Presentation at the Chief Supply Chain Officer Conference on June 19th

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Presentation given at the CSCO conference in Chicago on June 19th. Discussion on why companies are stuck on the Effective Frontier of balancing growth, profitability, cycles and complexity. The …

Presentation given at the CSCO conference in Chicago on June 19th. Discussion on why companies are stuck on the Effective Frontier of balancing growth, profitability, cycles and complexity. The answer lies in redesigning the processes outside-in and orchestrating demand and supply in market-driven processes through new forms of technology. We need to embrace the new and learn from the old while holding ourselves accountable to the balance sheet.

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  • 1. In Search of Supply ChainExcellenceLora Cecere of Supply Chain Insights
  • 2. Supply Chain Insights LLC Copyright © 2013, p. 2Supply Chain Insights is focused on deliveringindependent, actionable and objectiveadvice for supply chain leaders. A companydedicated to research, turn to us when youwant the latest insights on supply chain trends,technologies to know and metrics that matter.About Us
  • 3. Supply Chain Insights LLC Copyright © 2013, p. 318 Reports in 2012
  • 4. Supply Chain Insights LLC Copyright © 2013, p. 4Over 30 Reports Planned for 2013#sciwebinar
  • 5. Supply Chain Insights LLC Copyright © 2013, p. 5This is the new bible for all supply chainexecutives. It provides an insider’sperspective that will prove incrediblyvaluable to even the most grizzledsupply chain veteran. This is the nextmust-have business book.--Bruce Richardson, Chief EnterpriseStrategist, Salesforce.comToday, the worlds of social business andsupply chain management have manydegrees of separation. I enjoyed workingwith Lora to understand what the futuretransformation of digital marketing todigital business could look like.--Jeremiah Owyang, Research Director,AltimeterSecond Printing of Bricks Matter:15 Five-Star Reviews on AmazonBook can be ordered from Amazon.com in Hardcopy or Digital Format
  • 6. Supply Chain Insights LLC Copyright © 2013, p. 6Publishing Two eBooks in2013 on Supply ChainMetrics That Matter– Consumer Value Networks– Industrial Value Networks2013 Publications#sciwebinar
  • 7. Right Useof AssetsExpansion intoBRIC Countries(Brazil, Russia,India and China)Supply ChainProcessKnowledge
  • 8. Supply Chain Insights LLC Copyright © 2013, p. 8Evolving Practices
  • 9. Where are we on Supply ChainExcellence?
  • 10. Supply Chain Insights LLC Copyright © 2013, p. 11 Perform better than peer group Improve year-over-year results Alignment in metrics Delivery of performance against the businessstrategy Consistency in results Be a leader in managing trade-offsWhat Is Supply Chain Excellence?#sciwebinar
  • 11. Supply Chain Insights LLC Copyright © 2013, p. 12A Look at History: Progress in Productivity#sciwebinar
  • 12. Supply Chain Insights LLC Copyright © 2013, p. 13Source: Supply Chain Insights, Corporate Annual Reports 2000-2011Inventory Performance2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Consumer Packaged Goods 59.0 57.0 62.0 64.0 67.0 67.0 68.0 70.0 70.0 64.0 64.0 67.0Chemical 71.5 71.9 78.2 75.1 62.0 70.3 68.1 64.3 64.3 78.6 72.9 72.8Pharma 122.2 133.7 190.1 171.0 184.3 175.6 167.8 149.8 154.9 198.7 154.3 131.8High Tech 93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4Average 86.5 80.0 94.2 89.6 87.3 87.5 86.9 80.2 81.0 95.6 81.5 75.50.050.0100.0150.0200.0250.0DaysofInventory
  • 13. Supply Chain Insights LLC Copyright © 2013, p. 14Current State: Corporate SocialResponsibility
  • 14. Supply Chain Insights LLC Copyright © 2013, p. 15Current State: Sales and OperationsPlanning
  • 15. Supply Chain Insights LLC Copyright © 2013, p. 16A Supply Chainis a Complex Systemwith Complex Processeswith Increasing Complexity
  • 16. Supply Chain Insights LLC Copyright © 2013, p. 17The Effective FrontierProfitable GrowthRevenue Cost of GoodsWorking CapitalCorporate Social ResponsibilityR&D Strategy and Investment Asset Strategy and InvestmentForecast Accuracy Customer Service InventoryChannel Strategy Product andService PortfolioSupplier StrategySalesPoliciesDistributionPoliciesManufacturingPoliciesLogisticsPoliciesProcurementPoliciesReturns Backorders First Pass Yield Empty Miles Material Yield
  • 17. Supply Chain Insights LLC Copyright © 2013, p. 18Trying to Reach Balance
  • 18. Supply Chain Insights LLC Copyright © 2013, p. 19Cross Industry View: (2000-2011)#sciwebinar
  • 19. Supply Chain Insights LLC Copyright © 2013, p. 20Apparel
  • 20. Supply Chain Insights LLC Copyright © 2013, p. 21Apparel Performance
  • 21. Supply Chain Insights LLC Copyright © 2013, p. 22Consumer Packaged Goods IndustryPerformance
