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Presentation for GHX on Cost to Serve
 

Presentation for GHX on Cost to Serve

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Discussion on the evolution of cost to serve in Healthcare and the impact on value analysis

Discussion on the evolution of cost to serve in Healthcare and the impact on value analysis

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    Presentation for GHX on Cost to Serve Presentation for GHX on Cost to Serve Presentation Transcript

    • Where are we on the Journey?A Closer Look at HealthcareProviders
    • Supply Chain Insights LLC Copyright © 2013, p. 3Supply 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
    • Supply Chain Insights LLC Copyright © 2013, p. 4Healthcare Value ChainFinancial Metrics
    • Supply Chain Insights LLC Copyright © 2013, p. 5Components of Cash to Cash
    • Supply Chain Insights LLC Copyright © 2013, p. 6Supply Chain Organization:Three-Quarters Have a Formal Supply Chain Organization
    • Supply Chain Insights LLC Copyright © 2013, p. 7Supply Chain Organization:7 Functions Report Through It on Average;Reports Primarily to Chief Financial Officer
    • Supply Chain Insights LLC Copyright © 2013, p. 8Supply Chain Organization:Purchasing is Primarily Done Corporate-Wide
    • Supply Chain Insights LLC Copyright © 2013, p. 9Hospitals: Measuring Value
    • Supply Chain Insights LLC Copyright © 2013, p. 10Hospitals: Value Analysis
    • Supply Chain Insights LLC Copyright © 2013, p. 11Value Analysis Group:Supply Chain is Primary Leader;Changing/Adding Products are Most Common Decisions
    • Supply Chain Insights LLC Copyright © 2013, p. 12Value Analysis Program
    • Supply Chain Insights LLC Copyright © 2013, p. 13Focus: Negotiating Lower Prices
    • Supply Chain Insights LLC Copyright © 2013, p. 14Current State
    • Supply Chain Insights LLC Copyright © 2013, p. 15SHAREDVISION+ 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
    • Supply Chain Insights LLC Copyright © 2013, p. 16Applying theSupply Chain Index to HealthcareA formulaic representation ofhow companies are trading offgrowth, profitability, cycle andcomplexity performance onselected supply chain financialmetrics against marketvaluation.#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 17Value 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
    • Supply Chain Insights LLC Copyright © 2013, p. 18• Redesign for value• Focus on outcomes• Management of end-to-end processesSummary
    • Supply Chain Insights LLC Copyright © 2013, p. 19Our Focus2-DAY PUBLICTRAININGPrinceton – June 24-25Minneapolis – August 8-9$1500GLOBALSUMMITPODCASTSwww.supplychaininsights.com#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 20PAST SUPPLY CHAIN INDEX WEBINARS:AVAILABLE ON DEMAND• From September 24, 2012:The Supply Chain Index, 20 Years in the Making:A Focus on Process Industries• From October 26, 2012:The Supply Chain Index, 20 Years in the Making:A Focus on Discrete IndustriesWebinarswww.supplychaininsights.com/upcoming-webinars#sciwebinarUPCOMING WEBINARS• May 23 rd: Supply Chain Index, Update, Part II• June 13th: Sales and Operations Planning: Stateof the Union• July 11th: Big Data Supply Chains and the Futureof Analytics• August 15th: State of Supply Chain Talent:Missing Link in the Supply Chain• August 29th: Digital Manufacturing
    • In Search of Supply ChainExcellenceLora Cecere of Supply Chain Insights
    • Supply Chain Insights LLC Copyright © 2013, p. 22Supply 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
    • Supply Chain Insights LLC Copyright © 2013, p. 2318 Reports in 2012
