. Inventory Decrease supply chain inventory to 0 ROI 16.7% (effort to reduce inventory has no huge movement)ROCE 16.0% (no change) Productivity Work with Maintenance and Ops to increase productivity by 5% (assuming $ 85 million cost of Maintenance) ROI = 18.2% ROCE 17.7% Expenses Inventory at $85 M Production at $100M Decrease Expenses by 5% (focus on cost) RoI = 17.2%ROCE = 16.7% Capital savings No increase in production revenue No decrease in costs over life of creating capital Major projects delivers 5% less Capital decreased by 5% ROI = 17.4% ROCE 16.9% 6. Combined Impact:Uptime improved by 5%Decrease expenses by 5%Capital decreased by 5% ROI = 19.9% ROCE = 19.4%
  • Additional research suggests that the new processes we are setting into motion are directly aligned with these benefits. How? In the early stages of improvement, we will deploy strategic sourcing processes, that will reduce the number of suppliers. This is a key ticket to heaven – you can’t deploy some of the more advanced strategies, until you reduce the number of people you’re working with, leverage your spend to the extent possible, and partner with the right group of people. Note that not every relationships will be a “partnership” – but we need to really understand our markets, and make better decisions that reduce our risk exposure. As we do so, we will save money – the next benefit. This will impact our COGS, and we will be able to cut prices for all business units. The majority of people working in SCM at Suncor today are doing manual paperwork – non-value added work. As we become more efficient – we can grow the company, without having to dedicate people to non-value added transactional work – and instead train our people to become more strategic – in working with suppliers to find additional opportunities to improve delivery, quality, cost, technology, and ways of working. Some of these benefits will accrue from Cornerstone – but the majority are a function of the new processes we will put into place. Finally, the greatest opportunities occur once we have established our supply chain network, and have designed the supply chain to be able to deliver. In the words of Dave Balsom: “The biggest opportunity for savings occurs after the ink on the contract has dried.” Moreover, by working on managing the relationship with our suppliers, collaborating and sharing ideas and innovation, we can find ways to take cost OUT of the supply chain – in a way that mutually benefits both parties, and which would not occur otherwise. Think of it as exploiting the human capital and intellectual property that resides in our supply base – and putting those ideas to work for Suncor. That is the most advanced level of supply chain maturity, and one that we aspire to, and which we have set our sights on. We project that at level four, we can move the needle on ROI from 16.5% to 20%, and ROCE from 16^ to 19.5%. How (see notes below): SCENARIOSROIROCE 1. No Action ROI 16.5% ROCE 16.0% 2. Inventory Decrease supply chain inventory to 0 ROI 16.7% (effort to reduce inventory has no huge movement)ROCE 16.0% (no change) Productivity Work with Maintenance and Ops to increase productivity by 5% (assuming $ 85 million cost of Maintenance) ROI = 18.2% ROCE 17.7% Expenses Inventory at $85 M Production at $100M Decrease Expenses by 5% (focus on cost) RoI = 17.2%ROCE = 16.7% Capital savings No increase in production revenue No decrease in costs over life of creating capital Major projects delivers 5% less Capital decreased by 5% ROI = 17.4% ROCE 16.9% 6. Combined Impact:Uptime improved by 5%Decrease expenses by 5%Capital decreased by 5% ROI = 19.9% ROCE = 19.4%
  • Additional research suggests that the new processes we are setting into motion are directly aligned with these benefits. How? In the early stages of improvement, we will deploy strategic sourcing processes, that will reduce the number of suppliers. This is a key ticket to heaven – you can’t deploy some of the more advanced strategies, until you reduce the number of people you’re working with, leverage your spend to the extent possible, and partner with the right group of people. Note that not every relationships will be a “partnership” – but we need to really understand our markets, and make better decisions that reduce our risk exposure. As we do so, we will save money – the next benefit. This will impact our COGS, and we will be able to cut prices for all business units. The majority of people working in SCM at Suncor today are doing manual paperwork – non-value added work. As we become more efficient – we can grow the company, without having to dedicate people to non-value added transactional work – and instead train our people to become more strategic – in working with suppliers to find additional opportunities to improve