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For london aligning for action For london aligning for action Presentation Transcript

  • Supply Chain InsightsAligning for Action & Resolving Conflict
  • BRICKS Book Publishes Matter in August 2012 The Role of Supply Chains in Building Market-Driven Differentiation LORA M. CECERE CHARLES W. CHASE JR.
  • What’s in a name? A rose by any othername would smell as sweet. William Shapespeare 3 p. 3 Supply Chain Insights, LLC © 2012
  • 4
  • AgendaWhat is Supply Chain Excellence? What is the Goal? How do we make Decisions? What do we Measure? Wrap-up p. 5 Supply Chain Insights, LLC © 2012
  • Impact of Supply Chain Challenges Impact of Supply Chain Challenges on Organization in 2011 (7-Point Scale) Impact (5-7) Extreme impact (7) Demand volatility 77% 21% Top 3 Supply Chain Need to improve profit margin 76% 18% Challenges Supply prices 70% 12% New product launch effectiveness 66% 10% Need to increase market share 60% 9% Change in global economy 59% 15% Product consistency and reliability of 55% manufacturing operations 16% Growth in global markets 50% 6% Changes in competition 45% 12%Base: Total Sample (117) p. 6Q16. How much impact did the following supply chain challenges have on your organization in 2011? Supply Chain Insights, LLC © 2012
  • Supply Chain Tipping Points1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 JIT Supply Chain Internet/Email RFID Organization Evolution of eProcurement the PC Re-Engineering the Total Quality S&OP Organization Management Theory of Constraints (Michael Hammer)Supply Chain Excellence = Supply Chain Excellence = Islands of Manufacturing Vertical Silo Efficient Order to + + Excellence Excellence Excellence Cash Processes Inside-Out Inside-Out p. 7 Supply Chain Insights, LLC © 2012
  • Supply Chain Tipping Points 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 .com Social Responsibility Y2K Demand Driven Concepts CSCO Lean Six Sigma Market-Driven Value NetworksSupply Chain Excellence = Supply Chain Excellence = Vertical Silo Outsourcing Value-Based Outcomes + Excellence Effectiveness Delivered by Horizontal Processes Inside-Out Outside-In p. 8 Supply Chain Insights, LLC © 2012
  • A Supply Chain is a Complex System with Complex Processeswith Increasing Complexity p. 9 Supply Chain Insights, LLC © 2012
  • The Effective Frontier Profitable Growth Revenue Cost of Goods Working Capital Corporate Social ResponsibilityR&D Strategy and Investment Asset Strategy and InvestmentForecast Accuracy Customer Service InventoryChannel Strategy Product and Supplier Strategy Service Portfolio Sales Distribution Manufacturing Logistics ProcurementPolicies Policies Policies Policies PoliciesReturns Backorders First Pass Yield Empty Miles Material Yield p. 10 Supply Chain Insights, LLC © 2012
  • Evolution of Supply Chain Process Excellence Continuous TestingAlign Building Horizontal Process Connectors Learning Orchestrate Demand and Supply Improving In Market Adapt Resilient Reliable Right Product Efficient Sense Demand Demand Volatility and Supply Right Place Cost Shape Right Time Procure to Demand and Supply pay/order to Supply based Volatility cash on Market Right Cost p. 11 Supply Chain Insights, LLC © 2012
  • Supply Chain Excellence Definition How Define Supply Chain “Excellence” Right product, right place, right time at the 70% right cost. A responsive supply chain that can adapt as 57% Most Mature markets change. A resilient supply chain that can withstand 52% the shocks of demand and supply volatility. The Efficient Supply Chain. Lowest cost per 38% unit. Right product, right place, right time. 20%Base: Total Sample (61) p. 12Q14. How does your company define supply chain “excellence?” Please select all that apply. Supply Chain Insights, LLC © 2012
  • AgendaWhat is Supply Chain Excellence? What is the Goal? How do we make Decisions? What do we Measure? Wrap-up p. 13 Supply Chain Insights, LLC © 2012
