Alan Braithwaite, Professor Cranfield University School of Management - 5 Supply Chain ‘Maxims’ for a high performace decade
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The document outlines 5 supply chain "maxims" for high performance in the coming decade: 1) build in customer service excellence, 2) reduce unprofitable complexity in customers and products, 3) design, plan, and execute for agility, 4) synchronize and integrate to eliminate waste, and 5) collaborate to leverage performance. It argues that structural flexibility, configuring supply chains through rules and engagement, end-to-end integration, and designing for resilience will be key capabilities. Adopting these maxims and capabilities can help companies manage complexity for profitability and align with customers and suppliers for co-created value.
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Alan Braithwaite, Professor Cranfield University School of Management - 5 Supply Chain ‘Maxims’ for a high performace decade
- 1. 5 Supply Chain ‘Maxims’ for a high performance decade Alan Braithwaite Visiting Professor – Cranfield School of Management Chairman LCP Consulting © LCP Consulting Ltd, The Stables, Ashlyns Hall, Chesham Road, Berkhamsted, HP4 2ST UK Tel: +44 (0)1442 872298 Fax: +44 (0)1442 873896 Page 1
- 2. Agenda • Disruption, Innovation and Schumpeter • Disrupt or be disrupted – building in structural flexibility • The Five Maxims • Areas for focus and their challenges Page 2
- 3. The big supply chain challenges CROP SHORTAGES WATER STRESS CHINA DOMINANCE POLLUTION POLITICAL UNREST CURRENCY VOLATILITY Page 3
- 4. Volatility and risk – the ‘new normal’ Supply Chain 2.0: Managing the supply chain in the era of turbulence M. Christopher & M Holweg, IJPDLM, Vol 41, No 1, 2011 Page 4
- 5. Business @ the speed of thought “If the 1980’s were about quality and the 1990’s about re-engineering, then the 2000’s will be about velocity” Bill Gates, 1999 “Business @ the speed of thought” “Conventional retail is flat but multi-channel sales are growing at 20% - the marketplace is being transformed” Page 5
- 6. Multi / Omni channel – creative destruction Joseph Schumpeter (1942) Schumpeter’s big idea • Economic growth is driven by replacing former trading models • Overcoming monopolies such as the high street • Some big losers as well as winners Page 6
- 7. Radical thinking is needed – its about mindset – “My argument is the more difficult the economic times, the more one is tempted to retrench, the more radical innovation becomes the only way forward. In a discontinuous world, only radical innovation will create wealth” Professor Gary Hamel - London Business School and the World’s leading expert on business strategy (Fortune Magazine) Page 7
- 8. Opportunity – be disrupted or disrupt Danger CRISIS Hidden opportunity Page 8
- 9. Coping with the ‘New Normal’ – new themes • ‘AAAA’ • The 4 ‘R’s • Agile • Responsive • Adaptable • Resilient • Aligned • Reliable • Architected • Relationship driven – Prof Hau Lee – Prof. Martin Christopher Page 9
- 10. Moving from dynamic to structural flexibility Structural Flexibility Low High High Efficient Adaptable Supply Supply Chain Chain Dynamic Flexibility Traditional Supply Chain Low Source: Prof Martin Christopher Page 10
- 11. Structural flexibility shifts the exposure to risk as uncertainty increases As uncertainty increases in the future, the value of Return flexibility will increase! On Flexible route investment Traditional route Profit Loss Now Future Time Source: Prof Martin Christopher Page 11
- 12. This about shaping capacity and being demand responsive – lower long term cost and increasing adaptability D I C P Key D : Demand P : Plan I : Inventory C : Capacity Source: Prof Martin Christopher Page 12
- 13. Operational transformation – power of 1% Supply Chain Value © LCP Consulting Ltd Page 13
- 14. 5 Supply Chain Maxims to prosper to 2020 BUILD IN CUSTOMER SERVICE EXCELLENCE REDUCE UNPROFITABLE DESIGN, PLAN & COMPLEXITY – EXECUTE FOR CUSTOMERS AND AGILITY PRODUCTS SYNCHRONISE / COLLABORATE INTEGRATE TO TO LEVERAGE ELIMINATE PERFORMANCE WASTE © LCP Consulting Ltd Page 14
- 15. Reduce unprofitable complexity – customers & products Net profit management through Cost-to-Serve® 10,000k 12,000k 9,000k 8,000k 10,000k Cost-of variety 7,000k & complexity 6,000k 8,000k Common experience Net Profit 5,000k 6,000k that > 50% of 4,000k 4,000k net profit is 3,000k eroded by 2,000k 2,000k some product / 1,000k customer 0k 1 201 401 601 801 1001 1201 1401 0k combinations No. of SKUs SKUs / Customers Profit Revenue © LCP Consulting Ltd Page 15
- 16. Build in customer service excellence SVC Company's Performance 5 6 Understand the current SVC 1 SVC 4 SVC performance and the 2 4 SVC service features that the 5 market values and how the company is doing against 3 SVC them 7 SVC 2 3 Align your organisation to the SVC 8 ‘valued’ components; ensure actual performance is excellent 1 on the things they value 1 2 3 4 5 Importance to Customers © LCP Consulting Ltd Page 16
- 17. Design, plan and execute for agility – increase the organisation’s clock speed ‘Synchronised Rules’ Frequency, Order Quantities and Stock Plans govern the connection of the nodes and function and determine the service performance and inventory Suppliers Suppliers Suppliers Suppliers Well Distribution Industrial Chems / Lubes Head Refinery Centres Producers Plants Segmented by customer and product requirements and profitability Batch sizes, lead times, ship quantities © LCP Consulting Ltd Page 17
- 18. Synchronise & integrate - Engage the customer with the right point in the chain Make to order 10 to 15 days 3 to 5 days LT Same day © LCP Consulting Ltd Page 18
- 19. Collaborate to leverage performance …become the preferred customer of your key suppliers Suppliers Suppliers Suppliers Suppliers Well Distribution Industrial Chems / Lubes Head Refinery Centres Producers Plants Lowest end-to-end cost through balancing and quality of execution “My business with my suppliers is their most profitable – yet we still have the lowest total cost of ownership” VP of Procurement – a world leading electronics manufacturer © LCP Consulting Ltd Page 19
- 20. Value Co-Creation – Service Dominant Logic Goods dominant Transitional Service-Dominant concepts concepts logic concepts S S P P S P S S Product OR Service Core product + added service Product Service System Product = Value Product = Value Product + Service = Value Service = Cost Service = Differentiation Source: Vargo and Lusch Page 20
- 21. Key capabilities for the next decade 1. Excelling at the ‘basics’ – Six Sigma accuracy 2. Highly configured supply chains – rules and engagement 3. End to end process and data integration 4. Design for resilience and responsiveness © LCP Consulting Ltd Page 21
- 22. Outcomes and opportunities – Complexity managed for profitability – Customers and suppliers aligned for co-created value © LCP Consulting Ltd Page 22