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How Agile is Your Business? New Research on Agility Trends

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Steelwedge Agility Webinar Series …

Steelwedge Agility Webinar Series

Featuring Lora Cecere, Supply Chain analyst and author of the enterprise software blog "Supply Chain Shaman" with Nari Viswanathan, Steelwedge

Companies want to be more agile in driving growth regardless of volatililty in the global business environment. But there is no clear, consistent industry standard definition of business agility. To better understand what this means and how organizations like yours are using S&OP to drive supply chain agility, Lora Cecere, Founder of Supply Chain Insights and former Supply Chain Analyst and Partner with Altimeter Group, conducted a survey of business professionals in April about the importance of agility in business planning. On May 15th, Lora will be sharing her analysis of this research during her featured webinar.

View recorded webinar to learn how others are prioritizing and enabling agility in their organizations. Get tips from Lora and Steelwedge’s VP of Product Marketing, Nari Viswanathan on how you can use S&OP to drive better resilience in your operation.

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  • 1. How Agile is Your Business?Presenters: Lora Cecere & Nari Viswanathan May 15, 2012
  • 2. How S&OP Drives Agility Research Results March-April 2012 Supply Chain Insights
  • 3. Key Findings• Today, S&OP landscapes are more complex. It is not a bell curve. The average company now has five S&OP processes. Eight years ago there was one.• Today, a company is 5X more likely to have a supply chain center of excellence than eight years ago. However, there is still a large gap in the effectiveness of S&OP.• 90% of companies surveyed believe that a mature S&OP improves agility. However, only 13% of companies have effectively tied S&OP planning to execution. p. 3 Supply Chain Insights, LLC © 2012
  • 4. An Athlete Needs: StrengthFlexibility Balance And so does a supply chain…. p. 4 Supply Chain Insights, LLC © 2012
  • 5. Agenda Overview & Demographics What is Agility?Increasing Complexity of S&OP So What? Who Cares? p. 5 Supply Chain Insights, LLC © 2012
  • 6. Study Overview WHY WHAT• OBJECTIVE: To assess the importance of • Survey topics included: supply chain agility and tactics used to • Supply chain organization definition improve agility and to understand the role of • Agility definition and techniques S&OP in driving agility in organizations. • S&OP process details and impact on agility• HYPOTHESIS: The greater the complexity of the supply chain, the more important it is to have a mature S&OP process. WHEN & HOW WHO• Online interviews were conducted between • 117 business leaders, primarily Managers and March 22 – April 9, 2012. above.• Respondents were recruited via email • Across over 50 companies in 13+ industry Steelwedge. groups (primarily Food & Beverage, Make to Order Discrete, Consumer Packaged Goods, and High Tech & Electronics). • 62% from Process industries, and 34% from Discrete manufacturers. p. 6 Supply Chain Insights, LLC © 2012
  • 7. Who Was Surveyed? Industry, Company Size & Title From 13+ Industry Groups 47% from Companies with Over 5K Employees 62% Process vs. 34% Discrete Food and Beverage 18% Over Make to Order Discrete 18% 15,000 ≤1000 Consumer Packaged Goods 11% 25% 27% High Tech and Electronics 11% 5001-15,000 1001-5000 Chemical - Industrial 9% Chemical - Specialty 9% 22% 26% Pharmaceuticals 9% Medical Devices 4% Oil and Gas 3% 88% Managers & Above Fashion Apparel 2% Commodity Apparel and… 1% 47% Retail - Convenience 1% 25% Retail - Specialty 1% 12% 11% 5% Other 4% Internal consultant Manager Director Senior Director President ViceBase: Total Sample (117)Q2. Which industry grouping best defines your company? Please select the one that best applies.Q3. What is the size of your company, in terms of number of employees? Your best estimate is fine. p. 7Q4. Which of the following best describes your current position? Please select the one that best applies. Supply Chain Insights, LLC © 2012
