The Supply Chain Shaman's Journal - Spring 2014 - A Focused Look at Building Value Networks

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Supply Chain Shaman’s
Journal
A Focused Look at Building Value Networks
Volume 2 - Issue 1
Spring 2014
TM
by Lora Cecere
TM

The
Supply Chain Shaman’s
Journal™
A Focused Look at Building Value Networks
Volume 2 – Issue 1
Spring 2014
by
Lora Cecere
author of
Bricks Matter – The Role of Supply Chains
in Building Market-Driven Differentiation
SUPPLY CHAIN INSIGHTS LLC, PHILADELPHIA
Copyright 2014
All rights reserved. Published March, 2014
ISBN # 978-0-9889376-2-8 PDF version

Contents
Introduction5
The Evolution of B2B Networks�� 6
Whew! Let’s Get This Party Started��7
Start a New Conversation. Free the Data to Answer Questions You Don’t Know to Ask 10
EDI: Workhorse of the Extended Supply Chain�� 12
Time to Paint Outside the Lines ��14
Building the End-to-End Supply Chain��20
Piece Parts�� 21
E2E: Really?��25
The Definition of B2B Relationships�� 26
Improving Relationships within the Health Care Value Chain ��27
A Walk on the Beach? A Run for Supply Chain 2020 ��30
Like a Green Lump of Clay ��35
Which Boat Do You Sail to Cross a Blue Ocean?��40
La Sagrada Familia, NRF and the Emerging Opportunity ��44
Time to Broaden the Knot in Your Bow Tie?��46
Crossing the Great Divide��49
Supply Chain Insights Training Sessions��54
Supply Chain Insights’ 2014 Global Summit ��55

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Introduction
The Supply Chain Shaman’s Journal is a collection of blog posts with a common theme. The posts
were written between 2010 and 2014 as I worked with clients, gave speeches, and gathered research
on the evolution of supply chain management.
The Journal should be read like a collection of short stories with each individual post sharing a unique
set of insights on a specific topic. Keep this in mind as you read it. If not, as a collection of blog posts,
they may seem disjointed.
This issue is focused on building end-to-end value chains through business networks. The articles are
organized around three sub-themes:
• The Evolution of B2B Networks
• Building the End-to-End Supply Chain
• The Definition of B2B Relationships
While companies say that they want to build end-to-end value networks, in essence they are
automating the enterprise and running the network on spreadsheets and by phone/fax. The reader will
find the journey is in its infancy.
Read and enjoy. Share with your friends and let me know your feedback.
I wish you all the best on your supply chain journey,
Lora Cecere, a.k.a. the Supply Chain Shaman
Founder of Supply Chain Insights LLC

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The Evolution of B2B Networks

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Whew! Let’s Get This Party Started
Originally published on March 12, 2014
I am an old gal. In six months I will raise a toast to my sixtieth birthday. It is hard for me to believe
that I am that old and still working. Many of my friends are retiring. The industry is in flux. Daily, I get
notices from LinkedIn of job changes. Sometimes, I ask myself, “Where has time gone?” Other times I
celebrate how much I have learned.
It will be a long time before I retire. I have a long memory. It is good today to celebrate something
that I wished could have happened 14 years ago. As an analyst, I watch trends and the progress of
technology adoption. Many times it is slow, and I get frustrated. However, today I am currently involved
in a research project where I am seeing fast, and demonstrable results. It is the adoption of new forms
of B2B networks for supply chains.
History
Let me start with some history to provide context. As background for the new reader, I have been
an analyst in the supply chain management market for 12 years. First I was employed by Gartner
Group and then by AMR Research. This was followed by a short stint at Altimeter Group which led to
starting-up my new company Supply Chain Insights. My research projects have been many, and I love
new technologies. I often find that new technologies are overhyped and underdeliver on promises. I
pride myself on cutting through the hype and getting to the facts. No fluff from me… I am known for
telling it straight.

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As we emerged from the Y2K cloud, there was exuberance about e-commerce and the promise of
Business-to-Business connectivity. I actively followed the emergence of marketplaces and watched
e-commerce blossom and B2B stagnate. In the period of 2000-2002, when I was at Gartner, I watched
the evolution of a model that I violently disagreed with. It was the premise of ERP II. I could not
condone investment in ERP as the path forward to building end-to-end value chains. I did not believe
that it could happen from the inside-out. Instead, I felt that it needed to happen from the outside-in
(from the network or channel back.)
When Gartner Group bought AMR Research, I could not go forward. I had left Gartner because I did
not feel that they were as serious about supply chain research as I wanted them to be. I wanted to
write about cool technologies for the line-of-business buyer. I wanted to be uncorked and out of the
control of dominant players in the market to write the unabashed truth as I see it. This journey has
taken courage. It is tough to take a hard stand. Today, I want to take another one.
Celebration of the Evolution of B2B Networks
I am currently working on a series of reports on the state of Business-to-Business Connectivity. The
first published this week, and the second will publish next week in our newsletter.
While many companies wax eloquently on the concept of building the end-to-end value chain, I find
that they are not clear on the meaning. It is often stated as a goal in meetings, and I see it used in
many strategic plans. However, what I observe is continued investment in the automation of enterprise
practices. We are busy working on process iterations and continuous improvement programs that
I think only inch us towards business transformation. I am excited to state that today I think that we
finally have B2B Network alternatives that work. I am also excited to state that I think that they are one
of the disruptive technologies that can help us get unstuck in delivering on corporate performance.

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It is important. As we have outsourced logistics and manufacturing, I firmly believe that we need to get
more serious about the building of Business-to-Business (B2B) networks. These are one-to-many and
many-to-many architectures that connect logistics providers, contract manufacturers and suppliers into
true supply networks. There is a community layer, an application layer, and a connectivity layer. In our
recent research reports, line-of-business users are using these networks for 7% of their flows. The
primary methods of connecting with trading partners are spreadsheets and EDI.
It is easier said than done. We have been at it for over a decade, and I see real progress in the
evolution of these technologies in the last two years. An image representing this type of network
connection is used in the beginning of this post. (I use it courtesy of GT Nexus.) Here is the essence of
what I have found out:
• Confusion reigns. The term control tower confuses the market. It is used by Kinaxis
in a one-to-one model, by E2open in a one-to-many model, and by GT Nexus in a
many-to-many model. What I think that we are seeing is the evolution of different types
of supply chain visibility as outlined in Figure 1. To solve the problem, we have to be
clear on the type of connectivity that we are seeking. When people use terms loosely
we need to ensure clear definitions.
• Why business networks over EDI Vans? In the words of my reference callers last
week, “They work.” While EDI providers do point-to-point integration, the connections
are fragile. Every time there is a software upgrade at a point in the node, the
connections break. This is not the case for the B2B business network provider. EDI
VANS have consolidated and stagnated, but B2B Networks are maturing.
• The answers are not coming from ERP players, and will not in the short-run.
Yes, I know that SAP bought Ariba, and that they are hard at work on the integration of
SAP APO, SNC and the Ariba business network. I just do not see that it will be a viable
alternative in the short-term. (i.e., less than five years.) Why? It lacks the community
infrastructure and the depth of application. However, it is important to note that SAP is
trying. Oracle is not. As a result, I would invest my money in E2open, Elemica, Exostar,
GHX, GT Nexus, or iTradenetworks in the short-term. The specific choice depends on
the requirements at the application layer and the desired community. But, look for more
on this next week.
• The business networks have evolved. I am impressed by the evolution of canonical
models in these business networks. We have come a long way from the failed start-
ups of over 300 marketplaces in 2001-2005. I am also stoked to see the use of non-
relational databases and cloud-based computing to make B2B business networks
for supply chain a reality. They have come a long way in the past two years. In fact
they had matured faster than I had given them credit for. So the next time you see an
analyst compare an EDI VAN and a B2B Business Network on the same model throw
up a red flag. It is obvious that they just do not know what they are talking about. They
are very different solutions with far-reaching implications.
• We need to get on with connecting the value chain. The traditional roles of buyers
and sellers make it difficult to get past traditional buy/sell relationships and start the
work of building value networks. Less than 1% of companies have a resource aligned
to drive this work. It is a gap. I think that we need to just get on with it.
So, in closing, I would love to hear about your experiences with the Business-to-Business Supply
Chain Networks.

