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Innovation Global Supply Chain


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Innovation Global Supply Chain

  1. 1. Innovation - Global Supply Chain New Products, Services & Processes Anand Subramaniam
  2. 2. <ul><li>“ Knowledge is power and enthusiasm pulls the switch&quot; </li></ul><ul><ul><li>Steve Droke </li></ul></ul>
  3. 3. Highlights <ul><li>Supply Chain Management (SCM) Principles </li></ul><ul><li>Need for Innovation in SCM </li></ul><ul><li>Managing Current SCM Challenges </li></ul><ul><li>SCM Innovation - Trends & Drivers </li></ul><ul><li>SCM Innovation Process </li></ul><ul><li>Innovative Global SCM Strategies </li></ul><ul><li>SCM - Product Innovation </li></ul><ul><li>SCM - Service Innovation </li></ul><ul><li>SCM - Competency / Performance Relationships </li></ul><ul><li>Manage Change & Risks </li></ul>
  4. 4. SCM - Principles
  5. 5. Supply Chain Management Collaboration Arrangement Joint Business Plan Sales Forecasting Order Planning/ Forecasting Order Generation Order Fulfillment Exception Management Performance Assessment Manufacturer Account Planning Market Planning Customer Scorecard Execution Monitoring Logistics/ Distribution Production & Supply Planning Demand Planning Market Data Analysis Vendor Management Category Management POS Forecasting Replenishment Planning Buying/ Re-buying Logistics/ Distribution Store Execution Supplier Scorecard
  6. 6. Supply Chain Management - Principles <ul><li>Principle 1: Segment Customers based on logistics and SC needs </li></ul><ul><li>Principle 2: Customise the Logistics Network to be responsive to customer segments </li></ul><ul><li>Principle 3: Listen to Demand Signals and Plan Accordingly </li></ul><ul><li>Principle 4: Differentiate Products Closer to the Customer </li></ul><ul><li>Principle 5: Source Strategically </li></ul><ul><li>Principle 6: Develop an Integrated SC Technology Strategy </li></ul><ul><li>Principle 7: Adopt Channel-Spanning Performance Measure </li></ul>
  7. 7. Need for Innovation in SCM
  8. 8. Direction for Business Innovation <ul><li>Products : Create new products and services </li></ul><ul><li>Platforms : Create modular platforms and strategic control points </li></ul><ul><li>Solutions : “End-to-end” solution for customers </li></ul><ul><li>Customers : Find new customer segments or unmet customer needs </li></ul><ul><li>Customer Experience : Change how customers interact with you </li></ul><ul><li>Revenue Model : Change how you get paid </li></ul><ul><li>Processes : Innovate on operating processes </li></ul><ul><li>Value Chain : Change position or scope of value chain participation </li></ul><ul><li>Logistics/Supply Chain : Change the way you source & ship products </li></ul><ul><li>Channels : Change how you go to market with your products </li></ul><ul><li>Networking : Change how you connect with customers or products </li></ul><ul><li>R&D : Create new technologies, materials, products or processes </li></ul>Source: Mohan Sawhney - Mc Cormick Tribune Professor of Technology
  9. 9. Emerging Opportunities Disciplined Profitable Growth Majority Supply Chain Innovators The Lean and the Masterful Closure Strong/Weak Currencies Advanced Technologies Emerging Skill Sets Rising Commodity Prices Global Competition Global Liquidity Crisis Profitability Performance Partnership
  10. 10. Global Supply Chain Innovators Supply Chain Innovators <ul><li>Profitability </li></ul><ul><li>Create innovative product and service processes to meet customer needs in collaboration with supply chain partners </li></ul><ul><li>Implement real-time accurate access to relevant customer & supply chain operational data </li></ul><ul><li>Quickly identify root causes of issues and manage by exception through alert messaging </li></ul><ul><li>Shared information on plans, issues and actions to enable rapid decision-making </li></ul><ul><li>Develop variable cost structures that can be controlled and managed in direct relationship to customer demand </li></ul><ul><li>Performance </li></ul><ul><li>Implement responsive, end-to-end and integrated processes to synchronise demand and supply and eliminate supply chain waste (time, inventory, effort, money) </li></ul><ul><li>Scorecards to identify performance trends and recurring issues </li></ul><ul><li>Integrated end-to-end supply chain measurements - Perfect order, Cycle time reduction, Customer service level attainment </li></ul><ul><li>Implement a robust capability to sense and respond to customer demands and other critical events as they occur </li></ul>Partnership Develop and implement the supply chain network through collaborative planning and execution with customers and suppliers Rationalise the logistics network and outsource non-differentiating activities to partners Develop and implement dynamic and adaptive supply chain logistics structures for variable cost control Develop and implement global sourcing and supply networks End-to-end visibility and adaptability that sense and respond in a coordinated fashion to changes in the environment
  11. 11. SC Risks & Need for Innovation <ul><li>Environment </li></ul><ul><li>Natural disasters </li></ul><ul><li>Terrorism and war </li></ul><ul><li>Regulatory changes </li></ul><ul><li>Tax, duties and quotas </li></ul><ul><li>Strikes </li></ul><ul><li>Demand </li></ul><ul><li>Loss of major accounts </li></ul><ul><li>Volatility of demand </li></ul><ul><li>Concentration of customer base </li></ul><ul><li>Short life cycles </li></ul><ul><li>Innovative competitors </li></ul><ul><li>Network </li></ul><ul><li>Asymmetric power relationships </li></ul><ul><li>Poor visibility along the pipeline </li></ul><ul><li>Inappropriate rules that distort demand </li></ul><ul><li>Lack of collaborative planning and forecasts </li></ul><ul><li>Bullwhip effects due to multiple echelons </li></ul><ul><li>Process </li></ul><ul><li>Manufacturing yield variability </li></ul><ul><li>Lengthy set-up times and inflexible processes </li></ul><ul><li>Equipment reliability </li></ul><ul><li>Limited capacity/bottlenecks </li></ul><ul><li>Outsourcing key business processes </li></ul><ul><li>Supply </li></ul><ul><li>Dependency on key suppliers </li></ul><ul><li>Consolidation in supply markets </li></ul><ul><li>Quality and management issues arising from off-shore sourcing </li></ul><ul><li>Potential disruption at 2nd tier level </li></ul><ul><li>Length and variability of replenishment lead-times </li></ul>
  12. 12. Some thoughts going in your mind !! Who selects the right ideas and how will it be funded? How to remain competitive and delight our customers & shareholders? Where do we grow revenue stream and is it from new and / or existing products? What process, tools and methods should we use to ensure success? How can we get employees to contribute to new ideas and ensure we have a process to capture this? How do we create an environment for taking risk and enable creativity? How can we objectively assess and prioritise ideas? When do I create a market disruption? What is the best practice for an innovation process? When and where do I involve my supply chain in innovation? How do we measure the innovation performance? What competencies / capabilities should we have in place tin order to deliver innovative products / services / processes ? When do we cut our losses before it is too late? How do I manage change? Who decides on Go / No Go at stage gates? What, Who, Why, When, Which, How, Where ?? What to do about global competition?