delivery, quality, cost, technology, and ways of working. Some of these benefits will accrue from Cornerstone – but the majority are a function of the new processes we will put into place. Finally, the greatest opportunities occur once we have established our supply chain network, and have designed the supply chain to be able to deliver. In the words of Dave Balsom: “The biggest opportunity for savings occurs after the ink on the contract has dried.” Moreover, by working on managing the relationship with our suppliers, collaborating and sharing ideas and innovation, we can find ways to take cost OUT of the supply chain – in a way that mutually benefits both parties, and which would not occur otherwise. Think of it as exploiting the human capital and intellectual property that resides in our supply base – and putting those ideas to work for Suncor. That is the most advanced level of supply chain maturity, and one that we aspire to, and which we have set our sights on. We project that at level four, we can move the needle on ROI from 16.5% to 20%, and ROCE from 16^ to 19.5%. How (see notes below): SCENARIOSROIROCE 1. No Action ROI 16.5% ROCE 16.0% 2. Inventory Decrease supply chain inventory to 0 ROI 16.7% (effort to reduce inventory has no huge movement)ROCE 16.0% (no change) Productivity Work with Maintenance and Ops to increase productivity by 5% (assuming $ 85 million cost of Maintenance) ROI = 18.2% ROCE 17.7% Expenses Inventory at $85 M Production at $100M Decrease Expenses by 5% (focus on cost) RoI = 17.2%ROCE = 16.7% Capital savings No increase in production revenue No decrease in costs over life of creating capital Major projects delivers 5% less Capital decreased by 5% ROI = 17.4% ROCE 16.9% 6. Combined Impact:Uptime improved by 5%Decrease expenses by 5%Capital decreased by 5% ROI = 19.9% ROCE = 19.4%
  • Additional research suggests that the new processes we are setting into motion are directly aligned with these benefits. How? In the early stages of improvement, we will deploy strategic sourcing processes, that will reduce the number of suppliers. This is a key ticket to heaven – you can’t deploy some of the more advanced strategies, until you reduce the number of people you’re working with, leverage your spend to the extent possible, and partner with the right group of people. Note that not every relationships will be a “partnership” – but we need to really understand our markets, and make better decisions that reduce our risk exposure. As we do so, we will save money – the next benefit. This will impact our COGS, and we will be able to cut prices for all business units. The majority of people working in SCM at Suncor today are doing manual paperwork – non-value added work. As we become more efficient – we can grow the company, without having to dedicate people to non-value added transactional work – and instead train our people to become more strategic – in working with suppliers to find additional opportunities to improve delivery, quality, cost, technology, and ways of working. Some of these benefits will accrue from Cornerstone – but the majority are a function of the new processes we will put into place. Finally, the greatest opportunities occur once we have established our supply chain network, and have designed the supply chain to be able to deliver. In the words of Dave Balsom: “The biggest opportunity for savings occurs after the ink on the contract has dried.” Moreover, by working on managing the relationship with our suppliers, collaborating and sharing ideas and innovation, we can find ways to take cost OUT of the supply chain – in a way that mutually benefits both parties, and which would not occur otherwise. Think of it as exploiting the human capital and intellectual property that resides in our supply base – and putting those ideas to work for Suncor. That is the most advanced level of supply chain maturity, and one that we aspire to, and which we have set our sights on. We project that at level four, we can move the needle on ROI from 16.5% to 20%, and ROCE from 16^ to 19.5%. How (see notes below): SCENARIOSROIROCE 1. No Action ROI 16.5% ROCE 16.0% 2. Inventory Decrease supply chain inventory to 0 ROI 16.7% (effort to reduce inventory has no huge movement)ROCE 16.0% (no change) Productivity Work with Maintenance and Ops to increase productivity by 5% (assuming $ 85 million cost of Maintenance) ROI = 18.2% ROCE 17.7% Expenses Inventory at $85 M Production at $100M Decrease Expenses by 5% (focus on cost) RoI = 17.2%ROCE = 16.7% Capital savings No increase in production revenue No decrease in costs over life of creating capital Major projects delivers 5% less Capital decreased by 5% ROI = 17.4% ROCE 16.9% 6. Combined Impact:Uptime improved by 5%Decrease expenses by 5%Capital decreased by 5% ROI = 19.9% ROCE = 19.4%
  • .