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Start a New Conversation. Free the Data to Answer Questions
You Don’t Know to Ask
Originally published on September 14, 2010
It happens all the time. IT says to line of business leaders, “Tell me what you need for Business
Intelligence (BI), and I will go find the right technologies.” The issue is that we don’t know, and
we will not know soon. We only know that applications are changing and that the data is growing
exponentially. The answer to the question, “What is the right data architecture for demand-driven value
networks?” The answer is “It is evolving. We don’t know.”
All we know is that it will get even bigger and more complex. We are facing a redefinition of
applications for consumer products and retail. It will require a rethinking of business intelligence
strategies.
The Discussion Today
When I talk to most people about BI and demand-driven value networks, the discussion quickly
evolves to two topics:
• What is the best BI solution to layer on top of Enterprise Resource Planning?
• How do I contain and manage the volumes of data in Excel spreadsheets?
For me, these are the wrong discussion tracks. It is like going to the wrong church with the wrong pew.
For a lady that is knee-deep in building a house, the analogy that I would like to apply is this: It is like a
discussion of which window pane will be best for the view, when we should really be talking about the
design of the house.
Planning for Tomorrow
I think that we need to create conversations that don’t exist. We need to free the data to answer
the questions that we don’t know to ask. Sensing technologies to support the evolution of pattern
recognition technologies, advanced optimization and rules-based ontologies. We also need flexible
information architectures that will support changing application infrastructures.
Let’s take a closer look at six drivers:
1) Geospatial Data: Maps enable new ways to engage the shopper. The list is
endless but includes geomapping for gaming, new technologies to track shopping to
drive in-store insights, and searches across banners to understand in-stock positions,
pricing strategies and offers. Mapping has grown in importance and generates a new
type of data.
2) Sentiment Analysis/Listening Posts: I was speaking to a customer last week
that is trying to syndicate data from 800 review sites, and another that was listening
to customer sentiment at 500 listening sites. This is unstructured data that needs to
be cleansed, syndicated, and managed. A new source of data that will be critical to
the evolution of the future of demand-drive value networks. It will allow us to better
plan demand, execute assortment and run-out programs, and adjust new product
launch programs.
3) Loyalty Programs: Traditionally, loyalty programs have been household level
data. As social/mobile/e-commerce programs converge, loyalty programs move from

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household to individual loyalty data sets. The data explodes as we add shopper
attributes to individual data to drive market insights.
4) Engage: Before we have loyalty data we have the tracking of engagement
behavior. How do I engage with fans like me? In programs that make sense in my
community? The result is social behavior data. Look for a convergence of social
and shopping insights data as we try to merge information across the proliferation of
channels. The apparel retailer will soon have at least five channels: social, mobile,
e-commerce, direct store purchases and purchases within other retail outlets. The
term cross-channel will take on a WHOLE new meaning.
5) Point-of-Sale (POS)/Enrichment: As we move from broad-brushing markets
to localized assortments driven by crowd sourcing/social fan engagement, retailers
will add enrichment data to POS data. Recently, I attended a Retail Connections
conference BTW, Marc Millstein throws a great conference, three retailers
mentioned that they have over 100 attributes to add to their retail POS data. Just
think about the possibilities of how we can use this enriched data to sense, shape
and respond to demand.
6) Data Enrichment/Syndicated Data: Despite the investment in downstream data,
syndicated data is not going away. Instead, it will become deeper and we will see a
coalescence of social, consumer and shopper insight data.
My Take...
It is time to stop picking out window panes. We need to build a new foundation—a data foundation—
for the new enterprise architecture that is coming. Yes, we do not know exactly what it looks like, but
we do know that it will need to:
• Manage large quantities of data
• Use data that is mostly EXTERNAL
• Allow unstructured data to open up new frontiers for sensing true customer service
• Be built using a data strategy where data reuse will be key
• Be flexible to support changing applications as the vendor landscape rises, wanes and
falls. There will be a lot of change.
• Support line of business sandboxes that will become prevalent to run specialized
analytics
• Have advanced master data management (MDM) tools for data maintenance
Am I missing anything? What do you see? Where will you turn?

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EDI: Workhorse of the Extended Supply Chain
Originally published on November 19, 2013
work·horse
nounˈwərk-ˌhȯrs : a dependable person who does a lot of work
: a dependable machine or vehicle that is used to do a lot of work
EDI is the workhorse of B2B connectivity. It is not new. It is not sexy. Four decades after its
creation, supply chain executives see it as slow and expensive. They are frustrated. They question the
value. But it does matter and slowly, we are making progress.
In our recent research study of 89 companies, we find that EDI is used nearly six times more
frequently in the connection of trading partners than portals, and eight times more frequently than the
use of business networks (e.g., trading exchanges or specialized industry hubs). We also find when
companies can achieve hands-free orders, order-to-shipment cycles decrease by 50% and there is
greater accuracy in fulfillment. The current state of B2B connectivity is outlined in figure 1.
Figure 1. Current State of Trading Partner Connectivity
Most companies see EDI and the exchange of documents through established protocols as old-school
processes. Many technology options have promised to make EDI outdated, but it has not happened.
Today, no company studied uses just one method for B2B connectivity. The connectivity with trading
partners is usually a mix of portal, business network and manual processes. While companies have

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invested in portals, trading exchanges and automated business networks, the adoption is low. The
reason? Portals are one-way communication. The use of portals is too passive and companies
struggle to synchronize the many changes that occur in sales and purchase order processing through
this passive form of connectivity. Business networks represent 7% of B2B connectivity.
The value proposition for automation is compelling. The messaging is pennies and the value
proposition is in dollars. Here are some of the findings of the study:
• Irrespective of how they are processed, over 40% of customer orders change at least
once. The use of EDI reduces errors and improves processing times.
• Today, there are few incentives to use EDI in trading partner relationships. Despite the
strong value proposition, only 6% of respondents offer order discounts to customers for
using EDI for order processing.
• The use of EDI reduces costs. Today, 30% of shipments are received without Advance
Shipment Notification (ASN). Shipments without an ASN cost the average company an
additional $78 per purchase order to process.
Does this match what you are seeing? Any stories to share?

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Time to Paint Outside the Lines
Originally published on July 7, 2012
As a creative kid, I never wanted to paint within the lines. Did you? I found that it was just too confining.
While my mother knew that the teacher’s goal was to help me develop fine motor skills, she let me
race past the boundaries to make the picture my masterpiece... my expression of the day. She never
forced me to paint within the lines.
As an analyst, in an attempt to explain supply chain planning to the potential buyer, I have not done
as well. I have unwittingly asked supply chain leaders to paint within the lines. The origins were well
intended. In an effort to better explain technologies, I defined application areas. I drew lines and boxes
and defined taxonomies. I rated vendors within these frameworks. These diagrams provided order in a
crazy world. This was done in an attempt to provide clarity; but today, I find what I built ten years ago
too confining. However, I still see them being used. I have unknowingly constrained thinking.
The analyst community traditionally penalizes technology vendors that do not fit into “nice and neat”
boxes. We unknowingly want the vendors to stay within the lines, and then ironically complain that
there is no “innovation.” (Admittedly, I am part of a tough group of characters.)
Let’s take a look at history. I was part of a group at Gartner Group that put Ariba on Problem Watch
in 2001
http://www.marketwatch.com/story/ariba-rebounds-after-it-replies-to-negative-report
We predicted that this builder of procurement networks would struggle and be acquired in 2002. We
were wrong, Ariba had a good run for a decade after the report predicted its demise. The company
was acquired in 2012 by SAP for $4.3 billion after establishing cloud-based networks for procurement.
Cloud and networks were new concepts in 2001. They went to the cloud and painted outside the lines.
In a similar way, I feel that this bias limited the potential of vendors like Kinaxis. The overzealous
coverage of i2 Technologies by AMR Research did not allow for others to shine, and Kinaxis did not fit
into the «nice and neat» boxes. Quite frankly, understanding the value proposition of new technology
vendors is hard. As analysts we have to sort through a lot of hype to find out what is real. Many come
and go. It took me two years to understand the value proposition of Terra Technology. I was dubious

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when I first encountered the founders of Open Ratings that was then bought by Dun and Bradstreet. I
was also skeptical when I first met the founder of Enterra Solutions. All of these vendors have had the
courage to paint outside the lines.
Recently, I was visiting the offices of a major ERP/APS technology provider. They were proud to
show me some new software that ran the old definitions of supply chain planning faster in memory.
They thought that I would be excited, and were a bit surprised when I was not. Initially the meeting
was contentious, then they mellowed when I asked them, like I ask you, to paint outside the lines. As
I drew what I think is the future of supply chain planning, the drawings were contested by the group;
but as they left the room, they took pictures of the drawings before they erased the board for the next
meetings. They wanted to be sure that they had them.
In this blog, I want to give my readers permission, even encouragement, to paint outside the lines. The
traditional definitions of supply chain planning are being redefined. The business problem has changed
and new technologies enable new approaches. With the evolution of Big Data systems, new forms of
analytics and greater power of in-memory processing, old architectures are antiquating. I believe that it
is time for the old and traditional architectures to give way, and for gals like me to try to paint new lines
and boxes within new frameworks. In this blog, I contrast the old and new views.
An Aside
As I have traveled the country and talked about the exciting things we are cooking up at Supply Chain
Insights, I have had a lot of push back on the name Supply Chain Insights. This happens most often in
Europe or in discussions with Indian system integrators.
As I describe the research agenda of my new company, and the aggressive publishing schedule,
their standard comment is “You are covering so much more than supply chain. Why did you name the
company with such a limiting definition by using the term supply chain?”
I smile. And then I respond, “I believe that we should be discussing how to connect the customer’s
customer to the supplier’s supplier. I believe that we should not be marketing driven, but market driven.
I believe that the vertical processes of sales, marketing, logistics, manufacturing and procurement
need to cede and give way to the building of outside-in horizontal processes. The traditional views
are too limiting. We have built inflexible inside-out processes that need to transition to outside-in
processes to improve sensing and drive an intelligent response. We need to start with the ends of the
supply chain (commercial and procurement teams) and work back. This is my mission.” They smile.
Sometimes dubiously....
I know that it is a different world. I am painting outside of the lines again. Their world view is within
functional lines that they are comfortable with. I am challenging the hard and fast lines that defined the
traditional functional buyer of enterprise applications. I write for the buyer of enterprise applications
that is pushing the boundaries. As a result, I will always paint outside the lines.
The Old Lines
The old lines of supply chain planning were hard and fast. The traditional supply chain frameworks
had a strong focus on vertical process focus. Supply chain execution (SCE) was only defined as
systems -- transportation, warehouse management, and order fulfillment-- that improved order to cash
processes. Demand planning was defined tactically, but lacked an operational component. Demand
sensing definitions evolved in the past five years to fill this void to replace rules-based consumption
with short-term forecasting processes, but it is not sufficient. Customer Relationship Management
(CRM) has never lived up to its believed potential.