    • Supply Chain Insights LLC Copyright © 2013, p. 24Over 30 Reports Planned for 2013#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 25This 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:14 Five-Star Reviews on AmazonBook can be ordered from Amazon.com in Hardcopy or Digital Format
    • Supply Chain Insights LLC Copyright © 2013, p. 26Right Useof AssetsExpansion intoBRIC Countries(Brazil, Russia,India and China)Supply ChainProcessKnowledge
    • In Search of Supply ChainExcellence
    • Supply Chain Insights LLC Copyright © 2013, p. 28Current StateSupply Chain Insights LLC Copyright 2013
    • Supply Chain Insights LLC Copyright © 2013, p. 29The Supply Chain Pioneers
    • Supply Chain Insights LLC Copyright © 2013, p. 30Source: 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
    • Supply Chain Insights LLC Copyright © 2013, p. 31 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
    • Supply Chain Insights LLC Copyright © 2013, p. 32
    • Supply Chain Insights LLC Copyright © 2013, p. 33Evolving Practices
    • Supply Chain Insights LLC Copyright © 2013, p. 34A Supply Chainis a Complex Systemwith Complex Processeswith Increasing Complexity
    • Supply Chain Insights LLC Copyright © 2013, p. 35The 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
    • Supply Chain Insights LLC Copyright © 2013, p. 36Trying to Reach Balance
    • Supply Chain Insights LLC Copyright © 2013, p. 37Useful Ratios
    • Supply Chain Insights LLC Copyright © 2013, p. 38Industry Averages
    • Supply Chain Insights LLC Copyright © 2013, p. 39Chemical Industry Performance
    • Supply Chain Insights LLC Copyright © 2013, p. 40Consumer Packaged Goods IndustryPerformance
    • Supply Chain Insights LLC Copyright © 2013, p. 41Colgate-Palmolive Company vs Unilever N.V.
    • Supply Chain Insights LLC Copyright © 2013, p. 42Inventory Turns vs. Revenue per Employee(2002-2011) SUMMARY SLIDE
    • Supply Chain Insights LLC Copyright © 2013, p. 43Cash-to-Cash Cycle vs. Operating Margin(2000-2011)
    • Supply Chain Insights LLC Copyright © 2013, p. 44Cash-to-Cash Cycle vs. Gross Margin(2000-2011) SUMMARY SLIDE
    • Supply Chain Insights LLC Copyright © 2013, p. 45Pharmaceutical Industry HistoricalPerformance
    • Supply Chain Insights LLC Copyright © 2013, p. 46Cash-to-Cash Cycle vs. Gross Margin(2000-2011) SUMMARY SLIDE
    • Supply Chain Insights LLC Copyright © 2013, p. 47Healthcare Value Chain:Financial Metrics#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 48Healthcare Value ChainCash-to-Cash Cycle
    • Supply Chain Insights LLC Copyright © 2013, p. 49Food Industry HistoricalPerformance
    • Supply Chain Insights LLC Copyright © 2013, p. 50Cash-to-Cash Cycle vs. Gross Margin (2000-2011)SUMMARY SLIDE
    • Supply Chain Insights LLC Copyright © 2013, p. 51Five Year Comparison
    • Royal Dutch Shell
    • Supply Chain Insights LLC Copyright © 2013, p. 53Corporate Summary
    • Supply Chain Insights LLC Copyright © 2013, p. 54Metrics Included for Comparison
    • Supply Chain Insights LLC Copyright © 2013, p. 55Metric Equations
    • Supply Chain Insights LLC Copyright © 2013, p. 56Cash-to-Cash Cycle vs. Operating Margin(2000-2003)
    • Supply Chain Insights LLC Copyright © 2013, p. 57Cash-to-Cash Cycle vs. Operating Margin(2004-2007)
    • Supply Chain Insights LLC Copyright © 2013, p. 58Cash-to-Cash Cycle vs. Operating Margin (2008-2011)
    • Supply Chain Insights LLC Copyright © 2013, p. 59Cash-to-Cash Cycle vs. Operating Margin (2012)
    • Supply Chain Insights LLC Copyright © 2013, p. 60Cash-to-Cash Cycle vs. Operating Margin (2000-2012) SUMMARY SLIDE
    • Supply Chain Insights LLC Copyright © 2013, p. 61Inventory Turns vs. Revenue per Employee (2002-2003)
