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Rapid Roi Ideas For The Supply Chain
 

Rapid Roi Ideas For The Supply Chain

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A quick overview of some IBM ideas to create value in the supply chain

A quick overview of some IBM ideas to create value in the supply chain

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    Rapid Roi Ideas For The Supply Chain Rapid Roi Ideas For The Supply Chain Presentation Transcript

    • Right Here, Right Now: Rapid ROI Opportunities In The Supply Chain A Discussion Document February 23, 2009 © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain The Business Reality and the Supply Chain Imperative An unprecedented Global Financial Crisis is straining most Supply Chains with Demand Uncertainty and Excess Inventory Qty Inventory Today Where is the economy heading Demand Time 2007 2008 2009 The slow‐down is not  Optimizing the use of cash  Fastest path to freeing up  even across products and  throughout the supply  cash is through inventory  geographies, so good BI is  chain is a critical need reduction. critical 2 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain Right Here, Right Now: We looked at a range of solutions and screened them based on fastest, large ROI Mfg. Cost Inventory Logistics SG&A Solution & Main Focus ROI Size ROI Speed Complexity      Inventory Optimization Large <1 Yr Low      SKU Rationalization Large <1 Yr Medium      Forecasting Process Large <1 Yr Low      SCM ERP Tune-Up Medium <1 Yr Low      S&OP with CPFR & VMI Large 1-2 Yrs High       SCM Ops Outsourcing Large 1-2 Yrs High      Network Optimization Medium 2+ Yrs High      SCM Shared Services Small 2+ Yrs Low 3 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain Inventory Reduction & Optimization What is the idea? Why it matters What is the idea? Why it matters • Quickly assess current inventory situation and devise a plan with • Quickly assess current inventory situation and devise a plan with • Need to capture every available demand opportunity while • Need to capture every available demand opportunity while goal of simultaneously increasing product availability / service optimizing the use of cash to fund operations. goal of simultaneously increasing product availability / service optimizing the use of cash to fund operations. levels while reducing inventory levels. levels while reducing inventory levels. • Having the right products readily available is critical to capturing • Having the right products readily available is critical to capturing • Devise an improvement plan to create high value in less than 3 • Devise an improvement plan to create high value in less than 3 the demand while keeping inventory levels low the demand while keeping inventory levels low months. months. How to go about implementing it How to go about implementing it Preparation Phase (4 weeks) Delivery Phase (8-24 weeks) (8- Express Express Opportunity Diagnostic Opportunity Diagnostic Identification Inventory Strategy Data Analysis Identification Inventory Strategy Data Analysis Inventory Presentation and and Value Details Inventory Presentation and and Value Details Inventory Demo Opportunity Inventory Reduction Demo Opportunity Reduction Performance Performance Optimization Discussion Optimization Discussion Measurement Measurement Off-Shore Support Off- Off-Shore Support Impacted Operational Metrics/Decisions Typical ROI Impacted Operational Metrics/Decisions Typical ROI Reduction in inventory levels without • Inventory positioning and management strategies by SKU • Inventory positioning and management strategies by SKU • Optimized inventory and replenishment policies negative impact on service levels • Optimized inventory and replenishment policies • Increased inventory turns • Increased inventory turns • Higher service level, fill rate or similar fulfillment metrics Higher service level, fill rate or similar fulfillment metrics • Return On Investment • Reduced distribution and procurement expenses • Reduced distribution and procurement expenses 4 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain Inventory Reduction Case Study Industrial Products Background Background Facing a chaotic and very costly inventory situation, a leading industrial company secured our help for a quick MRO Facing a chaotic and very costly inventory situation, a leading industrial company secured our help for a quick MRO assessment project. Our effort lasted 4 weeks and consisted in assessing their MRO process, conducting a benchmarking assessment project. Our effort