  • 8. Who Was Surveyed? Supply Chain Organization Functions Reporting Through Supply Chain Leader Supply Chain Chief Operating Officer 43% 69% Profit Center Supply Chain Gen Mgr of Business Unit 26% Managers Planning (Supply) 80% Leader of Manufacturing 12% Supply Chain Planning (Demand) 72% Chief Financial Officer 9% Inventory 63% Head of Procurement 3% Chief Information Officer 2% Deliver (Distribution) 56% Supply Chain Definition Transportation 52% Not Sure Configure 3% to Order Source 12% (Procurement) 51% Make Build 38% 58% (Manufacturing) 26% to Build to Stock Customer Service 37% OrderBase: Total Sample (117)Q5. Please tell us how you define your company’s supply chain organization by selecting which function(s) report through the supply chainorganization. Please select all that apply. p. 8Q7. To whom does your supply chain organization report? Q6. How would you characterize your company’s supply chain? Supply Chain Insights, LLC © 2012
  • 9. S&OP Process Existence & Processes Have a Sales & Operations Planning Process Not sure No 3% 10% Yes 87% # Distinct S&OP Processes 5 S&OP processes on average 59% have 3+ processes 27% 20% 19% 14% 12% 9% 1 2 3 4 5 More than 5Base: Total Sample (117)Q17. Does your company have a Sales and Operations Planning (S&OP) process? A S&OP process is a tactical planning process to forecast sales and plan operations.Base: Have a S&OP process (102) p. 9Q18. Which one of the following best defines the goal of your current S&OP process?Q19. How many distinct S&OP processes does your company currently have? Your best estimate is fine. OPEN-ENDED Supply Chain Insights, LLC © 2012
  • 10. Center of Excellence Primary Functions of Center of Excellence Center of Excellence Definition of best practices for process 90% Not sure 2% Definition of supply chain metrics 82% Supply chain planning 77% No Inventory strategies 74% 30% Facilitation of horizontal processes, like… 72% Yes Evaluation of new technologies 69% 64% Network design 69% Establishment of goals 51% Supplier development 18% Other 3% 6 functions of the center of excellence on averageBase: Total Sample (61)Q8. Does your company have a supply chain center of excellence – in other words, a dedicated team focused on improving supply chain process excellence?Base: Have Center of Excellence (39) p. 10Q9. What are the primary functions of your supply chain’s center of excellence? Please select all that apply. Supply Chain Insights, LLC © 2012
  • 11. Center of Excellence Importance vs. Performance Importance vs. Performance 120% Importance (6-7) Performance (6-7) Gap (Perf - Impt) 100% 82% 77% 74% 80% 66% 62% 57% 58% 52% 60% 43% 44% 42% 34% 30% 40% 28% 21% 20% 20% 0% -16% -20% -22% -33% -30% -31% -34% -37% -40% -61% -60% -80% Facilitation of Supply chain Network design Definition of Inventory Definition of best Establishmt Evaluation of horizontal planning supply chain strategies practices for of goals new technologies processes, like metrics process S&OP Base: Have 28* 30 27* 32 29* 35 19* 27*function NOTE: Supplier Development is not shown because not enough respondents report it is a function of their supply chain center of excellence Base: Have Center of Excellence & Particular Function (varies by function) *CAUTION: SMALL BASE SIZE Q10. For each of the following functions of the supply chain center of excellence, how important is it to your overall company? SCALE: 7=Extremely important – 1=Not at all important p. 11 Q11. For these same functions, how would you rate your company’s performance? SCALE: 7=Excellent– 1=Poor Supply Chain Insights, LLC © 2012
  • 12. Audience QuestionHow balanced is your S&OP Process?• Big OP and little s• Big S and little op• We are balanced p. 12 Supply Chain Insights, LLC © 2012
  • 13. Agenda Overview & Demographics What is Agility?Increasing Complexity of S&OP So What? Who Cares? p. 13 Supply Chain Insights, LLC © 2012
  • 14. What is Agility? How Define Supply Chain “Agility” Shorter supply Flexibility to make cycles and deliver whatever is ordered 3% 10% Most Mature Definition: Ability to recalibrate plans in the face of market, demand and supply volatility and deliver 49% the same or comparable cost, quality and customer 38% service Ability to adapt to variations in demand and supplyBase: Total Sample (117) p. 14Q11. How would you define what it means for your company’s supply chain to be “agile”? Please select the one that fits best. Supply Chain Insights, LLC © 2012