  • .
  • Transcript

    • 1. Daily Plan-Day 1
    • 2. Module Overview
      • Background of Supply Chain Management
      • The Supply Chain Network
      • Competitive Advantage from the supply chain – SCM Maturity and Business Performance
      • Supply Chain Visibility and its impacts
      • SCM KPIs mapped to Business Strategy
    • 3. Background of Supply Chain Management
    • 4.
          • “ It's no longer about competing products. It's about competing supply chains . The company with the most streamlined, cost-effective, collaborative supply chain wins”.
      • SAP
    • 5. History of Supply Chain Initiatives 60’s 1970 1985 1990 1995 2000 2004 MRP MRP II S&OP, JIT Closed Loop MRP ERP TQM Manufacturing Excellence Continuous Improvement Reorder Points 1980 1981 1979 Lean, Six-sigma BPR 1996 - Supply Chain Council Formed 2000- Supply Chain Networks Emerge Supply Chain Risk Management
    • 6. Supply Chain DEFINITIONS Supply Chain: The global network used to deliver products and services from raw materials to end customers through an engineered flow of information, physical distribution, and cash. APICS Supply Chain: The integrated processes of Plan, Source, Make, Deliver, and Return…spanning your suppliers’ supplier to your customers’ customer, aligned with Operational Strategy, Material, Work & Information Flows. Supply Chain Council Suppliers Make/Maintain Customers Distribution Depot
    • 7.
      • The five distinct management processes link together (the chain in supply-chain) seamlessly from supplier to customer
      Supplier Customer Customer’s Customer Suppliers’ Supplier Make Deliver Make Deliver Make Source Deliver Source Internal or External Internal or External Your Company Source SCOR Model Supply Chain Execution Processes Plan Source Deliver Return Return Return Return Return Return Return Return
    • 8. A Global Supply Chain Latin American Suppliers Manufacturing European Supplier Customers Customers Customers’ Customers Warehouse Other Suppliers Warehouse Warehouse Warehouse Outgoing material Incoming from supplier Returns
    • 9. Supply Chain Management DEFINITIONS Supply Chain Management: The design , planning , execution , control , and monitoring of supply chain activities with the objective of creating net value , building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally. APICS Supply Chain Optimization: the activities (such as planning, work flow and process improvements, trade-offs) that provide the goods to the consumer in an “optimal” manner – the best trade-off between the lowest cost, lowest inventory, and best due-date performance.
    • 10. SCS SCD SS PM SRM Business Strategy DM Core SC Processes SC Management Processes (operational) CM PSR MRP Orders RP MDM Signal SCPln CI RM PT CA SC Supporting Processes EN QM AP SC Management Processes (Strategic) Supply Chain Management Processes
    • 11. Supply Chain Flows The ‘Chain’ is a series of connected activities and physical processes Product Information Cash Product Returns Suppliers Make/Maintain Customers Distribution Depot
    • 12. Supply Chain Classifications
    • 13.  
    • 14. The Supply Chain Network
    • 15. Supply Management Evolution
    • 16. Perspectives Customers Suppliers (And outsource Manufacturing) Suppliers’ Environment Customers’ Environment Organization Organization’s Environment Customer Facing Supplier Facing Internal Facing Global Environment
    • 17. Perspective is Important
    • 18. Supply Network s s s s s s s SC Network Organizer Commodity Category Interactions and Relationship Supplier Attributes Supplier Environment Supply Chain Network: A complex adaptive supply network is a collection of firms that seek to maximize their individual profit and livelihood by exchanging information, products, and services with one another’’ (Choi et al., 2001).Choi, T.Y., Dooley, K.J., Rungtusanatham, M., 2001. Supply networks and complex adaptive systems: Control versus emergence. Journal of Operations Management 19 (3), 351–366.