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The ends of the supply chain—sales and procurement—are weak links, and a barrier to forging the
end-to-end supply chain. We will never build strong value networks with the current definitions of
enterprise applications.
My New Lines
Today, I think the processes need to start outside-in. They need to be constructed from the customer
back to the supply chain within the enterprise. The focus needs to be on value-based outcomes.

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Long term, I think that the architectures will have a collaborative layer, a transactional layer and
will be enriched and supported by a new Business Intelligence (BI) architecture. Companies will
also realize they need to build an inter-enterprise system of record.
The purple areas in the drawing are new forms of analytics that are evolving to help organizations
better sense and respond to market shifts. I also believe that in this next decade we will see our
current transactional systems (often termed ERP, CRM and SRM) become legacy applications.
Business differentiation will occur through new forms of predictive analytics and pattern recognition
that will happen within the new suites of emerging applications by vendors that paint outside the lines.
Look for them in the areas of sentiment analysis, natural language processing, text mining, advanced
pattern recognition, rules-based ontologies, and advanced optimization techniques. I think we will get
new sets of “black boxes” that will combine these techniques for the supply chain.
Within the supply chain planning suite within the enterprise, I predict that the new world will be based
on analytics. Demand signal repositories, supply signal repositories and enterprise data warehouses.
There will be a shift from transactional systems to Business Intelligence (BI) architectures. BI will mean
much more than rows and columns and reporting. This drawing is aspirational, it is not today’s reality.
There are eight shifts in the drawing that are a major shift from the traditional view portrayed above.
1) Shift from Vertical to Horizontal Processes. While there has been a
resurgence in Sales and Operations Planning (SOP), there is also slow momentum
growing for revenue management and supplier development programs. There

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is slow realization that CRM and SRM architectures are not sufficient to drive
compliance and orchestrate reliable networks. As a result, companies are beginning
to invest in three, not one, horizontal processes (definitions listed below): revenue
management, SOP, and Supplier Development.
2) Demand Translation and Demand Orchestration. With the increasing volatility
of commodity markets, companies need to quickly translate demand implications
of channel strategies and orchestrate them bidirectionally market-to-market
through demand orchestration. In demand orchestration, advanced analytics are
used to rationalize customer, product and material strategies to predicted shifts
in commodity markets against market potential. An early example of this type
of functionality is Signal Demand in the process industries. The work by Cargill
Beef and Fonterra are case studies to follow closely.
3) Management of the Supply Chain Planning Market-to-Market from Contract-
to-Contract. Contract management has not played heavily in supply chain planning.
With the slowing growth and increased market volatility, this is changing. In the future,
I believe that text mining and natural language processing will be used to translate
contract terms to demand orchestration processes. Early work in this area is seen in
contract compliance by Enterra Solutions’ work at Conair and Newell Rubbermaid.
4) Completion of the Demand Management Footprint. Traditional demand
planning was defined as a tactical planning process with no tie to market execution.
As demand sensing capabilities are replacing rules-based consumption, there
is the evolution of a demand execution footprint complete with forecast value-
added analysis (FVA) to evaluate continuous improvement programs in demand
management. Look for new footprints in this area from SAS and Terra Technology.
5) Building of Demand and Supply Sensing Capabilities. The use of
unstructured and structured data to sense demand and supply capabilities will
first evolve through Big Data Services and then be integrated with enterprise data
repositories. Bazaarvoice’s listening service for ratings and reviews and Dun
Bradstreet’s listening for supplier performance are early examples of this type of
service.
6) New Capabilities for Demand and Supply Execution. Long term, both
demand and supply execution and functionality for demand and supply networks
will be constructed from the outside-in. This is where the average company will first
encounter Big Data concepts as they try to fuse streaming data, geolocation and
mobile data, and large transactional data sets. Kinaxis’ work in in-memory processing
of supply data is an early form of this functionality.
7) Closed Loop Processes for Demand and Supply. Large scale parallel
processing and advanced optimization and new predictive analytics techniques will
allow companies to sense, respond and evaluate. This will evolve to listen, test and
learn strategies for both demand and supply over the course of the next five years.
8) Building of Supply and Demand Networks. The traditional programs for Vendor
Managed Inventory (VMI) and Supplier Managed Inventory (SMI) systems have been
implemented, but never tightly integrated because the enterprise data models were
inside-out not outside-in. As the enterprise architectures are redefined, VMI and SMI
will become tightly integrated and enriched with unstructured data like quality, return,
warranty and social data. This will redefine demand and supply visibility.

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Where Are You Drawing the Lines?
Supply chain architectures are in flux. I would love to know your thoughts. While I hesitate to replace
one set of boxes and lines with another, I know no other way to communicate the changes. However,
this does not mean that you or your teams need to paint within the lines. All I know for sure is that
the traditional architectures are too constraining and no longer meet the business need; and that new
forms of technologies allow us to rethink how companies can draw the lines.
OK, enough from me on a sizzling July afternoon. Drop me a note and let me know your thoughts. I
would love to hear from you on where you are drawing the new lines.
Next week, I am attending the SAP Base Camp followed by a full agenda to work with clients on these
concepts in strategy workshops. I have made good progress on my new reports. I should publish four
by Friday next week. Things are exciting in my new company. We appreciate your support of Supply
Chain Insights.
Definitions
For those that have not read some of my fundamental writing on these topics, for clarity, I list the
definitions of the terms below:
• Demand Sensing: Shortening the time to sense “true” market data to understand
“true” market shifts in the demand response. This is in contrast to the use of order-to-
shipment data that can have 1-3 weeks latency in translating “true” market demand.
• Demand Shaping: The use of techniques to stimulate demand. This includes
new product launch, price and revenue management, assortment, merchandising,
placement, sales incentives and marketing programs.
• Demand Translation: The translation of demand outside-in from the market to
each role within the organization. Recognizing that the requirements for distribution,
manufacturing and procurement are different.
• Demand Orchestration: The process of making trade-offs market-to-market based on
the right balance of demand risk and opportunity.
• Demand Shifting: The shifting of demand from one period to another through
advanced shipments, and moving more products into the channel without stimulating
base demand.
• Revenue Management: The process of stimulating demand through demand shaping
efforts and carefully managing payment capture to ensure that the changes in payment
terms do not result in deductions. Evaluation of the effectiveness of demand shaping
programs through sales analytics.
• Supply Sensing: The use of unstructured and structured data to sense supplier failure
and pending supply shortages.
• Supplier Development: The process of supplier selection, training, onboarding
and adherence to supplier policies. Supplier development programs have increased
in importance to accelerate innovation, improve supply and ensure compliance to
corporate social responsibility initiatives.

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Building the End-to-End Supply Chain

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Piece Parts
Originally published on February 7, 2014
You have brains in your head, and feet in your shoes.
You can steer yourself any direction you choose.
You’re on your own and know what you know.
And, you are the only one that will decide where to go.
Dr. Seuss
In this blog we are going to focus on the word part. By definition it is:
...one of the pieces, sections, qualities, etc., that make or form something.
Merriam-Webster Dictionary
I love Dr. Seuss. When my daughter was six, I would beg her to let me read her another whimsical Dr.
Seuss story before she went to bed. It was fun. The words from Seuss would flow from the pages as I
held a promising young girl full of life and energy. We laughed at the illustrations. The sing-song words
rang through the night air as we turned out the light and said good night.
Tonight, as I return from a client, I thought that I would start with Seuss to lighten up a bad story. It is
a story of parts. It is a tale of pieces that do not assemble to build the whole. It is 2014. Leaders tell
me the real story of monies spent and pennies saved. The consultants and technology vendors tell
the stories of small dollars invested and large value gained. The advertisements in the airports boast
of great gains. There is a disconnect. I do not see value when I am visiting clients. So I ask myself,
“Why?” These leaders are well-equipped. They have brains in their heads and feet in their shoes.
They can steer themselves any direction they choose. Why are we not making more progress?
Figure 1.

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Let’s start with history. We have been at this for at least thirty years. This is not a new topic. ERP was
designed to deliver transactional efficiency. It accomplished this goal. It was not designed to be a
planning architecture.
At the beginning of the last decade, the promise of the tightly-integrated enterprise was born.
Companies invested in tight integration of ERP with supply chain planning (APS). It was a mistake.
ERP vendors rushed to provide planning solutions that were less robust than best-of-breed providers.
Consultants touted that 80% was good enough. Today, ERP investments have consumed IT budgets.
The monies have flowed to the consultants. Today, only 8% of companies are satisfied with their
“what-if” capabilities and only 22% of companies can get to cost data in making planning decisions.
We are stuck. We have not been able to build the planning architectures that effectively let
manufacturers plan from the customer’s customer to the supplier’s supplier. As shown in figure 1, the
gaps in the value chain network are large.
The Problem
The goal was to automate the process of planning from the customer’s customer to the supplier’s
supplier. However, today, we have pieces that do not fit together to make a whole. Sadly, our
architectures are a compilation of piece parts. Most companies have defined enterprise architectures
that are inside-out, but lack the ability to take them outside-in. The focus is on the enterprise not the
value network.
With the investment in transactional systems for order-to-cash and procure-to-plan, many have lost
focus on planning. As a result, they are not effectively able to connect to customers and suppliers. We
have talked about it for a long time, but we are not making much progress.