  • 15. Agility Importance vs. Performance Agility Importance vs. Performance (7-Point Scale) 6% 5% 40% Low (1-3) 89% 32% Middle (4) Agility Performance is 62 % Points Lower than 27% High (5-7) Importance Importance PerformanceBase: Total Sample (117)Q12. How important is it for your company’s supply chain to be “agile” in 2012? Please base your answer on however your company defines agility.SCALE: 1=Not at all important, 7 = Extremely important p. 15Q13. How would you currently rate your company’s supply chain in terms of being “agile”? SCALE: 1=Not at all agile, 7 = Extremely agile Supply Chain Insights, LLC © 2012
  • 16. Importance of S&OP Process for Agility Importance of S&OP Process to Agility 3% Not important (1-3) 7% 20% (4) (5) 90% 42% Important (6) 28% Extremely important (7)Base: Have a S&OP process (102) p. 16Q22. How important do you think your S&OP process is to improving the agility of your supply chain? Supply Chain Insights, LLC © 2012
  • 17. Audience QuestionHow well can you plan and build scenarios toplan for agility today?• Works well. My system lets me easily build what-if scenarios.• Area for improvement. I can plan, but I cannot easily build what if scenarios. p. 17 Supply Chain Insights, LLC © 2012
  • 18. Agenda Overview & Demographics What is Agility?Increasing Complexity of S&OP So What? Who Cares? p. 18 Supply Chain Insights, LLC © 2012
  • 19. S&OP Evolution Greater Benefit Business- • GrowthSales Driven planning Driven • ResilienceMatch Demand Maximize • Efficiency with Supply Profitability Market Driven Manufacturing- Demand Driven Driven Maximize Maximize Opportunity and Deliver a Feasible Opportunity Mitigate Risk. Plan for Operations Sense and Orchestrate Match Demand Shape Demand with Supply Demand Market to Market
  • 20. S&OP Goal By Supply Chain Leader S&OP Goal by Supply Chain Leader 43% Total Match demand with supply 43% GM or COO 41% Other* 32% Maximize opportunity and mitigate risk 37% Most Mature Goal 19% 14% Develop a feasible plan 7% 33% 8% Determine the most profitable plan 9% 7% 3% Other (please specify) 4% 0%Base: Have a S&OP process -- Total (102), Supply Chain Leader is GM or COO (70), Other (27) – *CAUTION: SMALL BASE SIZE p. 20Q18. Which one of the following best defines the goal of your current S&OP process? Supply Chain Insights, LLC © 2012
  • 21. What is Agility? By S&OP Goal Agility Definition by S&OP Goal Ability of the supply chain to recalibrate plans in Most the face of market, demand and supply volatility 64% Mature and deliver the same or comparable cost, quality 48% and customer service Definition Ability to adapt the supply chain to variations in 30% demand and supply 41% Mature S&OP Goal (Maximize Opportunity, Mitigate Risk) 3% Other S&OP Goal Flexibility to make and deliver whatever is ordered 10% 3% Shorter supply cycles 1%Base: Max Opp/Min Risk (33), Other (69) p. 21Q11. How would you define what it means for your company’s supply chain to be “agile”? Please select the one that fits best. Supply Chain Insights, LLC © 2012
  • 22. S&OP Plan Execution S&OP Plan Execution Execution is not connected to S&OP plan 9% We try to execute the S&OP plan, but hardly do in practice 25% We execute the S&OP plan most of the time 35% We execute the S&OP plan nearly all of the time 19% We monitor market events and adjust to S&OP Sense & plan within limits 13% RespondBase: Have a S&OP process (102) p. 22Q25. After your S&OP plan is generated, how is it executed? Please pick the one that describes it best. Supply Chain Insights, LLC © 2012
  • 23. Agility Techniques Primary Technique to Improve Agility Better visibility of market events due to improved S&OP decision making 32% Improved demand forecasting 28% Top 3 Techniques Lean manufacturing 15% Use of channel data to sense demand (decrease demand latency) 5% Vendor managed inventory (VMI) 3% Inventory postponement 3% Manufacturing products closer to market 3% Change in transportation modes 3% Supplier managed inventory (SMI) 1% Ability to speed up new product launch process to be more responsive to customers 1% Other 3% Not sure 4%Base: Total Sample (117) p. 23Q15. What is the primary technique your company currently uses to improve supply chain agility? Supply Chain Insights, LLC © 2012