    • Supply Chain Insights LLC Copyright © 2013, p. 62Inventory Turns vs. Revenue per Employee (2004-2007)
    • Supply Chain Insights LLC Copyright © 2013, p. 63Inventory Turns vs. Revenue per Employee (2008-2011)
    • Supply Chain Insights LLC Copyright © 2013, p. 64Inventory Turns vs. Revenue per Employee (2012)
    • Supply Chain Insights LLC Copyright © 2013, p. 65Inventory Turns vs. Revenue per Employee (2002-2012) SUMMARY SLIDE
    • Supply Chain Insights LLC Copyright © 2013, p. 66Cash-to-Cash Cycle Components (2000-2003)
    • Supply Chain Insights LLC Copyright © 2013, p. 67Cash-to-Cash Cycle Components (2004-2007)
    • Supply Chain Insights LLC Copyright © 2013, p. 68Cash-to-Cash Cycle Components (2008-2011)
    • Supply Chain Insights LLC Copyright © 2013, p. 69Cash-to-Cash Cycle Components (2012)
    • Supply Chain Insights LLC Copyright © 2013, p. 70Cash-to-Cash Cycle (2000-2012)
    • Supply Chain Insights LLC Copyright © 2013, p. 71Publishing Two eBooks in2013 on Supply ChainMetrics That Matter– Consumer Value Networks– Industrial Value Networks2013 Publications
    • Supply Chain Insights LLC Copyright © 2013, p. 72Introducing theSupply Chain IndexA formulaic representation ofhow companies are trading offgrowth, profitability, cycle andcomplexity performance onselected supply chain financialmetrics against marketvaluation.#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 731. To better understand which supply chain metricsmatter to corporate balance sheet performance inpublic markets. We want to help leaders better alignsupply chain and financial performance.2. To create an objective system for evaluating andranking supply chains by industry peer group.3. To connect financial performance with supply chainexcellence as measured through quantitativesurveys in an effort to better identify and define bestpractices across industry groups.Why Did We Do This?#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 74• What it is: A way to understand the impact ofcompanies’ supply chain (relative to peerswithin an industry sector) to marketcapitalization based a set of preselected supplychain ratio metrics.• What it is NOT: A way to evaluate overallcompany performance or compare the modelresults to actual market capitalization.What It Is. What It Is Not.#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 75Step 1: Located data sourcesStep 2: Selected core supply chain ratios from over 50 financial metricsStep 3: Identified meaningful metrics per industry using regression analysisamong selected ratiosStep 4: Constructed industry equation based on correlation of industrymetrics to market capitalization valuesStep 5: Determined company rankings within industry by applying 2012company results to industry equationStep 6: Analysis of peer group companies over the last decadeStep 7: Correlations to supply chain practices, technologies andorganizational designSupply Chain Index Methodology#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 76– Market capitalization data of public companies(Ycharts.com)– Industry peer groups defined by Morningstar Sector(36)– Financial ratios built from balance sheet and incomestatement data collected from OneSource– Analysis of quarterly data using R (frequency 2006Q1to 2012Q4)Step 1: Located Data Sources#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 77Step 2: Selected 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
    • Supply Chain Insights LLC Copyright © 2013, p. 78Step 3: Identified Industry Metrics#sciwebinarMarket Capitalization vs. Revenue GrowthInsight: Forexample,growth didnot correlatefor chemicalcompanies.