— 23 —
The Dilemma. How We Got Here.
-Outsourcing Is Growing. It Is Here to Stay. It Is Growing More Important.
In the study of 63 manufacturers, the average company has outsourced 49% of
logistics and 30% of manufacturing. Physically, the supply chain is becoming a
network. Logically it is not. Companies are more dependent on each other and there
is less excess capacity. It is more brittle and less flexible. Upstream companies have
systemically pushed costs and waste backwards on suppliers. While EDI is used to
share transactional data, and progress has been made in this area, the software of
choice to share plans is an Excel spreadsheet. Yes, we have brains in our heads
and feet in our shoes, but we communicate most of the important information about
the supply chain in an Excel spreadsheet? Does this make sense? I do not think so.
I spoke to one client last week that gets 13,000 spreadsheets from one customer
that has 72 manufacturing plants with changes two to three times a day. After these
discussions, I am amazed that we have made as much progress as we have.
-Nine out of Ten Companies Are Stuck at the Intersection of Operating Margin
and Inventory Turns. I am convinced that the greatest opportunity to unstick the
supply chain lies in the value network. We have got to break the cycle of pushing
costs and waste backwards in the supply chain and paying a higher price for
materials. Modern procurement practices have lengthened payables by 30 days and
made it almost impossible to have a true relationship.
-ERP Was to Be the Solution. We have naively gone down this path. ERP vendors
were to build the architectures to extend the enterprise to their trading partners. It has
not happened. As shown in Figure 2, connectivity of planning information with trading
partners for third-party logistics, transportation and material suppliers is important
to companies, and supply chain leaders have lost confidence that this gap can be
closed by an ERP vendor. The investment in supply chain planning is growing by
55% in 2014, yet 56% of supply chain leaders report that it is focused on the work
with their strategic vendors which are most often the ERP provider. The selection of
IT solutions is typically a joint decision where IT is involved 80% of the time and the
line of business leaders are involved 85% of the time. This just does not make sense
to me.
-Supply Chain Business Networks Are New and Promising; Yet Only Represent
7% of the Flow. Today, there are a number of cloud-based supply chain planning
solutions and new forms of business networks that offer both applications and
communities to facilitate these planning flows; however, the awareness of these by
line-of-business supply chain leaders is low and the ability to get funding for these
projects is tough because most of the corporate funding is locked into ERP programs.
Where Do We Go from Here? What Do We Do About It?
Supply chain leaders have brains in their heads and feet in their shoes. Only they can direct what they
do. They need to act. Ownership of the extended value chain is more important to drive differentiation
and improve Corporate Social Responsibility initiatives. What steps to take?
1) Get clear on a planning road map. Put the parts together to make the whole. Build
a multi-year road map.
2) Recognize the reality. Stabilize ERP investments. Recognize them for what they
are. You need them as a planning system of record and to automate transactions.

— 24 —
The gap in current state to automate the value network is real.
3) Take ownership for the signal that you are sending your suppliers.
4) Partner with emerging cloud-based solutions and business network technologies
to connect the extended value chain.
Today, there is no perfect solution. However, the path that we are going down is not closing the gap. It
reminds me of the old Turkish proverb, “No matter how far you have gone on a wrong road, turn back.”
I would love to hear your thoughts. What do you think?

— 25 —
E2E: Really?
Originally published on January 14, 2014
Over the last month, I have been working with five companies that say that they want to implement an
End-to-End (E2E) Supply Chain Strategy. However, when I hear their stories and get their PowerPoint
slides outlining their design, I laugh. Why? The slides all look the same. And, they are anything BUT
end-to-end.
Why does it matter? Nine out of ten companies are stuck. Organizations are unable to power
progress on operating margin and inventory turns together in the same year. The answer lies with a
new approach. Complexity has increased, and companies need to reach a better balance between
profitability, cycles and complexity. They cannot today.
I love the fact that companies are stepping up to ask the questions, but I often find them asking the
wrong questions. Here is what I see is missing:
-Strategic. Tactical. Operational. Executional. There are four distinct layers of
planning functionality. For E2E processes, each needs to be redefined. Each layer
of planning has a different time horizon, planning cycle and level of data granularity.
It needs to be designed with the goal in mind. In the building of E2E planning
processes, the supply chain systems needs to start at the channel and end with the
supplier. The flows need to be bidirectional. Most companies start at the middle of the
planning architecture with supply; not at the channel. And, the flows are sequential
not bidirectional. For most this is a big change.
-Consumption Logic. Each layer of planning needs to be a market-to-market
connector. There needs to be consumption and synchronization between the layers.
The design needs to drive synergy bottoms-up and tops-down. Most companies
are not using the data that they have. For example, I have just finished interviewing
thirteen Vendor Managed Inventory (VMI) leaders. In my interviews, no company has
successfully integrated VMI into their E2E planning processes. This is sad. VMI was
defined in the 1980s.
-Clear Definition of Each Planning Horizon. Each of the planning horizons need
to be defined and redefined with new forms of analytics. I find that most companies
have gotten quite muddled in these definitions, forgetting the basics of planning.
-Plan with the Goal in Mind. I also find that companies get overzealous about a
technology and use it without rethinking the planning architectures. Just because you
have lots of data does not mean that it should be loaded for every cycle.
So, here is my challenge. Please rethink mental models. The traditional Advanced Planning Systems
(APS) are not designed to be end-to-end. It requires a redesign.

— 26 —
The Definition of B2B Relationships

— 27 —
Improving Relationships within the Health Care Value Chain
Originally published on October 15, 2013
The healthcare provider network is fragmented. As the power shifted from the supplier to the
healthcare provider, over the last decade, the healthcare provider responded. The hospital built a
supply chain organization that is now viewed as stronger than that of its suppliers. Today, providers of
healthcare self-assess that they are more successful meeting their goals than the supplier.
The supplier, or healthcare manufacturer (pharmaceutical or medical device), in the healthcare value
chain is three times larger than the provider. They have four times the profits. However, in our recent
study on healthcare, the supplier rates themselves 15% less successful than healthcare providers in
their ability to deliver on their supply chain goals.
Here are the highlights from our recent study:
1) Rising Complexity. Nearly two-thirds of manufacturers are offshoring to reduce
costs. They have longer more complex supply chains, but rate themselves low on
their ability to plan demand and manage a network.
2) Enterprise Alignment. Only 1/3 of suppliers feel that they can effectively integrate
their supply chain and sales processes within their own organization. This is a barrier
to forming a successful value network.
3) End-To-End Focus Not in Sight for Suppliers. Two out of five manufacturers
report that they have someone responsible for the end-to-end supply chain. For the
supplier, the focus to move from a supply chain to build a value network is just
starting. To focus on the patient, there needs to be a value-chain focus.

— 28 —
4) Stalled Progress on Inventory and Cash-To-Cash Cycles. While hospitals have
improved inventory turns by pushing the responsibility backwards onto the supplier, in
the last decade, there has been no improvement in cash-to-cash and inventory
cycles for the value network. Each party self-assesses their capabilities in demand,
supply and network planning at a very low level. There is a need for both parties to
step up and improve capabilities.
So, in the absence of supply chain leadership, the government will step in to try to heal the healthcare
value chain. What they will find is:
1) Value Analysis and Supplier Collaboration Programs by Hospitals Just
Starting. Over 70% of healthcare providers now have value analysis programs.
They are being used to evaluate new products and services. Sixty-seven percent of
companies rate them effective in meeting the goals of managing costs, determining
physician preferences and reducing infection rates. However, most of the processes
are not about VALUE; instead, they are about cost mitigation. There is a need to align
value-based outcomes to serve the patient. The toughest nut to crack is the incentive
systems.
2) Business Model Innovation Needed. Unlike other industries, no company in
the healthcare value chain has stepped forward to use power to drive business
model innovation (E.g. like Walmart in retail or Intel in the semiconductor industry) to
significantly improve the end-to-end value chain. This is an opportunity for a

— 29 —
company like Eli Lilly or Nova Nordisk. Both of these companies actively provide
medications to diabetic patients. The movement to patient sensing and monitoring
and direct delivery of services to the patient through better communication and
monitoring for the physician is now within our grasp at a technology level. The greater
barriers lie in the building of systems and effective networks for patient delivery. The
most movement is with CVS and Walgreens.
3) Lack of Alignment on Outcomes. Regulations, taxation and talent are the top
three challenges for manufacturers while the top three challenges for providers are
costs, inventory, and contract management. Sadly, the patient does not make the list.
We are a long way from a focus on value-based outcomes to serve the patient.
If I had a magic wand, what I would like to see happen is:
1) A Redesign from the Patient Back with a Focus on Wellness. I would like
to see us rethink the value network and the delivery systems to focus end-to-end.
Since we are facing government intervention, perhaps a tax credit for big pharma
and medical device companies to invest in innovation to use the Internet of Things to
focus on real-time patient monitoring to improve wellness?
2) Investment by Manufacturers in Supply Chain Planning. It is hard for
companies that have high profit margins to focus on supply chain planning to improve
costs, inventories and customer service. With the rise in complexity, it is time for
manufacturers to get to work to close the gap between themselves and the other
manufacturing industries. Perhaps an audit system on supply chain excellence to get
reimbursement levels?
3) Data Sharing on Usage. The management of goods throughout the channel and
the sharing of downstream data in a meaningful way can streamline the entire value
network. The redesign of these systems outside-in could dramatically reduce costs
and improve service.
4) Eliminate Rebates. The healthcare value network has the most antiquated
and ineffective system for rebate management. The waste and time spent trying to
manage bifurcated trade should be eliminated.
5) Building of Strong Networks for Case Management. I like what GHX is doing
on the building of an inter-enterprise system of record for case management for
scheduling a patient and the management/tracking of use in the operating room. I
would love to see this type of approach more widely adopted.
What are your thoughts? I look forward to hearing from you.