    • 19. Competitive Advantage from the supply chain – SCM Maturity and Business Performance
    • 20. Supply Chain Excellence Objective
      • Achieving and maintaining a competitive edge in supply chain…
          • Reliability
          • Responsiveness
          • Flexibility
          • Cost
          • Asset Management
          • Quality
      “ Delivery of Cash is the ultimate supply chain management metric.” S.Mozaffar,Gp.VP-ICI Chemicals, 2003
    • 21. Where are the “Leaders” focusing their efforts?
      • Global SAP Implementation
      • Enterprise Cost Efficiency Program Office (PMO)
      • Aggressive SKU Rationalization / Simplification
      • Expanded Sourcing strategy & Cash focus
      • Customer Direct Ship Program
      • Centralizing Supply Chain Management
      • Focus on Basics – S&OP and APS tools
      • Dramatic working capital improvement
      • Strategic-level Customer Relationships
      • RFID leadership
    • 22. Where are the “Leaders” focusing their efforts?
      • Global “Funding the Growth” program (PMO)
      • Cross functional “Go-to-Market” teams for NPI
      • Leveraging global SAP platform for SC Optimization
      • Demand Pull Focus & Disciplined S&OP
      • Regional Mfg - Global sourcing & SC coordination
      • Targeting 10 inventory turns by 2005
      • “ Agent-enabled Supply Network” by 2008
      • Plant and DC Network Optimization
      • Rolling out `Produce-to-Demand` Capability
      • CPFR and Scan-based trading
    • 23. Process Maturity Definition
      • Process Maturity postulates that:
      • Organizations of higher maturity are more productive and that
      • Processes, in order to mature and improve, have to go through Evolutionary Phases defined as Ad-hoc, Defined, Managed, Leveraged, and Optimized
    • 24. Components of Process Maturity
      • Leadership - that actively supports & believes in the process value proposition and participates in the process.
      • Strategy – that aligns with the process (customer focused) values between company, customers, and suppliers.
      • Structure – informal and formal cross functional (horizontal) team based organization structures with broad process ownership with authority (and investments) clearly assigned.
      • Process – the process is defined, documented and understood by a majority of the company (not just the people directly involved). People speak in the process “language”.
      • People – that are skilled, trained and capable with multi-dimensional jobs and authority. Also a “learning” and continuous improvement philosophy.
      • Systems – that enable information sharing and collaboration between business functions and units, organization and suppliers; organization and customer
    • 25. Maturity Relationships Process Maturity High High Low Low Process Maturity Accuracy / Control Stability Predictability / Certainty Efficiency Effectiveness Capability Business Performance Esprit d’ Corps Process Focus Internal - within functions Inter-functional Inter- company Process Performance
    • 26. Maturity Relationships Source: Dorfman, M. and Thayer, R.H. (1997). The Capability Maturity Model for Software. Software Engineering , pp.427-438.
    • 27. The Process Maturity Model: Best Processes, Practices, & Enablers The company, its vendors and suppliers, take cooperation to the process level. Organizational structures and jobs are based on process, and traditional functions, as they relate to the supply chain, begin to disappear altogether. Process measures and management systems are deeply imbedded in the organization. Advanced process management practices take shape. Ad Hoc Defined Managed Leveraged Optimized Process Maturity Processes are unstructured and ill-defined. Process measures are not in place and the jobs and organizational structures are based upon the traditional functions, not horizontal processes. Individual heroics and “working around the system” are what makes things happen. Basic processes are defined and documented. Changes to these processes must now go through a formal procedure. Jobs and organizational structures include a process aspect, but remain basically traditional. Representatives from functions meet regularly to coordinate with each other concerning process activities, but only as representatives of their traditional functions. The breakthrough level. Managers employ process management with strategic intent. Broad process jobs and structures are put in place outside of traditional functions. Cooperation between intra-company functions, vendors and customers takes the form of teams that share common process measures and goals. Competition is based upon multi-firm networks. Collaboration between legal entities is routine to the point where advanced process practices that allow transfer of responsibility without legal ownership are in place. Trust and mutual dependency are the glue holding the extended network together. A horizontal, customer-focused, collaborative culture is firmly in place.