lasted 4 weeks and consisted in assessing their MRO process, conducting a benchmarking study and developing an improvement roadmap (6 months) based on an achievable and compelling business case. study and developing an improvement roadmap (6 months) based on an achievable and compelling business case. 1 Operations Baseline MRO Strategy Inventory Reduction 2 Benchmarking & Inventory Tracking / Barcoding Analysis Inventory Optimization 3 Warehouse Location Transformation Value Prioritization KPI / Scorecard Process 4 Improved Forecasting Scenario Workshops & Analysis Material Movement 5 Supplier Management Roadmap Creation Reverse Logistics Org Design Strategic Analytical / Tactical Operational Strategic Analytical / Tactical Operational Phase I Cost Phase II Cost 5 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain SKU Rationalization What is the idea? Why it matters What is the idea? Why it matters • Many years of sustained growth without discipline in • Many years of sustained growth without discipline in • Complex product portfolio can lead to lower margins, • Complex product portfolio can lead to lower margins, product management have created a daunting complexity excess inventory product management have created a daunting complexity excess inventory • SKU portfolio analysis is proven to have great bottom line • SKU portfolio analysis is proven to have great bottom line • Without processes and business rules in place, it can get • Without processes and business rules in place, it can get and top line impact on operational performance worse over time and become a recurring issue. worse over time and become a recurring issue. and top line impact on operational performance How to go about implementing it How to go about implementing it Assessment Design Implement (4 – 6 Weeks) (4 - 6 Weeks) (4 - 12 Weeks) Customers Customers  Stratify  Design process  Implement  Stratify  Design process  Implement $ $ $ $ $ $ $ $ $ $ $ $ products by Product  Define products by  Define Product segment Management segment segmented Management segmented Process  Identify process Internal Internal business rules Process  Identify process business rules  Implement gaps and root to differentiate  Implement gaps and root to differentiate causes of services business rules causes of services business rules proliferation proliferation Suppliers Suppliers Impacted Operational Metrics/Decisions Typical ROI Impacted Operational Metrics/Decisions Typical ROI • Reduced Inventory (finished goods and raw material) • Reduced Inventory (finished goods and raw material) • Improved product profit margin Improved product profit margin • Return on Investment • Reduced SG&A cost • Reduced SG&A cost 6 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain SKU Rationalization Case Study Industrial Products Background Background • 3% of sales and profit comes from 76% of SKUs which creates unnecessary complexity and higher costs 3% of sales and profit comes from 76% of SKUs which creates unnecessary complexity and higher costs • • These products compete for capacity at constrained period causing over time and poor customer service • These products compete for capacity at constrained period causing over time and poor customer service • High organizational complexity caused by needs to support these products and associated customers, leading to higher High organizational complexity caused by needs to support these products and associated customers, leading to higher • SG&A costs SG&A costs Sales, Profits and Inventory Cost by Product  Disproportionate gains made by 100% cutting marginal products Sales and profit 80% % of total  Inventory falls by much bigger 60% Inventory Eliminate margin than sales 40% Rationalize 20%  Profitability of the total portfolio Leverage 0% increases substantially 525 656 787 918 394 1 132 263 1049 1180 1442 1311 1573 1704  Operational complexity decreases Products (#) 102 327 1352 % of total Products 6% 18% 76% Sales (% total) 80% 17% 3% Profit (% total) 80% 17% 3% Inventory (% total) 64% 27% 9% • Conducted customer and product stratification • Conducted customer and product stratification Cost Reduction • Eliminated unnecessary products Eliminated unnecessary products Solution Business • • Rationalized product portfolio • Rationalized product portfolio Summary Results • Implemented business rules to offer differentiated • Implemented business rules to offer differentiated Inventory Reduction services services 7 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain Forecasting Process Improvement What is the idea? Why it