— 30 —
A Walk on the Beach? A Run for Supply Chain 2020
Originally published on July 21, 2013
I like art, and love unusual sculpture. Some days when I need a pick-me-up, I watch the videos of
Theo Jansen’s Strandbeests. These self-propelling plastic pipe structures use wind power to walk. I
am amazed as one of these ungainly creatures catches the wind and walks easily across the sand. It
is carefully designed alignment.
Over time, these modern sculptures have become more resilient. The artist, over two decades, refined
the sculptures to withstand the rigors of the environment. In an interview this morning, on Sunday
Morning, he discussed two factors that improve performance:
• Flexibility at the joints
• Design of the ends to catch and propel the sculpture in the wind.
As he shared his secrets, I smiled. I had started this blog post on Friday afternoon. It is a discussion
of supply chain design and the sharing of research that supports that the best supply chains
have flexibility in the joints and are well designed on the ends to propel commerce. Like the
Strandbeest, using these two design elements, the supply chain is more resilient. It might even propel
your organization to win the race for Supply Chain 2020. Take a minute and watch the video of the
Strandbeest and contrast this effortless movement to what you see in your organization and see if you
agree.
Flexibility at the Joints
Sometimes I find the writing of reports drudgery. Sometimes, it is fun. One that I enjoyed the most was
the recent report Three Techniques to Improve Organizational Alignment. The study looked closely at
the views of over 190 respondents from three functions within the organization: supply chain, finance
and IT. In the survey, each of the organizations rates the need for agility high, and rates it low. As
shown in figure 1, the gap is wide. The supply chain group rates it the lowest.
Figure 1

— 31 —
The supply chain needs to be designed to be agile. It does not just happen. There is no industry
standard. In this research, we define an agile organization as one that is designed to withstand the
levels of demand and supply volatility and deliver the same levels of cost, quality and customer
service.
An agile organization, like the Strandbeest, has flexibility in the joints (at the connections between
functions within the organization and in the interconnectivity between organizations in the creation of
value networks). A barrier to creating this level of flexibility is the tight integration of functions. While
the transactions need to be tightly integrated, the planning and analytics need to be based on “what-if”
analysis and visualization. In our research, we find that only 11% of companies feel that these criteria
are being met in their IT architectures today.
To have this flexibility, the organization also needs to be aligned. In this study, we asked each
organization to rate how well each organization was aligned. In figures 2-4, we share the ratings and
perspectives of the individual functions. The self-assessed ratings are very different.
The only commonality in the three views is the gap between sales and the rest of the organization.
Many companies have made the mistake of rewarding sales for volume and the rest of the
organization for profitability. This, by definition, creates misalignment.
In the figures below, we share the perceptions of each “teams’” view of alignment. Contrast how
different these three views are.
Information Technology Group. As shown in Figure 2, the Information Technology (IT) team views
the organization as more aligned, with fewer gaps, than their finance and supply chain counterparts.
They also have a false sense of how well they are aligned with the business teams. They believe that
the team has achieved greater alignment than is seen by the other line-of-business counterparts.
Figure 2.

— 32 —
Finance Group.
The Finance Group sees the largest gaps within operations. For this group, the gap between
operations and finance, and sales and finance, are both acute. They also feel that there is a gap
between manufacturing and procurement, and sales and operations. While they see the gap between
sales and IT, they see it as less important than the gap between other functions.
Figure 3.

— 33 —
Supply Chain Team.
The perceptions of the supply chain show the greatest lack of organizational alignment. In the views
of this team, there is a greater gap in organizational alignment than felt by the finance or the IT teams.
This is particularly true in the teams’ view of alignment between the operations group and IT. This
group also feels a large gap in manufacturing and procurement alignment and the gap between sales
and operations. They see that the operations and finance teams are more closely aligned than the
views of the finance team around this alignment.
Figure 4.

— 34 —
So, How Do We Run the Race for Supply Chain 2020?
Just as the Strandbeest walks the beach, organizations need alignment to run the Race for Supply
Chain 2020. To improve alignment, the research study supports three next steps:
1) Improve Sales and Operations Planning. In our research, we see that
companies that have a mature view of SOP and are modeling the network, and
planning to maximize opportunity and mitigate risk, nearly double their perceptions of
organizational alignment.
2) Clear Supply Chain Strategy. Agility does not just happen. It requires design.
Postponement, demand and supply orchestration, and supplier network flexibility are
all tactics that require careful design and deliberation. Today, 95% of organizations
are not clear on supply chain strategy. Like the Strandbeests, the supply chain needs
to be carefully designed, and redesigned, to improve agility.
Some organizations see agility as shorter cycles. This is a mistake. Many times
people can do the wrong things quickly and create a heap of problems. Take the
example of a shoe manufacturer that I worked with for many years. The CEO
believed that the best supply chain had short cycles. The team focused on improving
cycles and was surprised to find that their costs were 38% higher and that their
supply chain cash-to-cash cycle was 49% longer.
3) An Effective Supply Chain Center of Excellence. While the supply chain
center of excellence is present in over 35% of organizations, only 53% of companies
surveyed feel that they have a successful supply chain center of excellence. The
primary issues lie in the design of supply chain strategy and the facilitation of cross-
functional horizontal processes. Most of these issues lie with the organization’s view
of supply chain as a function versus the definition as an end-to-end process.
What do you think? Any ideas on how to improve organizational alignment and flexibility? We would
love to hear your thoughts.
We will be sharing more on this research and other snippets from our 18 research studies at our
upcoming Global Summit to be held at the Phoenician in Scottsdale, AZ on September 11th and 12th.
For more on how to register check out our Supply Chain Insights Global Summit website.

— 35 —
Like a Green Lump of Clay
Originally published on October 7, 2012
My iPhone buzzed on my nightstand. I groaned. I had gotten to bed late. It was 6:00 AM. This was
before my wake-up call. I am not a morning person.
As I picked it up, I saw a twitter alert welcoming people to the APICS webinar with @lcecere on
Agility that afternoon. Much to my chagrin, I rubbed my eyes and checked my calendar. The APICS
event was not there. My schedule had me on a plane to Chicago at the time of the presentation. There
were 250 attendees signed up and I needed to adapt. We rescheduled my flight and I quickly put
together some slides for the presentation. (To see what I built, check it out on SlideShare or view/
download it in the SCI Community)
As we went live with the webinar, I laughed. I had successfully adapted to give a presentation on agility
to 254 people.
Defining Agility
When I think of the definition of the word agility, I think of Gumby, pictured here. Gumby can bend and
adapt. He started as a green lump of clay. He was designed to be agile. Your supply chain needs to be
agile too.
The best supply chains are also designed for purpose. They are balanced. They also have the right
amount of agility. The foundation is a base of strong processes to deliver business results. “But,” you
might say, “what is the right amount of agility? And, how do I design for agility?” The answer is the
goal of this post.
For the purpose of this discussion, I define agility as the design of the supply chain to deliver the
same cost, quality and customer service given a level of both market volatility and process variability.
It requires design. For mature supply chain organizations, it is a natural extension of Six Sigma. It is a
goal for 87% of companies, but only 27% of organizations feel that they have met their internal goals to
achieve agility.
One of the largest issues for organizations to drive supply chain agility is the lack of a commonly held
and well-understood definition. As you will see in the questions from the respondents, people often
confuse agility and responsiveness. They are also very confused. It is something that they want, but
they cannot describe it and they do not know the steps to take to make it happen.
Seven Levers of Agility
In this blog post, I publicly answer the questions from the webinar. The astute reader will quickly see
that the concepts, while simple, are not well understood.