  • 22. Supply Chain Insights LLC Copyright © 2013, p. 23Three Different Strategies
  • 23. Supply Chain Insights LLC Copyright © 2013, p. 24Another View
  • 24. Supply Chain Insights LLC Copyright © 2013, p. 25Comparison
  • 25. Supply Chain Insights LLC Copyright © 2013, p. 26Industry Progress
  • 26. Supply Chain Insights LLC Copyright © 2013, p. 27Introducing theSupply Chain IndexA formulaic representation ofhow companies are trading offgrowth, profitability, cycle andcomplexity performance onselected supply chain financialmetrics against marketvaluation.#sciwebinar
  • 27. Supply Chain Insights LLC Copyright © 2013, p. 28Selected 14 CoreSupply Chain Ratios to StudyFinancial MetricsGrowth Profitability Cycle ComplexityCommon Shares Cash Cash-to-Cash Cycle Altman ZEmployee Growth Cash Change in Period Days of Finished Goods Capital TurnoverEmployees Cash on Hand Days of Inventory Current RatioMarket Capitalization Cash Ratio TTM Days of Payables Outstanding Quick RatioR&D Margin Cash Ratio Quarter Days of Raw Materials Return on AssetsR&D Ratio Cash Ratio Year Days of Sales Outstanding Return on EquityR&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested CapitalRevenue EBITDA DPO/DSO Return on Net AssetsRevenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per EmployeeRevenue Growth TTM Gross Margin Inventory Working Capital RatioRevenue TTM Gross Profit Inventory TurnsSG&A Margin Net Profit Margin Receivables TurnsSG&A Ratio Operating Cash Flow Ratio Raw Materials InventorySG&A to COGS Ratio Operating Margin Work in Progress InventoryOPEX RatioPretax MarginSource: Supply Chain Insights LLC#sciwebinarSelected Ratios
  • 28. Supply Chain Insights LLC Copyright © 2013, p. 29Identified Industry Metrics#sciwebinarMarket Capitalization vs. Revenue GrowthInsight: Forexample,growth didnot correlatefor chemicalcompanies.
  • 29. Supply Chain Insights LLC Copyright © 2013, p. 30Metrics that Matter
  • 30. Supply Chain Insights LLC Copyright © 2013, p. 31Consumer Value ChainMetrics That Matter by IndustryMass Retail IndustryConsumer PackagedGoods IndustryChemical IndustryOperating Margin Operating Margin Operating MarginDays of Inventory Days of Inventory Days of InventoryDPO/DSODays of PayablesOutstandingDays of PayablesOutstandingReturn on Invested Capital Return on Invested Capital Return on AssetsWorking Capital Ratio Current RatioFree Cash Flow RatioSG&A to COGS Ratio#sciwebinar
  • 31. Supply Chain Insights LLC Copyright © 2013, p. 32Healthcare Value ChainMetrics That Matter by IndustryMedical Care Industry Medical Distribution Pharmaceutical MajorFree Cash Flow Ratio Operating Margin Free Cash Flow RatioWorking Capital Ratio Return on Invested Capital Return on Invested CapitalOperating Margin Free Cash Flow Ratio Altman ZSG&A to COGS Ratio Working Capital Ratio Current RatioYoY Revenue Growth Return on Net AssetsDays of PayablesOutstandingCurrent Ratio DPO/DSO RatioDays of Sales Outstanding Current RatioDays of Inventory Days of InventoryDays of PayablesOutstanding
  • 32. Supply Chain Insights LLC Copyright © 2013, p. 33SHAREDVISION+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGESKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSIONSHAREDVISION+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETYSHAREDVISION+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =FALSESTARTSSHAREDVISION+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATIONSHAREDVISION+ SKILLS + RESOURCES + PLAN + LEADERSHIP =GRADUALCHANGESource: J.P. KotterCollaboration: The Right Stuff
  • 33. What is a Market-Driven ValueNetwork?
  • 34. Supply Chain Insights LLC Copyright © 2013, p. 35Future EvolutionAlign:MarketDrivenBuilding HorizontalProcess ConnectorsContinuousTestingLearningImprovingIn MarketOrchestrateDemand and SupplyResilientReliableAdapt:DemandDrivenEfficientSenseDemandand SupplyShapeDemand andSupply basedon MarketAbsorbDemandVolatilityAbsorb SupplyVolatilityRight ProductRight PlaceRight TimeRight CostCostProcure topay/order tocash
  • 35. Supply Chain Insights LLC Copyright © 2013, p. 36A network that senses demand with minimallatency to drive a near-real time response fordemand shaping and demand translation.What Is a Demand-drivenValue Network?
  • 36. Supply Chain Insights LLC Copyright © 2013, p. 37Rising Price of a Barrel of West TexasIntermediate (WTI)
  • 37. Supply Chain Insights LLC Copyright © 2013, p. 38Commodity Price Increases and Volatility
  • 38. Supply Chain Insights LLC Copyright © 2013, p. 39An adaptive network focused on a value-based outcome that senses and translatesmarket changes (buy and sell-side markets)bi-directionally with near-real time datalatency to align sell, deliver, make andsourcing operations.What Is a Market-driven Value Network?