    • 28. Total SCM Cost Impacts and Definition
        • Mature Supply Chains realize savings:
      12.3% 9.6% Levels 1-2 Levels 3 Source: A Presentation to SCC Members “Supply Chain Practice Maturity Model and Performance Assessment”, The Performance Measurement Group, November 6th, 2001.
    • 29. Ad Hoc Defined Managed (Linked) Leveraged (Integrated)
      • Source: “Procurement: Current Benchmark Findings.” The Hacket Group, 2004
      Optimized SCM Maturity and Associated Performance 7700 No. of Suppliers Per $B Spend Suncor - 8125 1.0 2.0 3.0 4.0 1700 No. of Suppliers Per $B Spend 1% of Spend Procurement Costs Suncor – 0.96% 0.7% of Spend Procurement Costs 104 No. of FTEs Per $B Spend Suncor - 200 54 No. of FTEs Per $B Spend RM Processes LT=1 SS=1 PO=1 RM Processes LT<40% SS<40% PO>40% 2. “The Quit Revolution in Supplier Management.” Aberdeen Group, 2004 1 1 1 2 Anticipated Performance at the Top Maturity Levels ROI = 20% ROCE = 19.5% Performance at Lower Maturity Levels ROI = 16.5% ROCE = 16% 3. A Presentation to SCC Members “Supply Chain Practice Maturity Model and Performance Assessment”, The Performance Measurement Group, November 6th, 2001. 3 LT = Leadtime SS = Safety Stock PO = Perfect Order
    • 30. Ad Hoc Defined Managed (Linked) Leveraged (Integrated) Source: Grosspietcsch, J. and Kupper, J. “Supply Chain Champs” (2004). The McKinsey Quarterly. 2004. No. 1 Optimized SCM Maturity and Associated Performance Consumer Goods Companies 18% Weekly Measurement Frequency 1.0 2.0 3.0 4.0 42% Weekly Measurement Frequency 5.3% of Sales Logistics Costs 4.1% of Sales Logistics Costs 4.0 Days Delivery Times <2.5 Days Delivery Times 96% Perfect Order 99% Perfect Order Performance at the Top Maturity Levels Performance at Lower Maturity Levels
    • 31. Ad Hoc Defined Managed (Linked) Leveraged (Integrated) Source: Grosspietcsch, J. and Kupper, J. “Supply Chain Champs” (2004). The McKinsey Quarterly. 2004. No. 1 Optimized SCM Maturity and Associated Performance Consumer Goods Companies 48 Days Turnover 1.0 2.0 3.0 4.0 11 Days Turnover 2.5 SKU per $1.17 mil. USD 1.4 SKU per $1.17 mil. USD 33% % SKUs with weekly planning slots 66% % SKUs with weekly planning slots 1.0 Participate in customer planning 4.0 Participate in customer planning Performance at the Top Maturity Levels Performance at Lower Maturity Levels Note: Higher maturity firms have shorter change-over times and greater upside flexibility Without capital investments. Lower maturity firms have 33% of contracts informal while Higher maturity firms have 66%
    • 32. Ad Hoc Defined Managed (Linked) Leveraged (Integrated) Source: “Mature Supply Chain Planning”. In Focus , 2003. A PRTM and SAP Study of 60 firms and 75 supply chains in firms from $500 Million to $2 billion in Sales across several industries in Europe, US and Asia. Optimized SCM Planning Maturity and Performance 1.0 Inventory Levels 1.0 2.0 3.0 4.0 0.78 Inventory Levels 1.0 Delivery Performance 1.10 Delivery Performance 1.0 Order Fulfillment Lead Times 0.86 Order Fulfillment Lead Times 1.0 Inventory Costs 0.88 Inventory Costs Performance at the Top Maturity Levels – Profit =1.38 Performance at Lower Maturity Levels – Profit = 1.00 Note 1: Firms that combine higher maturity planning practices with advanced planning systems Have 35% lower inventory costs than lower maturity firms. 1 40% 37% 23% Results Distribution
    • 33. Supply Chain Visibility and its impacts
    • 34. 227 338 112 Ad Hoc Defined Managed Leveraged Borden Total SCM Scores v. Performance 2001 273 1999 203 Optimized
    • 35. Borden Chemical Savings from increasing maturity
      • 2004 EBIT impact
      • on $1.4 billion in sales
      Improved Supply Chain Design & Operations $15 MM Savings* Leveraged Global Purchasing $25 MM Savings* Improved Service & Quality 90% reduction in perfect order failure rate by 2002 Cycle Time Reduction 20% by 2004 Organization Development Global Structure, Capable Resources by 2001
    • 36. S&OP Practices Maturity – Degussa Engineered Carbons (DEC) Overall Supply Chain Process Performance S&OP Practice Institutionalization Foundation Advanced Non-institutionalized Advanced Institutionalized Note: Data represents 55 Supply Chain Council firms, from various industries, that were examined using the SCM best practices survey. 150 105 60 DEC – 92 2004 BM Mean - 91 DEC - 2003 DEC 2004 Results: 20% reduction in inventory with no loss in service. A reduction in SCM costs of 2% of revenue or $4 million annually.