— 36 —
Q: Is it only inventory disrupting the agility resulting from inaccurate forecasts by SOP?
What is the biggest challenge in supply chain agility in balancing the cash-to-cash cycle? Is it
SOP?
In the supply chain, variability and volatility come from many sources. The best way to start the design
of an agile supply chain is to look at the sources of variability and market volatility that your supply
chain encountered in the prior year. These can be shift in the channel, issues in manufacturing,
increasing variability in transportation, or a shift in commodity prices. Make a list and identify the
degree of impact. The reasons are usually many. Then match the type of variation with a potential
agility design element to absorb the variability. The biggest barrier is looking at the design holistically.
The focus in agility is in horizontal processes. There are seven primary agility levers:
1) Analysis of Form and Function of Inventory: Form of inventory is the decision
of what form to hold the inventory in: raw material, semi-finished good or finished
good. The less conversion of materials in the inventory strategy, the greater the
flexibility of the supply chain. Likewise, the functional forms of inventory are cycle
stock, seasonal inventory, and safety stock. Companies that are agile try to minimize
the need for cycle stock and use discipline in run out of seasonal/promotional
inventories. These companies have accurate inventories counts and analyze the form
and function of inventory quarterly.
2) Alternate Bill of Materials and Alternate Sourcing: The more alternatives that
exist through the manufacturing and procurement processes, the easier it is to design
the supply chain to absorb cost and supplier variability. Additionally, through network
strategies, be sure to design your warehouses for flows. Products with dissimilar
flows should not be stored together.
3) ATP. Product Substitution Logic and Accurate Inventories: Clarity of product
substitution and accurate inventories enables a robust Available to Promise Signal
which helps to align demand and supply for order fulfillment. Companies that have
implemented ATP well rate themselves more agile.
4) Common Platforms: The more that products are standardized and platforms are
rationalized, the easier it is to design for agility. I worked with one liquor manufacturer
that had the same product in 197 different bottles each with a different “footprint”
for the conveyor, the manufacturer improved agility by reducing the number of
packaging types and designing the packaging for common footprints (similar shape
of the bottom of the bottle) to minimize changeovers. Likewise, I also worked with a
company that had 67 varieties of carrots that they processed. Most of them similar
cuts, but different specifications. They worked with RD to simplify the ingredient
lines to get more common ingredients across the products. Due to the need for RD
support, this agility lever is the hardest to make actionable.
5) Flexible Manufacturing Scheduling Practices: The design of manufacturing
processes to flex with market fluctuations. This is the design of alternate work
centers, high performance work teams, alternate plant sourcing, and quick
changeovers. Companies with long order lead times and a long freeze duration
have a difficult time being agile. (However, a note of caution: I still believe in a freeze
period to reduce cycle stock. The goal here should be to make the right trade-offs
between inventory strategies and manufacturing policies. These should be evaluated
together frequently.)

— 37 —
6) Agile Transportation and Distribution Networks: The use of alternate
routing and mode, cross-docking, yard management and warehouse management
to absorb changes in volume and the shifts in tasks. The network is designed
to allow shipments from multiple origins with tight workflow integration between
transportation, order management and warehouse systems. Additionally, through
network strategies, be sure to design your warehouses for flows. Products with
dissimilar flows should not be stored together.
7) Streamline Horizontal Processes: Decrease data latency and friction between
organizational silos. Design the supply chain outside in with the processes minimizing
data latency and maximizing cross-functional process understanding to minimize
the impact of organizational silos. Also, invest time in improving the cross-functional
processes of revenue management, Sales and Operations Planning (SOP) and
Supplier Development. In the determination of policies for each of these important
horizontal processes invest in “what-if” analysis and test for feasibility based on
predicted levels of demand and supply volatility.
Caution: This analysis is more critical now than a decade ago. Why? Ten years ago, the supply
chain had two buffers: manufacturing and inventory. However, with the outsourcing of manufacturing,
the analysis, placement and determination of inventory becomes more critical. This realization gave
rise to the use of inventory optimization technologies that use deeper optimization than the traditional
deterministic logic found in the traditional Advanced Planning Systems (APS) and Enterprise Resource
Planning (ERP) systems.

— 38 —
Tips on Executing Agility Well
Q: You mention that Executive Buy-in is the biggest stumbling block. What techniques are
being used to get executive buy-in?
In the webinar, I spoke about the lack of understanding of supply chain fundamentals by the executive
team being a major stumbling block to the implementation of supply chain excellence and the adoption
of the seven levers of agility. The best way to help the executive team understand that the supply
chain is a complex system with increasing complexity that requires design to be agile is to show them
through experiential training activities, what-if optimization or discrete simulation.
The other advice that I would give is get alignment on each supply chain definition. The lack of
alignment and agreed upon definition is a barrier to the adoption of practices to improve agility.
Q: Our techniques for agility usually involve expedite vs. de-expedite in our planning teams
which keeps our teams in fire-fighting mode. What do you recommend for breaking that cycle?
I would start with a clear definition. Shortening cycle times improves responsiveness: the time
to react. It helps, but is not the answer to improving supply chain agility. Achieving supply chain
agility requires a much deeper design.
Use simulation technologies to show executives the impact of using the seven agility levers to improve
the quality of response. It is about much more than the time of the response.
Q: What will be the role of the freight companies in the supply chain agility?
Freight companies and alternate modes are key elements of agile networks. Companies that are
the most agile have strong relationships with their carriers and share forward visibility for equipment
requirements. They are disciplined in dock scheduling times and loading practices to ensure that the
“controllable time on the dock and being loaded” is minimized and performed consistently to the same
time schedule.
Q: For a business that perhaps has not done a sufficient job defining and documenting their
supply chain strategy, how would you suggest they get started so that all the key elements are
covered?
In my research, I find that 95% of companies are not clear on their supply chain strategy. Companies
complain that there is insufficient detail in the business strategy to make it actionable, but I find few
teams walking the extra mile to define the supply chain strategy as defined in figure 1. The seven
levers of agility need to be woven into the supply chain strategy in each of the white boxes below.
Where most organizations have failed is by starting with process. The most successful supply chains
start at the top of the chart and work down. The laggards believe that they can copy processes without
a definition of strategy and as a result, they implement pockets of technologies without a holistic focus
to drive value.
Q: What is the best metric to begin analyzing when starting to evaluate Supply Chain agility?
The best way to evaluate agility is to simulate volatility through either event simulation or “what-if”
analysis and see the impact on cost (Cost of Goods Sold), customer service (on-time delivery and
orders shipped full and complete), and quality of output (first pass yield, recalls, etc.) The quality
element is the toughest to model.
Q: You touched on robust network design tools which allow you to test your network to
determine your agility. Can you give a few examples of tools that are available today?

— 39 —
I continue to be impressed with the work that Llamasoft is doing on simulation and optimization in
network design. They have the most «packaged» network simulation capabilities. I also like their
new iPad tool, Llamasoft Sherpa for network visualization. There are also good what-if analysis
tools. Insights (Product Insight Supply Chain Optimizer) has also been working on some «what-if»
tools to maximize profitability that you might want to consider, and many clients have i2 Technology’s
Network Strategy tool (now owned by JDA) or the Logictools Network Analyzer Product (now owned
by IBM). (Logictools is best deployed for a single user.) I also have a lot of faith in Chainalytics as a
source of business process outsourcing.
Q: I notice example for large companies, for small firms “what-if” may not be practiced, what
do you recommend for smaller firms?
The same principles apply. I just used larger companies in the examples. I see many small companies
doing a great job at building an agile supply chain.
Q: Given the graphs shown in the slides is the following true: The less working capital days
the better?
Yes, the goal is to reduce the amount of working capital by decreasing inventory and
better managing receivables and payables. Progress in working capital has primarily been made
by companies increasing the terms of payables. Very few have done a good job of reducing inventory
or improving inventory turns.
Like a Green Lump of Clay
In short, it is like working with a green lump of clay. Work with your team to try to craft a flexible and
agile supply chain out of your supply chain. Carefully work cross-functionally on the seven levers of
agility and the understanding of the executive team. Your supply chain is like a green lump of clay
that is ready to be molded. It is not as easy as one or two process changes. Instead, it is a holistic
redefinition.
Good luck on your journey. Let us know if we can help. And, if we missed an agility technique that has
worked for you, please share it!

— 40 —
Which Boat Do You Sail to Cross a Blue Ocean?
Originally published on August 6, 2012
In a recent post, Time to Paint Outside the Lines, I advocated that we needed to expand our current
concepts of supply chain management. I challenged readers to rethink conventional processes and
to think outside the lines; to redefine them using the new capabilities of mobile, social, cloud-based
computing and more advanced analytics. The post was about the “what.” In a discussion with a client,
I was challenged to write about a third dimension. The client asked me to write about the delivery of
the services or the “who.” Here I share my insights.
When we start to paint outside the lines, we begin to enter the world of blue oceans. By definition, a
blue ocean is a new market that is uncontested. For the deliverer of services, it is a vast opportunity.
Full of hope and promise, the deliverer of services is bullish and aggressive on how they will cross the
blue ocean. For the user of technology, it is a situation fraught with indecision, risk and uncertainty.
Blurring of Lines
The lines are blurring on packaged application delivery. (When I use the term ‘supply chain
management,’ I am using the broad definition of defining cash, inventory, information and product flows
from the customer’s customer to the supplier’s supplier.) My goal is to help clients build the end-to-end
supply chain (E2E).
Mobility, advanced analytics, cloud-based computing, advanced predictive analytics, and the Internet
of Things offer us the ability to deliver new and improved solutions. By definition, Software as a
Service (SaaS) applications open the door to enable this innovation. It allows us new opportunities
to deliver value in the areas of pervasive computing and analytics. The traditional software licensing
model--always held back by the delivery of user-based enhancements--can now be untethered and
cast free to deliver new applications through SaaS delivery. Market requirements are driving it. The
processes need to be designed outside-in and there is a need for horizontal business processes to
enable a level of agility that is not possible in today’s organization.
As I attend conference after conference, for me, it seems that everyone is talking the talk, but
they have one foot in the first phase and one foot in the next phase trying to figure it all out. While
Silicon Valley is still in a love-fest with social applications, I see companies slowly realizing that social
for the sake of social is too limiting. It is about SO MUCH more than digital marketing. Likewise, it is
not mobile for the sake of mobile. It is about pervasive computing and real-time information. There
is also a growing recognition that it will not happen through the sticking of mobile and social data in
the outdated models of CRM and SRM. These applications were defined too narrowly to sense and
translate market signals into enterprise workflows. The delivery of services and products in these new
more pervasive models requires the redefinition of enterprise applications. The traditional definitions
of Enterprise Resource Planning (ERP) and Advanced Planning Systems (APS) are slowly becoming
legacy.
After the first and second decades of digital marketing, companies are now starting to ask questions
about digital business. They want to know how to transform their very “transactionally-focused
enterprise applications” into solutions that can sense and deliver a more agile response. They want
to turn to Oracle and SAP, but these very sales-driven solution organizations are well-tuned to
deliver traditional solutions, not to help users cross these blue oceans. They would like to turn to the
traditional supply chain planning vendors like JDA and INFOR, but they find that these organizations
are busy trying to harmonize and rationalize many acquisitions and that they have lost many of
their thought leaders. Deep within the IT groups of organizations, companies may reach out to the