    • Supply Chain Insights LLC Copyright © 2013, p. 79Step 3: Identified Industry MetricsMetrics 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
    • Supply Chain Insights LLC Copyright © 2013, p. 80Step 4: Mass Retail Equation#sciwebinarLn(market cap) = 10.41 + 52.67(OM) -34.72(WC) - 16.02(ROIC)– 0.09(DPODSO) + 0.02(DOI)Mass Retail Industry Equation
    • Supply Chain Insights LLC Copyright © 2013, p. 81Step 5: Determined Rankings by IndustryMass Retail Industry (2012)#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 82Top Ranked Mass Retail Industry (2012)#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 83Step 3: Identified Industry Metrics#sciwebinarMetrics 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
    • Supply Chain Insights LLC Copyright © 2013, p. 84Step 4: Consumer Packaged Goods(CPG) Equation#sciwebinarLn(market cap) = 3.37 + 2.11(OM) + 1.62(FCF) – 1.29(ROIC) –1.17ln(CR) + 0.25(SGAC) + 0.02(DPO) – 0.01(DOI)CPG Industry Equation
    • Supply Chain Insights LLC Copyright © 2013, p. 85Step 5: Determined Rankings by IndustryCPG Industry (2012)#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 86Top Ranked CPG Industry (2012)#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 87Step 3: Identified Industry Metrics#sciwebinarMetrics 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
    • Supply Chain Insights LLC Copyright © 2013, p. 88Step 4: Chemical Industry Equation#sciwebinarLn(market cap) = 7.85(OM) – 4.84(ROA) + 1.81ln(DPO) +0.01(DOI)Chemical Industry Equation
    • Supply Chain Insights LLC Copyright © 2013, p. 89Step 5: Determined Rankings by IndustryChemical Industry (2012)#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 90Top Ranked Chemical Industry (2012)#sciwebinar
    • Supply Chain Insights LLC Copyright © 2013, p. 91In ProgressFood Industry#sciwebinarLn(market cap) = 5.57 +15.56(OM) – 7.50(ROIC) – 4.13(ROA) +2.74(RONA) + 0.61(Z) + 0.04(DPO) – 0.04(DSO)Food Industry Equation
    • Supply Chain Insights LLC Copyright © 2013, p. 92Value Chain RelationshipsRetail(MassMerchant)CPG ChemicalEquations:Ln(market cap) =10.41+ 52.67(OM)-34.72(WC)- 16.02(ROIC)-0.09(DPODSO)+ 0.02(DOI)3.37+ 2.11(OM)+ 1.62(FCF)- 1.29(ROIC)- 1.17ln(CR)+ 0.25(SGAC)+ 0.02(DPO)– 0.01(DOI)7.85(OM)- 4.84(ROA)+ 1.81ln(DPO)+ 0.01(DOI)True collaboration only happens when there isa sustaining win-win value proposition.
    • Supply Chain Insights LLC Copyright © 2013, p. 93Future EvolutionAlign:MarketDrivenBuilding HorizontalProcess ConnectorsContinuousTestingLearningImprovingIn MarketOrchestrateDemand and SupplyResilientReliableAdapt:DemandDrivenEfficientSenseDemandand SupplyShapeDemand andSupply basedon MarketAbsorbDemandVolatilityAbsorb SupplyVolatilityRight ProductRight PlaceRight TimeRight CostCostProcure topay/order tocash
    • Supply Chain Insights LLC Copyright © 2013, p. 94A network that senses demand with minimallatency to drive a near-real time response fordemand shaping and demand translation.What Is a Demand-drivenValue Network?
    • Supply Chain Insights LLC Copyright © 2013, p. 95Rising Price of a Barrel of West TexasIntermediate (WTI)
    • Supply Chain Insights LLC Copyright © 2013, p. 96Commodity Price Increases and Volatility
    • Supply Chain Insights LLC Copyright © 2013, p. 97An 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?
    • Supply Chain Insights LLC Copyright © 2013, p. 98E2E Order  Delivery kaizen team was able toquantify the current order processinginefficiencies5/21/20131232174Process Steps Valued by theCustomerNecessary process steps but notvalue-producing for our businessManual intervention steps nowpart of "normal"Zero (0) orders flow through the e2e process without being manually handled!Massive value creation potential for eliminating waste, inefficiency and re-focusing resources on activities that actually deliver value0%20%40%60%80%100%Breakdown of E2E Order to DeliveryProcess% of time actually spent completing process stepsTime spent in Queues and "Do Loops"Vast majority of time is spent onactivities that do not produceenterprise value>60% of order processing is spent waitingor in inefficient manual intervention
    • Supply Chain Insights LLC Copyright © 2013, p. 9926%19% 21%30%26%12% 13%17%26% 19%20%18%11%24%17% 14%13%16%18%14%18%17%9%13%12%9%12%17%10%8%17%5%13%14%11%10%15%11% 9% 12%18%9%10%5% 4%11%8%6% 7%CPG Food+bev Electronics Semi-conductorDurables Process DiscreteOtherFaxPhoneInternet ordersCustomer portalVMI/collab.B2b (w/manual)B2b (no manual)Order Entry ProcessCONSUMER PRODS HIGH-TECH INDUSTRIAL
    • Supply Chain Insights LLC Copyright © 2013, p. 100Market-Driven Value NetworksCharacteristics
    • Supply Chain Insights LLC Copyright © 2013, p. 101Demand-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
    • Corporate Sustainability
    • Supply Chain Insights LLC Copyright © 2013, p. 103Current State
    • Supply Chain Insights LLC Copyright © 2013, p. 104Corporate Sustainability Alignment
    • Supply Chain Insights LLC Copyright © 2013, p. 105Corporate Sustainability Alignment
    • Supply Chain Insights LLC Copyright © 2013, p. 106Who Does it Best?