  • 14 Typical Organization CEO Chief Customer COO Officer Chief VP of Supply VP of Marketing Sales CFO Chain Manufacturing Officer Account Customer Procurement Logistics CIO Quality Teams ServiceGrowth Volume Cost p. 14 Supply Chain Insights, LLC © 2012
  • S&OP Process Existence, Goals & ProcessesHave a Sales & Operations Planning S&OP Process Goal Process Not sure Match demand with supply 43% 3% No 10% Maximize opportunity and mitigate risk 32% Develop a feasible plan 14% Determine the most profitable plan 8% Yes Other 3% 87% # Distinct S&OP Processes 5 S&OP 27% 14% 20% 19% processes 12% 9% on average 1 2 3 4 5 More than 5 p. 15 Supply Chain Insights, LLC © 2012
  • S&OP Evolution Greater Benefit Business- • GrowthSales Driven planning Driven • ResilienceMatch Demand Maximize • Efficiency with Supply Profitability Market Driven Manufacturing- Demand Driven Driven Maximize Maximize Opportunity and Deliver a Feasible Opportunity Mitigate Risk. Plan for Operations Sense and Orchestrate Match Demand Shape Demand with Supply Demand Market to Market
  • An Athlete Needs: StrengthFlexibility Balance p. 17 Supply Chain Insights, LLC © 2012
  • What is Agility? How Define Supply Chain “Agility” Shorter supply Flexibility to make cycles and deliver whatever is ordered 3% 10% Ability to recalibrate plans in the face of market, demand and supply volatility and 49% deliver the same or comparable cost, quality and customer service 38% Ability to adapt to variations in demand and supplyBase: Total Sample (117) p. 18Q11. How would you define what it means for your company’s supply chain to be “agile”? Please select the one that fits best. Supply Chain Insights, LLC © 2012
  • Agility Importance vs. Performance Agility Importance vs. Performance (7-Point Scale) 6% 5% 40% Low (1-3) 89% 32% Middle (4) 62 % Points (Gap in Performance vs. Importance) 27% High (5-7) Importance PerformanceBase: Total Sample (117)Q12. How important is it for your company’s supply chain to be “agile” in 2012? Please base your answer on however your companydefines agility. p. 19Q13. How would you currently rate your company’s supply chain in terms of being “agile”? Supply Chain Insights, LLC © 2012
  • Demand-side Views Supply-side Views Hole in Enterprise Architectures Account-Level VMI C A Supplier Supplier Supplier SupplierDownstream Data Distribution Distribution Distribution Network Network Network
  • Demand-side Views Supply-side Views Demand Translation Account-Level VMI C A Supplier Supplier Supplier SupplierDownstream Data Distribution Distribution Distribution Network Network Network
  • A Forecast is not a Forecast is not a Forecast Increasing need for value network strategy alignment Business Planning Forecasting Constrained Forecast Increasing levels of granularity 22
  • Getting to Letter Perfect…. Common Practice Market-driven FocusS Ask sales Focus on market drivers: How do we best shape demand?& Direct integration to supply Design of the value chain to optimize trade-offs, minimize risk, balance cycles, and orchestrate demandOP Manufacturing plan Trade-offs between make, source and deliver 23
  • The Need for Balance S: Go-to- OP: Demand Market Strategies & Orchestration Goal 24
  • AgendaWhat is Supply Chain Excellence? What is the Goal? How do we make Decisions? What do we Measure? Wrap-up p. 25 Supply Chain Insights, LLC © 2012
  • Reporting Structure Where does S&OP Report? Chief Operating Officer 43% 69% Profit Center Gen Mgr of Business Unit 26% Managers Leader of Manufacturing 12% Chief Financial Officer 9% Head of Procurement 3% Chief Information Officer 2%Base: Total Sample (117)Q5. Please tell us how you define your company’s supply chain organization by selecting which function(s) report through the supply chainorganization. Please select all that apply. p. 26Q7. To whom does your supply chain organization report? Q6. How would you characterize your company’s supply chain? Supply Chain Insights, LLC © 2012