— 41 —
conventional analytical vendors like Teradata and SAS, but they quickly find that these organizations
are used to selling servers and analytical tools and lack the deeper understanding of enterprise
application processes.
The Phases
As we progress, I feel that there are three phases. While we can argue about the names, please read
past the labels to understand the broader discussion, and then let’s engage in a discussion.
• Phase I. The Efficient Organization. The first phase of enterprise applications
is ending. It is where companies have invested and know best. The focus was
on transactional efficiency. In this phase, the organization was defined from the inside-
out and the order-to-cash cycle was automated. (In most cases, it was very rigid.
The focus was on control.) Decision support was layered on top of the transactional
systems to improve decision making using order and shipment data. This era is ending.
Leaders now realize that the dream of ERP II and building the end-to-end supply chain
on the back of ERP and B2B connectivity was too limiting.
• Phase II. Digital Business. The redefinition of processes outside-in from market to
market is the phase that we are entering. It will be enabled by cloud-based computing,
business-process outsourcing, and pervasive computing. New forms of predictive
analytics will enable listening (e.g., sentiment analysis and text analysis) to understand
the questions that we do not know to ask, and systems will be able to adapt through
horizontal process orchestration. This movement to “listen, test and learn,” and towards
bidirectional horizontal process management is just beginning. It is the new blue
ocean. It is the era of digital business.

— 42 —
• Phase III. Systems of Commerce for E2E Value Networks. As systems evolve,
companies will come to realize that there needs to be a greater focus on value-based
outcomes and inter-enterprise systems of record to better manage bifurcated trade.
This phase will no longer be about industry-specific applications. Instead, it will enable
the process flows of end-to-end value networks. For example, in healthcare, the shift
will move from efficient sickness (checking patients in and out of the hospital and
lowering the admission rate) to sensing the body and focusing on health and wellness.
Likewise, in transportation, the focus will shift from selling cars to safe transport using
sensors to guide vehicles with improved safety and lower carbon footprints. We are
already seeing this shift in Performance-based Logistics (PBL) in the department of
defense.
Users are confused. They want to know, “Which horse do we ride to cross the blue ocean?” Simply
speaking, the Best-of-Breed service provider will be the best bet.
Here are my predictions:
• Consultants Will Stumble. As the gravy train of ERP implementations winds down,
more and more consultants are attempting to build software. This includes traditional
consulting partners like Accenture, IBM, Infosys and Wipro. I do not believe that
they will be successful. The client model for consulting is just too strong. While they
fundamentally understand the client relationship for the delivery of services, they lack
the understanding of product marketing and product development. Of the four, IBM
will do the best. They have a long history of building software, but they have struggled
to market and capitalize on the software’s potential. While they will continue to have
success in the areas of analytics and data mining, and retail, they will struggle in
penetrating the deeper areas of enterprise applications. I believe that each will have
some initial success selling SaaS solutions, but will wake up within the year and
align their skills to contribute to the market in a greater ecosystem play (e.g., putting
SAP solutions into cloud-based delivery systems). I think that they would be better
served to combine business-process outsourcing with global centers of excellence
targeting large business problems like the Race for Africa for consumer products or the
Redefinition of the Cold Chain for biologic products.
• Best-Of-Breed Vendors Will Prevail. For me, the most exciting news is coming from
the Best-of-Breed providers. These solutions are becoming mainstream, helping to fill
the gaps that the extended ERP solutions cannot fill due to cost and depth of solutions.
• Oracle and SAP Will Follow. While Oracle and SAP will talk «blue ocean
talk,» internally they will struggle to “walk the walk.” Neither has been successful at
driving partnerships and each is handicapped by a very strong sales-centered (as
opposed to market-driven) model.
• Conglomerates Will Circle the Drain. The JDA and Infor models will continue to
consolidate, and the solutions will progress, but slowly. They will continue to be a good
fit for software evolution of existing implementations, but they will not be the horse to
ride across the blue ocean.
• Analytic Companies Will be Best Supporting Actors. GreenPlum, SAS,
Teradata and IBM will continue to help with analytic applications, but they will bring up
the rear. None of the analytic vendors really understand how to sell and market supply
chain applications to line of business leaders.

— 43 —
• Business Process Outsourcing Will Grow. The use of analytics and the evolution of
business process outsourcing for multi-tier processing will continue to grow. The work
that CapGemini or Genpact is doing on retail deductions or Accenture on consumer
insights will continue to grow.
My Take…
So, as we set our sails for new places, and plan to navigate blue oceans, be sure that you are working
with partners that can help you get there. Long term, it will take a village. Short term, it will be hoisted
on the back of best-of-breed providers. Sailing in the waters of enterprise applications for supply chain
management is always choppy, but it is time to look ahead.
I look forward to your thoughts. Anchors aweigh!

— 44 —
La Sagrada Familia, NRF and the Emerging Opportunity
Originally published on January 18, 2012
Today, I landed in Barcelona. It is one of my favorite cities. Tomorrow, after I speak to twenty-one
CEOs on the concepts of Market-driven Value Networks, I will put on my sneakers and walk to La
Sagrada Familia. For those that have seen this wonderful architecture, you know how moving this
famous work by Antoni Gaudi is. And, you know the story... The cathedral has been under construction
since 1882, and the dates for completion range from 2040-2100. It may never be completed. No
kidding.
One of the things that I love about the architecture is the detail. It is ornate with small ceramics
and intricate embellishment. It combines many forms of art and nature. It was a revolutionary approach
to architecture. It was so different that Gaudi will forever remain a controversial figure in the history of
architecture. It took many years. He died before finishing his work...
What Is a Market-Driven Value Network?
My work is helping the world understand Market-driven Value Networks and the power that lies in the
redefinition of supply chain architectures. For those familiar with my writings you know that Market-
driven Value Networks are supply chain networks that sense and shape demand while translating
demand requirements from customer’s customer to supplier’s supplier with a near-zero latency. It is
still aspirational and depends on the evolution of new technologies and processes. It builds on my six
years of research on becoming demand-driven, but is different in three ways:
1) Market to Market. In market-driven value networks, the extended supply chain is
connected bidirectionally from market to market (Note: The original demand-driven
concepts that I initially wrote about did not sense and shape market to market.)
Trade-offs are made through demand orchestration processes that trade-off risks
and opportunities in both buy and sell-side markets. The technologies for demand
orchestration are just now entering the market in the form of advanced optimization in
combination with natural language processing.
2) New Processes. The concept depends on the building of strong horizontal
processes to translate and orchestrate the demand signal. (Demand translation
is the seamless translation of customer requirements across the organization by
role and need (e.g. the translation of demand requirements across different units of
measure, reflections of changing mix and from ship to (market views) to ship from
(operations views) in near real-time)). Today, the demand signal is late (seen in days

— 45 —
and weeks), and the signal has a singular context. It cannot adapt for role-based
context across the organization.
3) From the Market Back. Traditional processes were also built with an internal view.
The signals are mapped from the corporation to the market. In market-driven value
networks there is an outside-in focus. Companies use demand signals to listen, test,
and learn. It is outside-in. (The focus from a fixed response to a learning system is
also a departure from demand-driven supply chain concepts.)