    • Building Value Networks
    • Supply Chain Insights LLC Copyright © 2013, p. 108Years 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012RETAILAVERAGE17.05% 42.46% 12.89% 8.76% 5.15%CPG AVERAGE 2.12% 0.84% 3.91% 7.26% 2.32%FOOD CPGAVERAGE3.68% 2.97% 8.13% 2.59% 4.27%BEVERAGE CPGAVERAGE12.87% 2.00% 9.59% 11.53% 4.92%Year-over-Year Growth
    • Supply Chain Insights LLC Copyright © 2013, p. 1091990-19941995-19992000-20042005 2006 2007 2008 2009 2010 2011 2012eCommerce 343 456 549 758 848 1016 998 1073Grocery 198 182 425 479 475 520 612 611 572 518 504Mass 112 144 253 348 379 617 487 474 533 464 348Specialty 296 384 414 458 479 527 534 282 312020040060080010001200RevenueperEmployee(K$)Revenue per EmployeeRetail: Revenue Per EmployeeSource: Supply Chain Index Analysis from Annual Reports 1990-2012Mean values utilized excluding outlier data
    • Supply Chain Insights LLC Copyright © 2013, p. 110Revenue Per Store
    • Supply Chain Insights LLC Copyright © 2013, p. 111A Look at History
    • Supply Chain Insights LLC Copyright © 2013, p. 112
    • Supply Chain Insights LLC Copyright © 2013, p. 113Cash-to-Cash Cycle vs. Gross Margin (2000-2011)SUMMARY SLIDE
    • Supply Chain Insights LLC Copyright © 2013, p. 114Value Chain RelationshipsRetail(MassMerchant)CPG ChemicalEquations:Ln(market cap) =10.41+ 52.67(OM)-34.72(WC)- 16.02(ROIC)-0.09(DPODSO)+ 0.02(DOI)3.37+ 2.11(OM)+ 1.62(FCF)- 1.29(ROIC)- 1.17ln(CR)+ 0.25(SGAC)+ 0.02(DPO)– 0.01(DOI)7.85(OM)- 4.84(ROA)+ 1.81ln(DPO)+ 0.01(DOI)True collaboration only happens when there isa sustaining win-win value proposition.
    • Supply Chain Insights LLC Copyright © 2013, p. 115SHAREDVISION+ 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
    • Supply Chain Insights LLC Copyright © 2013, p. 116DemandSignalAccurateWeeklyForecastingis ...Delay fromPurchase toSignalData Latency and Distortion Across the NetworkRed Represents Emerging Economies withDistributor TradeRetailer DCEasy3-10 Days7-20 DaysManufacturer DCDifficult10-20 Days20-45 DaysSuppliersAlmostImpossible20-50 Days45-80 DaysStoreTrivialInstantVariable
    • Supply Chain Insights LLC Copyright © 2013, p. 117We have not Fixed ReplenishmentProcesses….