matters What is the idea? Why it matters • Lack of proper forecasting process or skills causes • Lack of proper forecasting process or skills causes • Inaccurate forecast leads to systemic supply chain • Inaccurate forecast leads to systemic supply chain problems (e.g. excess inventory, lower manufacturing unreliable forecasts. problems (e.g. excess inventory, lower manufacturing unreliable forecasts. efficiency and higher transportation costs) efficiency and higher transportation costs) • Limited collaboration with partners also leads to • Limited collaboration with partners also leads to inaccuracies in the forecast. • An improved forecast is the first towards improved financial • An improved forecast is the first towards improved financial inaccuracies in the forecast. performance. performance. How to go about implementing it How to go about implementing it Assessment Design Implement IBM Forecast (2 – 4 Weeks) (2 - 6 Weeks) (4 - 8 Weeks) Engines History  Assess demand  Design  Implement  Assess demand  Design  Implement planning process forecasting Demand Planning planning process forecasting Demand Planning process Process  Identify gaps process Process  Identify gaps Partner  Define key metrics  Assess  Make  Define key metrics  Assess  Make performance recommendations performance recommendations Optimal Causal Forecast Impacted Operational Metrics/Decisions Typical ROI Impacted Operational Metrics/Decisions Typical ROI • Reduced inventory (Finished Goods, WIP, Parts) Reduced inventory (Finished Goods, WIP, Parts) • • Lower supply chain costs: material, manufacturing and logistics • Lower supply chain costs: material, manufacturing and logistics Return on Investment • Improved forecast accuracy • Improved forecast accuracy 8 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain Forecasting Process Improvement Case Study Consumer Electronics Background Background • Poor forecasting leads to high inventory and price protection costs in the channels. Poor forecasting leads to high inventory and price protection costs in the channels. • • As a result of poor forecast, replenishment lead time is long and stock outs at store level frequently occurs As a result of poor forecast, replenishment lead time is long and stock outs at store level frequently occurs • • Informal collaboration processes increases the “bullwhip effect” between true POS demand and manufacturer’s forecast Informal collaboration processes increases the “bullwhip effect” between true POS demand and manufacturer’s forecast • • Newly formed demand management group with inexperienced staff is not equipped to do statistical forecasting Newly formed demand management group with inexperienced staff is not equipped to do statistical forecasting • Suppliers CE OEM Client CE OEM Client DCs Retailer DCs Retailers Customers Pull Signal New Collaborative New Collaborative Demand Planning Replenishment Demand Planning Replenishment Process Process Pull Signal Material Forecast Demand POS, Promotions Supply Commits Consensus Forecast Forecast Before Forecast Accuracy Accuracy After Analysis Analysis Forecast • Demand forecasting and demand shaping • Demand forecasting and demand shaping Accuracy Solution Business • New product load in, POS and Promotions • New product load in, POS and Promotions Support Summary Results Support Average • Store level forecasting and replenishment planning weeks Weeks from • Store level forecasting and replenishment planning Inventory • Collaboration and VMI process with channel partners • Collaboration and VMI process with channel partners 9 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation
    • Rapid ROI Ideas for The Supply Chain For More Information: Contact your IBM Account Executive or Relationship Partner About The Authors: About The Authors: Mondher Ben-Hamida Mondher Ben-Hamida Associate Partner Additional Information Online: Visit www.ibm.com & Search: Associate Partner Supply Chain Strategy Supply Chain Strategy IBM Global Business Services IBM Global Business Services IBM’s 2009 Global Chief Supply Chain Officer Survey Paul Brody Paul Brody Partner & Practice Co-Leader Partner & Practice Co-Leader Latest White Papers on Supply Chain Strategy Supply Chain Strategy IBM Global Business Services Sales & Operations IBM Global Business Services Planning Dynamic Inventory Henry Dao Henry Dao Associate Partner Optimization Technology Associate Partner Supply Chain Strategy Supply Chain Strategy IBM Global Business Services IBM Global Business Services 10 IBM GBS Supply Chain Strategy Practice © 2009 IBM Corporation