— 46 —
Time to Broaden the Knot in Your Bow Tie?
With the current economic uncertainty, is it time to step out and to make lasting and meaningful supply
chain relationships and unleash the opportunities in the end to end supply chain? However, before you
take that step, do you need to broaden the knot in your bow tie?
I have been writing about supply chain collaboration for the last fifteen years. The term is bandied
about. Supply chain strategy documents drip with it. Conference presentations are ladened with the
concept. They include phrases like collaborate with your trading partners, build collaborative networks,
implement collaborative technologies, and collaborate to build value…. Can you imagine how
unpopular I am, when I give clients the feedback that “true supply chain can only really happen when
you have a lasting win-win value proposition.”
My goal of this blog: stop the madness. Reset expectations. Stop fooling yourself. What most people
call collaboration is really data sharing. Collaboration can only really happen when you have a lasting
win-win value proposition; and in this changing world of power structures, constraints, and demand
volatility, this is harder than ever.
By and large, we have failed in the creation of true collaborative relationships in Supply Chain
Management (SCM). Here I share insights on how to turn the tables and make true collaboration—a
lasting win-win value proposition – a reality. It is enabled by technology; but technology alone is not
sufficient.
Peeling Back the Onion
In reviewing history, there have been a lot of well-intended initiatives. Before we look at how we go
forward, let’s examine what went wrong and how we learn from history:
CPFR: Continuous Planning Forecasting and Replenishment failed for three reasons. Aspirations were

— 47 —
greater than capabilities. (Retailer’s forecasting processes and demand accuracy was not up to the
test.) It was labor intensive; and the planning processes was not connected well to execution. It was
overhyped by industry professionals which delayed a correction course for salvation.
Scorecards: This effort failed to reach potential due to a lack of standardization and connection of
the output back to buying behavior. For example, over 95% of companies do not align scorecards with
commercial buying processes. As a result, they are there (often there are many), and they are talked
about, but they fall short in driving TRUE collaborative behavior.
Collaborative Design: Collaborative design efforts have been the most successful tactic for
collaborative SCM, but thy have not been escalated to strategic importance. They are growing in
importance in companies green initiatives and micro-marketing efforts for packaging design; but
most companies do not know how to break down the walls between RD and supply chain to make
collaborative design systems work for them more holistically.
VMI/SMI: Vendor managed and supplier managed inventory programs have also had limited
success. Why? For 80% of companies the focus was on SHIFTING inventory responsibility as
opposed to improving value in the value chain. Companies that have gone the extra mile to focus on
reducing demand latency and downstream data sharing have achieved the greatest advantage.
An additional problem has been the labor required to support VMI initiatives and the sequence of
VMI orders in the order stream. A little known fact is that VMI orders while usually the most strategic,
get a lower priority on tight inventory. Why? Due to the amount of time to calculate replenishment
constraints, they are usually processed as the last orders in the day letting orders processed earlier in
the day drain tight inventory requirements.
Kaizen Events: Kaizen events, where two parties are focused on improving the value chain through
lean methods, can be effective if both parties are aligned against the same goals; but if they are not,
it is merely another program. While I am a big supporter of this type of initiative, it requires a focused
team and aligned objectives which are usually tough obstacles to conquer.
Building True Collaborative Practices
So, what does it take to have true collaboration? The key is to broaden the knot in your bow tie, align
goals and develop deep cross-organizational relationships. While traditional approaches have focused
on data sharing or transactional efficiency, the use of collaborative technologies allows you to connect
people-to-people across the value chain to build more long-lasting relationships.
Consider Three Tactics:
1) If You Are a Buyer. Put Your Money Where Your Mouth Is: If you are a
buyer, tie scorecards to buying decisions through multi-variant bid techniques from
companies like Ariba, Emptoris, Oracle and SAP. Reward suppliers for supply chain
excellence, contribution to open innovation and cash-to-cash improvements. Tie
scorecards to real money and review them monthly.
2) If You Are a Seller. Teach Sales How to Pitch a Winning Menu: While most
incentives for sellers are volume based, work with sales to build a menu of options
that can reduce costs and improve the trading relationships. Experience shows that
this is not the place for dictating policy. It is impossible to implement standardized
practices that can be adopted equally by all trading partners. Instead, focus on
a menu program where you incent the partner for buying like option A, option B,

— 48 —
option C and then reward the trading partner for taking these options through the
use of buying incentives. Include tangible items like shipping programs (backhauls,
continuous moves, private fleet utilization, etc.) to reduce costs and improve carbon
footprint, use of standards, taking new products, quick unloading of shipments,
payment schedules, and sharing of downstream data.
3) Broaden Your Bow Tie: Conceptually this concept has been around for a long
time, but it has been difficult to execute. Just too time consuming to connect trading
partner warehouse managers, traffic managers, customer service personnel, etc. Not
anymore. Use social technologies like Lithium and Jive as a core on partner extranets
to connect people to people. Complete with pictures, interests, microblogging, instant
messaging, and fan pages. Who says that supply chain cannot be more social?
One of the most successful collaborative efforts that I ever accomplished was when I was a
warehouse manager. I started a customer advocacy program where each lift operator owned a client.
The energy of having direct customer/supplier contact to clarify shipping issues that transcended
orders was an unmeasurable, and wonderful benefit. I close my eyes and imagine how much easier
my life as a customer service manager, warehouse manager or transportation manager would have
been if I could have broadened the knot on my bow tie. Then I laugh.... I am imagining the discussions
with the union steward to prep for the training and helping the organization to become an open
organization. It makes me ponder. While we have technologies, can we ever break the barriers to truly
build collaborative relationships and broaden the knot on our bow ties to build long-lasting supply chain
relationships: people to people?
What do you think? Any tips to share on how you have broadened your bow tie?

— 49 —
Crossing the Great Divide
It was a hot Atlanta day. The temperature in the cab was sweltering. It was the kind of day that makes
you feel like a grease spot on the pavement. As I bustled through the air-conditioned lobby, past
reception and not catching my breath until I sat down in the deep leather chairs in the Chief Financial
Officer’s conference room, I tried to compose myself. However, the question that I was asked did not
have an easy answer. I was in the HOT seat.
Bob, the CFO, opened the meeting with the statement, “Our SAP implementation was expensive. I
know we need it, but I am trying to get a Return on the Investment (ROI). I think that I can improve the
ROI by using retail Point of Sale (POS) data to improve forecasting and replenishment. How are others
using POS data?”
I swallowed hard. This question does not have an easy answer. Most companies are struggling to
answer the same question. The company had built a repository for demand data and wanted to plug
it into SAP APO, but I knew that it was not as easy as that. I replied, “You cannot get there from here.
The data in the repository used by the account teams cannot just be plugged into APO for three
reasons: scalability, granularity, and usability.” And I started to tell him a story.
The Story: We Have Puzzle Pieces That Do Not Fit Together
The good news is that the sharing of retail data by retailers is increasing and the data is cleaner and
more granular than it has ever been before. For most consumer goods manufacturers, 40-60% of the
channel is available as daily data received on a weekly basis.
The bad news is that POS technologies are overhyped and confusing. In the fourth quarter of 2009,
there were 72 instances of downstream data repositories sold in the North American market. Often at
more than one per company, and sometimes more than one technology sold into the same account
team. It is not unusual to have 4-6 different technologies to manage POS in the technology ecosystem
of a branded manufacturer.
The market for downstream data repository vendors is very competitive and overcrowded. To improve
market positioning, several technology providers have added forecasting to their offering. These
companies have very little understanding of the differences between account level and corporate

— 50 —
level forecasting. At a minimum, it varies by focus (short-term versus long-term), the data model, and
the depth of statistical forecasting. (Account level forecasting is short-term (0-8 weeks) and corporate
forecasting is longer term forecast. On average the longer term corporate forecasting process uses
demand data to project the period of 0-78 weeks).
Likewise, more than 80% of the market has an Advanced Planning System (APS) for corporate
forecasting. Most companies implement APS to model ship from data—either shipments or orders—
on a monthly or a weekly basis. Traditional APS technologies also use rules-based consumption to
split the forecast into daily targets—usually termed “buckets” to drive replenishment. The problem is
that rules-based replenishment is never right. And, POS data requires a ship-to or a market-driven
forecasting data model (outside in).
The data in the account team is used for weekly forecasting and replenishment. It is isolated, seldom
integrated and used for ad hoc analysis. Very few companies have figured out how to plan globally
at a corporate level to act with greater insight at a sales account team level. Similarly, the data needs
to flow bidirectionally to enable demand sensing by the account team to spotlight opportunities for
improving sales through pull-based replenishment, minimizing costs through demand orchestration,
and reducing channel and company inventories. Today, 98% of companies do not have a synchronized
demand signal and it is not as easy as just plugging POS data into APO. It takes more than that. To
use the POS data and drive maximum value, you have to cross the Great Divide.
The Answer: It Is Like Crossing the Great Divide
Demand data is the river that runs through the corporation that gives it life. There are many—not just
one— streams of demand data to harness.
The great divide is a name given to a mountainous region that forms a hydrological divide separating
watersheds. For example, the continental divide in the United States separates the watersheds that
drain into the Pacific Ocean from those river systems that drain into the Atlantic Ocean.
In a similar vein, forecasting is the great divide between go-to-market and supply-side processes.
It is a rocky process—each company defining it a bit differently—and few companies being entirely
happy with what they have. In this time of demand volatility, where demand error is the largest risk
to the corporation, it is often contentious. To be successful with POS data integration, you need two
hierarchies: a demand and a supply hierarchy. Most companies only have one: a supply hierarchy.
Therefore, they cannot cross the great divide, and they have no place to put POS data for modeling.
Good forecasting processes start with the end in mind. Each of the functions have a different goal.
Let’s take a look at history. As you read this synopsis, it is clear that the goal has changed, the data
input choices have improved and the processes are being redefined to move from a supply-focused
forecast to a demand-driven process. It is a shift from an inside-out (supply side modeling based
on shipments and orders) to an outside-in forecasting process (demand side modeling based on
downstream data) to focus on market drivers.
Forecasting Supply
In the 1990s—the go-go years of supply chain management—new forecasting systems answered two
questions for supply:
1) What should manufacturing make?
2) What should we stock in the warehouse to improve customer service?

The Supply Chain Shaman's Journal - Spring 2014 - A Focused Look at Building Value Networks

The Supply Chain Shaman's Journal - Spring 2014 - A Focused Look at Building Value Networks

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