    • Supply Chain Insights LLC Copyright © 2013, p. 118Supply ReliabilityManufacturermentioned byname
    • Supply Chain Insights LLC Copyright © 2013, p. 119Current State: Usage of Downstream Data
    • Supply Chain Insights LLC Copyright © 2013, p. 120Bar codes were first used at Marsh Supermarket in 1968
    • Supply Chain Insights LLC Copyright © 2013, p. 121Barriers
    • Supply Chain Insights LLC Copyright © 2013, p. 122Data Used
    • Supply Chain Insights LLC Copyright © 2013, p. 123Quality of Data100%72%62% 59%52%41% 38%72%55%41%14% 17%10% 7%-28%-17% -21%-45%-34% -31% -31%-60%-40%-20%0%20%40%60%80%100%120%Point of Sale WarehouseWithdrawalWarehousePerpetual InventoryChangesStore Forecasts In-store PerpetualInventory ChangesCompanyForecastsLoyaltyDownstream Data Received from Retailers vs. CleanReceives Clean (Rated 5-7 on 7-Pt Scale) Gap (Clean - Receive)____________________________________________________________Source: Supply Chain Insights LLC, Downstream Data (Aug-Oct 2012)Base: Manufacturers using/trying to use downstream data (n=29 – CAUTION: Small base size)Q17. What types of downstream data does your company get from retailers? Please select all that apply.Q19. For each type of data that you get, please rate how clean it is, on average, considering all retailers from which you get it. SCALE:1=Extremely dirty, 7=Extremely clean
    • Supply Chain Insights LLC Copyright © 2013, p. 124Percent of Channel
    • Supply Chain Insights LLC Copyright © 2013, p. 125Days of Inventory (DOI): Companies with and without DemandSensing (CPG, Food, Heath & Beauty Industries)Evolution646566636665 656360612007 2008 2009 2010 2011Source: Company FinancialsDaysInventory
    • Supply Chain Insights LLC Copyright © 2013, p. 126Risk ManagementhighlowhighlowImpactProbability of Adverse Eventcatastrophicperiodic incidentstrategicdaily surpriseProbability * Impact = Value at Risk
    • Supply Chain Insights LLC Copyright © 2013, p. 127Risk Assessment: A Value-Driven Approachhighlowhighlowsafety, qualityImpactProbability of Adverse Eventcatastrophicperiodic incidentstrategicdaily surprisemark to marketportfolio mgmt risksustainabilityproduct mix shiftcommodity costsmargin pressureprivate labeldeflationforeign exchange* AMR Research – Top CP Risk Mentions last quarterly earnings reportinnovation stallshealth & wellnessnutrition & labelingconsumer trendsfailed cost reduction programsfailed productivityn. american economyde-stocking
    • Supply Chain Insights LLC Copyright © 2013, p. 128Value 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
    • Supply Chain 2020 and the PathForward
    • Supply Chain Insights LLC Copyright © 2013, p. 130The Supply Chain of the FutureWorldPopulationSource: “The World at Six Billion” United Nations, 2004; The World UN Population Assessment 2006; “Unsustainable World,” 04/15/08, BBCNorth America2007 2020339M 342MEurope2007 2020731M 722MAsia2007 20204.0B 4.6BL America2007 2020572M 660MAfrica2007 2020965M 1.3BOceania2007 202034M 40M
    • Supply Chain Insights LLC Copyright © 2013, p. 131Outside-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
    • Supply Chain Insights LLC Copyright © 2013, p. 132
    • Supply Chain Insights LLC Copyright © 2013, p. 133Create Your Own Future
    • Supply Chain Insights LLC Copyright © 2013, p. 134Rethinking Analytics
    • Supply Chain Insights LLC Copyright © 2013, p. 135DefinitionChallenges:• Transactional• Time phased dataStructuredData• Social• Channel• Customer Service• Warranty• Temperature• RFID• QR codes• GPS• Mapping and GPS• Video• Voice• Digital ImagesUnstructuredDataSensorDataNewDataTypesVolumeVelocityVariability
    • Supply Chain Insights LLC Copyright © 2013, p. 136Analytics Evolution
    • Supply Chain Insights LLC Copyright © 2013, p. 137Listening Post Strategy
    • Supply Chain Insights LLC Copyright © 2013, p. 138• Outside-in• End-to-End Orchestration• Supply Chain MattersPath Forward
    • Supply Chain Insights LLC Copyright © 2013, p. 139Questions?
    • Supply Chain Insights LLC Copyright © 2013, p. 140• May 17th: How Do We Heal the Healthcare Value Chain, Part II• June 13th: Sales and Operations Planning: State of the Union• July 11th: Big Data Supply Chains and the Future of Analytics• August 15th: State of Supply Chain Talent. Missing Link in theSupply Chain• August 29th: Digital ManufacturingUpcoming WebinarsEach webinar is based on new and relevant researchand will feature two-three industry leaders
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    • Supply Chain Insights LLC Copyright © 2013, p. 143Who 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.
    • Supply Chain Insights LLC Copyright © 2013, p. 144Where 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)