  • 39. Supply Chain Insights LLC Copyright © 2013, p. 40Demand-shaping LeversNew Product LaunchMarketingSales IncentivesTrade PromotionsDistributor IncentivesAssortmentPriceRun-out of obsolescence or mark-down strategiesOrchestration LeversMarket-driven Orchestration LeversPrice to Price OrchestrationAlternate Bill of MaterialsAlternate SourcingChange in AssortmentOrchestration of Product Mix (Incentproducts with less commodityvariability)Changes in Demand ShapingStrategiesCommodity Hedging
  • 40. Supply Chain Insights LLC Copyright © 2013, p. 41Market-Driven Value NetworksCharacteristics
  • 41. Supply Chain Insights LLC Copyright © 2013, p. 42Value Network StrategySupply chain strategyBusiness StrategyWhat are the right things to do to increase company value?Value-network Supply Chain StrategyWhat are the right ways to support the business strategy?What are the right trade-offs between value drivers for each value network?Right productplatformsDesign thesupplyresponseBuildorganizationalsystems andmanage talentAlign supplyrelationshipsAlign demandrelationshipsEffective SupplyNetworksExecution of buy-side strategiesContinuousImprovementCapabilities RequiredSupply ChainNetwork DesignDesign NetworksInnovationMethodologiesDemand NetworksJoint Value CreationStrategiesBusiness ProcessHow do I do the right things right?Source: Supply Chain Insights, LLC
  • 42. Race for Supply Chain 2020
  • 43. Supply Chain Insights LLC Copyright © 2013, p. 44Outside-InValue-Based OutcomesDelivered by Value NetworksSupply Chain Excellence =Supply Chain 2020 Tipping Points2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025TalentShortageCompliance onSafe & SecureOrchestrationBig DataSupply ChainsInternet of ThingsLearningSupply ChainsDigital Manufacturing
  • 44. Supply Chain Insights LLC Copyright © 2013, p. 45Connecting the Extended Supply Chain45Trading Partner 1 Trading Partner 2 Trading Partner 3TransactionalApplicationsTransactionalApplicationsTransactionalApplications
  • 45. Supply Chain Insights LLC Copyright © 2013, p. 46Connecting the Extended Supply ChainCollaborativeLayerCollaborativeLayerCollaborativeLayerEnterprise DataWarehouseEnterprise DataWarehouseDemand SignalRepositorySupply SignalRepositoryPredictive AnalyticsKey:Inter-Enterprise Systemsof Record: TransactionalAdapters and IntelligentRule SetsTrading Partner 1 Trading Partner 2 Trading Partner 3TransactionalApplicationsTransactionalApplicationsTransactionalApplicationsEnterprise DataWarehouse
  • 46. Supply Chain Insights LLC Copyright © 2013, p. 47DefinitionChallenges:• Transactional• Time phased dataStructuredData• Social• Channel• Customer Service• Warranty• Temperature• RFID• QR codes• GPS• Mapping and GPS• Video• Voice• Digital ImagesUnstructuredDataSensorDataNewDataTypesVolumeVelocityVariability
  • 47. Supply Chain Insights LLC Copyright © 2013, p. 48Rethinking Analytics
  • 48. Supply Chain Insights LLC Copyright © 2013, p. 49• Outside-in• End-to-End Orchestration• Supply Chain MattersPath Forward
  • 49. Supply Chain Insights LLC Copyright © 2013, p. 50Questions?
  • 50. Supply Chain Insights LLC Copyright © 2013, p. 51Join Us!www.supplychaininsightsglobalsummit.com#sciwebinar
  • 51. Supply Chain Insights LLC Copyright © 2013, p. 52• July 11th: Big Data Supply Chains and the Future of Analytics• August 15th: State of Supply Chain Talent. Missing Link in theSupply ChainUpcoming WebinarsEach webinar is based on new and relevant researchand will feature two-three industry leaders
  • 52. Supply Chain Insights LLC Copyright © 2013, p. 53Who Is Lora?• Founder of Supply Chain Insights• Partner at Altimeter Group (leader in openresearch)• 7 years of Management Experience leadingAnalyst Teams at Gartner and AMR Research• 8 years Experience in Marketing and SellingSupply Chain Software at Descartes SystemsGroup and Manugistics (now JDA)• 15 Years Leading teams in Manufacturing andDistribution operations for Clorox, Kraft/GeneralFoods, Nestle/Dreyers Grand Ice Cream andProcter & Gamble.
  • 53. Supply Chain Insights LLC Copyright © 2013, p. 54Where Do You Find Lora?Contact Information:lora.cecere@supplychaininsights.comBlog: www.supplychainshaman.com(4000 pageviews/month)Twitter: lcecere 3800 followers. Rated as thetop rated supply chain social network user.LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (3560 in the network)