  • S&OP Plan Execution S&OP Plan Execution Execution is not connected to S&OP plan 9% We try to execute the S&OP plan, but hardly do in practice 25% We execute the S&OP plan most of the time 35% We execute the S&OP plan nearly all of the time 19% We monitor market events and adjust to S&OP Sense & plan within limits 13% RespondBase: Have a S&OP process (102) p. 27Q25. After your S&OP plan is generated, how is it executed? Please pick the one that describes it best. Supply Chain Insights, LLC © 2012
  • Global Operations Whether Operate Globally How Operate Globally Global Regional (regions roll up (regional No into global operations 23% team; plan supported by globally to act locally) 19% regional supply chains) 38% Yes Multi- 77% 32% national Multi- (countries roll national 11% up into regional operations; (countries roll up into regional regional operation; planning) global planning) 43% Multi-nationalBase: Total Sample (61)Q12. Does your company operate “globally?”Base: Operate Globally (47) p. 28Q13, Which of the following best describes how your company operates “globally?” Please select the one that fits best. Supply Chain Insights, LLC © 2012
  • Center of Excellence Primary Functions of Center of Excellence Center of Excellence Definition of best practices for process 90% Not sure 2% Definition of supply chain metrics 82% Supply chain planning 77% No Inventory strategies 74% 30% Facilitation of horizontal processes, like… 72% Yes Evaluation of new technologies 69% 64% Network design 69% Establishment of goals 51% Supplier development 18% Other 3% 6 functions of the center of excellence on averageBase: Total Sample (61)Q8. Does your company have a supply chain center of excellence – in other words, a dedicated team focused on improving supply chain process excellence?Base: Have Center of Excellence (39) p. 29Q9. What are the primary functions of your supply chain’s center of excellence? Please select all that apply. Supply Chain Insights, LLC © 2012
  • Center of Excellence Importance vs. Performance Importance vs. Performance 120% Importance (6-7) Performance (6-7) Gap (Perf - Impt) 100% 82% 77% 74% 80% 66% 62% 57% 58% 52% 60% 43% 44% 42% 34% 30% 40% 28% 21% 20% 20% 0% -16% -20% -22% -33% -30% -31% -34% -37% -40% -61% -60% -80% Facilitation of Supply chain Network design Definition of Inventory Definition of best Establishmt Evaluation of horizontal planning supply chain strategies practices for of goals new technologies processes, like metrics process S&OP Base: Have 28* 30 27* 32 29* 35 19* 27*function NOTE: Supplier Development is not shown because not enough respondents report it is a function of their supply chain center of excellence Base: Have Center of Excellence & Particular Function (varies by function) *CAUTION: SMALL BASE SIZE Q10. For each of the following functions of the supply chain center of excellence, how important is it to your overall company? SCALE: 7=Extremely important – 1=Not at all important p. 30 Q11. For these same functions, how would you rate your company’s performance? SCALE: 7=Excellent– 1=Poor Supply Chain Insights, LLC © 2012
  • IT Systems: Importance & Satisfaction IT Importance vs. Satisfaction Importance (6-7) Satisfaction (6-7) Gap (Sat - Impt) 120% 100% 86% 83% 80% 76% 75% 73% 80% 65% 63% 59% 58% 60% 42% 38% 30% 35% 40% 24% 28% 25% 20% 15% 11% 20% 0% -21% -20% -23% -34% -40% -45% -47% -56% -55% -52% -59% -58% -60% -80% Demand Enterprise Order Tactical Supply Price Production Transportation Product Manufacturing Warehouse Planning Resource Management Planning Management Planning Planning Lifecycle Execution Management Planning Management SystemsBase: Have 57 59 60 49 36 55 43 27* 44 48 System Base: Have 1+ Operational IT Systems (varies by system); *CAUTION: SMALL BASE SIZE Q16. How important are each of your current IT systems to your supply chain organization? SCALE: 7=Extremely important – 1=Not at all important p. 31 Q17. How satisfied are you with each of your current IT systems shown below? SCALE: 7=Extremely satisfied – 1=Extremely dissatisfied Supply Chain Insights, LLC © 2012
  • Importance of S&OP Process for Agility Importance of S&OP Process to Agility 3% Not important (1-3) 7% 20% (4) (5) 90% 42% Important (6) 28% Extremely important (7)Base: Have a S&OP process (102) p. 32Q22. How important do you think your S&OP process is to improving the agility of your supply chain? Supply Chain Insights, LLC © 2012