    • 37. <70% >89% Delivery performance v. commit date >89% 60% >75% Forecast Accuracy Benchmarks (SKU/ Location/ 30 days / Weekly) 60% S&OP Practices Statistically Related to Performance (Regression Analysis) S&OP Practice Institutionalization Overall Supply Chain Process Performance
    • 38. S&OP Foundation OF BM 79.7% OF BIC 98.4% BM = Benchmark BIC = Best-in-class OF BM Median 88.6% Order Fill Rate (Customer Service) and S&OP Advance S&OP Practices # of Companies
    • 39. Forecast Accuracy Median 67 % Forecast Accuracy BIC >75 % Forecast Accuracy (SKU/Location 30 Days) and S&OP BM = Benchmark BIC = Best-in-class S&OP Foundation Advance S&OP Practices # of Companies
    • 40. Total SCM Costs BM Median 8.7% Total SCM Costs BM BIC 3.1% Total SCM Costs (% of Sales) and S&OP S&OP Foundation Advance S&OP Practices # of Companies
    • 41. SCM KPIs mapped to Business Strategy
    • 42. Performance Expectations: SCOR-card & Gap Analysis Performance Vs Competition High Level Metrics Actual Parity Superior Value from Improvements Delivery Perf to Commit Date Fill Rates EXTERNAL Perf Ordr Fulfillment Order Fulfillment LT Flexibility Responsive Production Flexibility Total SCM Mgmt Cost 19% INTERNAL Cost Warranty Cost NA Value Added Employee Productivity NA Inven. Days of Supply 119 da Assets Cash-to-Cash Cycle 196 da Net Asset Turns (Working Capital) 2.2 turns SC Response Time Supply Chain Reliability 50% 63% 0% 37 da 97 da 45 da Advantage 85% 90% 95% 94% 96% 98% 80% 85% 90% 7 days 5 days 3 days 30 days 25 days 20 days 13% 8% 3% NA NA NA $156K $306K $460K 55 days 38 days 22 days 80 days 46 days 28 days 8 turns 12 turns 19 turns 82 days 55 days 13 days $9 M Capital Charge $80 M Indirect Cost Key enabler to cost and asset improvements
    • 43. Team Exercise Pick a supply chain for your group and.. 1. Build a SCOR card. 2. Access the maturity of your SCS and PM processes.
    • 44. SCOR-card & Gap Analysis Performance Vs Competition High Level Metrics Actual Parity Superior Value from Improvements Delivery Perf to Commit Date Fill Rates EXTERNAL Perf Ordr Fulfillment Order Fulfillment LT Flexibility Responsive Production Flexibility Total SCM Mgmt Cost 19% INTERNAL Cost Warranty Cost NA Value Added Employee Productivity NA Inven. Days of Supply 119 da Assets Cash-to-Cash Cycle 196 da Net Asset Turns (Working Capital) 2.2 turns SC Response Time Supply Chain Reliability 50% 63% 0% 37 da 97 da 45 da Advantage
    • 45. Processes to be Accessed
      • Supply Chain Strategy (SCS)– aligns the Supply Chain with the business goals.
      • Performance Management (PM) – aligns, structures and manages the performance measurement and management system.

    ×