  • 24. Top 5 Agility Techniques By Agility Definition Top 5 Techniques to Improve Agility by Agility Definition Mature Agility Definition Other Mature Agility = Same Cost, Quality & Customer Service Given Variable Supply & Demand Better visibility of market events due to improved S&OP decision making 49% 17% Improved demand forecasting 19% 37% Lean manufacturing 12% 17% Use of channel data to sense demand (decrease demand latency) 2% 8% Vendor managed inventory (VMI) 2% 5%Base: Mature Agility Definition (Same Cost, Quality & Customer Service Given Variable Supply & Demand) (57), Other Agility Definition (60) p. 24Q15. What is the primary technique your company currently uses to improve supply chain agility? Supply Chain Insights, LLC © 2012
  • 25. Agility Challenges & Efforts Supply Chain Agility Challenges (Open-Ended Verbatim Responses) • S&OP does not report into the Supply Chain structure. It maintains an independent force for impartial influencing of Demand, Supply and Finance • S&OP is only happening in the markets and not on a global level. We are operating a federated organizational model. Therefore we have numerous processes in place today. • Plan S&OP according to your best possible effort in line with your manufacturing capacity and logistic support • We have currently put the S&OP process on hold due to implementing a new ERP process and most people do not physically have the time. However in the mean time we are in the process of re vamping the process to move up one more level. • We are a telecommunications provider. We dont manufacture in a traditional sense, so supply chain (other than the procurement of mobile handsets and network equipment) doesnt occur. Matching supply to demand is not based on a linear one-to-one relationship between units sold matched to units consumed. The BOM is complex and statistical only. In saying that, we operate a robust S&OP process to try to match network and other resources to the products we sell. Questions about S&OP vs. agility are difficult to answer in our context. • Were investigating new sales forecasting software for installation in 2013. Ours no longer meets our needs. • The challenge in maturing a customer base/market to enable effective forecasting is a significant challenge in moving S&OP maturity - we are typically a second tier supplierBase: Total Sample (117) p. 25 SupplyQ26. Is there anything else that you think we should know about your supply chain and your company’s efforts to make it more agile? OPEN-ENDED Chain Insights, LLC © 2012
  • 26. Audience QuestionWhat is your largest challenge in building an agileS&OP?• Understanding and support by the executive team• Clarity of a supply chain strategy and supply chain excellence• The role of finance and the budget• Availability of skilled resources• Technologies that support the process p. 26 Supply Chain Insights, LLC © 2012
  • 27. Agenda Overview & Demographics What is Agility?Increasing Complexity of S&OP So What? Who Cares? p. 27 Supply Chain Insights, LLC © 2012
  • 28. Key Findings• Today, S&OP landscapes are more complex. It is not a bell curve. The average company now has five S&OP processes. Eight years ago there was one.• Today, a company is 5X more likely to have a supply chain center of excellence than eight years ago. However, there is still a large gap in the effectiveness of S&OP.• 90% of companies surveyed believe that a mature S&OP improves agility. However, only 13% of companies have effectively tied S&OP planning to execution. p. 28 Supply Chain Insights, LLC © 2012
  • 29. Who is Lora?• Founder of Supply Chain Insights• Partner at Altimeter Group (leader in open research)• 7 years of Management Experience leading Analyst Teams at Gartner and AMR Research• 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA)• 15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble. p. 29 Supply Chain Insights, LLC © 2012
  • 30. Where do you find Lora? Contact Information: loracecere@gmail.com Blog: www.supplychainshaman.com Q&A (over 6000 pageviews/month) Twitter: lcecere 2950 followers. Rated as the top rated supply chain social network user. Linkedin: linkedin.com/pub/lora- cecere/0/196/573 (2450 in the network) May 15, 2012 p. 30 Supply Chain Insights, LLC © 2012