  • AgendaWhat is Supply Chain Excellence? What is the Goal? How do we make Decisions? What do we Measure? Wrap-up p. 33 Supply Chain Insights, LLC © 2012
  • What do we Measure?• Inventory Turns• Forecast Accuracy• Profit• Revenue• Customer Service p. 34 Supply Chain Insights, LLC © 2012
  • Looking at Supply Chain as a Complex System Profitable Growth Revenue Cost of Goods Corporate Trade-offs Working Capital Corporate Social Responsibility Investment Trade-offs R&D Strategy and Investment Asset Strategy and Investment Forecast Accuracy Customer Service InventorySupply Chain Trade-offs Channel Strategy Product and Supplier Strategy Service Portfolio Sales Distribution Manufacturing Logistics ProcurementSupply Chain Policies Policies Policies Policies Policies Waste Returns Backorders First Pass Yield Empty Miles Material Yield
  • Looking at Supply Chain as a Complex System Profitable Growth Revenue Cost of Goods Corporate Trade-offs Working Capital Corporate Social Responsibility Investment Trade-offs R&D Strategy and Investment Asset Strategy and Investment Forecast Accuracy Customer Service InventorySupply Chain Trade-offs Channel Strategy Product and Supplier Strategy Service Portfolio Sales Distribution Manufacturing Logistics ProcurementSupply Chain Policies Policies Policies Policies Policies Waste Returns Backorders First Pass Yield Empty Miles Material Yield
  • Benefits Received from S&OP Processes Increasing revenue ▲ 2% 59% Improving forecast accuracy ▲ 5-7% 57% Reduction of inventory ▼ 10-15% 50% Improving asset utilization ▲ 3-7% 42% Determining outsourced manufacturing 38% Determining procurement requirements 36% Improving new product launch ▲ 3-6% 34% Transportation and warehouse management ▼ 2-8% 32%Capital planning and asset management 32% Improvements in the perfect order ▲ 3-6% 30%Source: Supply Chain Insights, 2012What benefits have you received from your work with S&OP processes? p. 37 Supply Chain Insights, LLC © 2012
  • Comparison of Revenue/Employee for the Period of 2000-2011 P&G Colgate Unilever Kimberly-Clark Nestle Kraft 700Revenue/Thousands of Employee 600 500 400 300 200 100 0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
  • Comparison of EBIT/Employee for the Period of 2000-2011 P&G Colgate Unilever Kimberly-Clark Nestle Kraft 140.0 120.0 100.0EBIT/Employee 80.0 60.0 40.0 20.0 0.0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
  • Consumer Products: Comparison of Days of Inventory P&G Colgate Unilever Nestle Kraft80757065605550 2002 2003 2004 2005 2006 2007 2008 2009 2010
  • Consumer Products: Cost of Sales as a Percentage of Revenue Unilever Kellogg Kraft General Mills Campbell Hershey P&G 70%Cost of Sales as a % of Revnue 65% 60% 55% 50% 45% 40% 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
  • AgendaWhat is Supply Chain Excellence? What is the Goal? How do we make Decisions? What do we Measure? Wrap-up p. 42 Supply Chain Insights, LLC © 2012
  • Historically, we have:Tried to get precise on inaccurate data.Believed that the most efficient supply chain is the mosteffective supply chain.Built efficient chains, but not effective networks.Focused inside-out, not outside-in.Rewarded the urgent, not the important. 43 p. 43 Supply Chain Insights, LLC © 2012
  • Who is Lora? •Founder of Supply Chain Insights •Partner at Altimeter Group (leader in open research) •7 years of Management Experience leading Analyst Teams at Gartner and AMR Research •8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA) •15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble. p. 44 Supply Chain Insights, LLC © 2012
  • Where do you find Lora? Contact Information: loracecere@gmail.com Blog: www.supplychainshaman.com (3500 pageviews/month) Twitter: lcecere 2900 followers. Rated as the top rated supply chain social network user. Linkedin: linkedin.com/pub/lora- cecere/0/196/573 (2300 in the network) p. 45 Supply Chain Insights, LLC © 2012