  13. 13. Managing Current SCM Challenges
  14. 14. Supply Chain Management <ul><li>Vertical Collaboration </li></ul><ul><li>Strategic optimisation – end-to-end supply chain structure </li></ul><ul><li>Integration - supply chain processes across organisations </li></ul><ul><li>Synchronisation – systems spanning organisations </li></ul><ul><li>Horizontal Collaboration </li></ul><ul><li>Economies of scope – multi-user solutions </li></ul>
  15. 15. Today’s market place requires.. <ul><li>New technologies & real-time visibility for design, production, capacity, inventory & transportation </li></ul><ul><li>New ways of conceptualising business from order tracking & reporting across multiple vendors & carriers </li></ul><ul><li>Global possibilities, regardless of size and location </li></ul><ul><li>Personalised content & services to customers </li></ul><ul><li>New kinds of partnerships where collaborative planning with design partners, distributors & suppliers </li></ul><ul><li>Green Supply Chain & Corporate Social Responsibility </li></ul><ul><li>Shift from vertical to virtual integration & collaboration </li></ul><ul><li>Manage team competencies / capabilities to sustain competitive advantage </li></ul>
  16. 16. Managing SCM Process Tier 1 Supplier Manufacturer Distributor Retailer Customer Inefficient logistics High stockouts Ineffective promotions Frequent Supply shortages High landed costs to the shelf High inventories through the chain Low order fill rates Glitch-Wrong Material, Machine is Down – effect snowballs Frequent breakdowns
  17. 17. Managing End to End Networks Sustaining Competitive Advantage New Materials Cooperative Development White-Space Development New Processing Product Adaptation Integrated Solutions Key Process Improvement New Products Supply Chain Responsiveness Alternative Channels Cost to Serve New Sales Sales Leadership Strategies New Business Systems Suppliers Manufacturing Distribution Retailer Consumer Flow of information, products, services and financials Product Development Distribution Efficiency Product Replenishment Order Fulfillment Marketing Strategy Business Development
  18. 18. Managing Product & Information Flow Postponement Vendor managed inventory Cross docking Continuous replenishment Flexible automation Modularisation Mass customisation Quick response Efficient consumer response End to End Supply Chain Time-based logistics Extended warehouse Visibility Integrated business planning / Sales & Operations Planning Cloud based services: Managed Services, On-Demand, SaaS Sustainability & Green Supply Chain Closed-loop Supply Chain Execution & Supply Chain Planning Demand Driven Lean Supply Chain Transportation Management & Global Trade Management Convergence Need for Innovations in Supply Chain
  19. 19. Managing Product Life Cycle Negative cash flow Introduction Growth Maturity Decline Sales, cost, and cash flow Cost of development and production Cash flow Net revenue (profit) Sales revenue Loss
  20. 20. Managing Competitive Pressures Requires a change in Business Model Serving localised customer with complex supply lines Demanding customers Changing market boundaries and new channels Aggressive global competition Industry consolidation and alliances Environmental and risk issues Stakeholder pressures Speed of technology change Shortening product life cycles Pressure on margins, growth, cost Supply & Demand Co-ordination Hyper – competition & Globalisation Partnership Green SCM
  21. 21. Managing Areas of Complexity Strategy / Change Management People Process Technology Financials Global Competition Costs, Revenues ROI, Payback Periods Data Connectivity Hardware Applications/ Tools Architecture Software Licensing Data Flow Work Flow Travel Practices Communication Coordination Competency Training Culture Leadership & Management Process Owners and Task Owners
  22. 22. Managing Disruptive Change Functional Innovative Products Focused Agile Manufacturing Fast Warp Speed Speed of Change Design-make-sell Sell-design-make Process Passive Interactive Customers Organised Chaotic Planning Hierarchical Networked Organisations Guarded Available to all Information Turnover Profit Growth Focus “ C” Level challenges in every area
  23. 23. Managing Risks <ul><li>Time Compression – product life cycles are being reduced, thus increasing risk </li></ul><ul><ul><li>New products must continually be in development </li></ul></ul><ul><ul><li>Less time to capture development costs </li></ul></ul><ul><li>Cost – new product development is expensive </li></ul><ul><ul><li>40% of all quality problems stem from poor design </li></ul></ul><ul><ul><li>60-80% of a product's cost is determined during design </li></ul></ul><ul><li>NPD is cross-functional, teaming with all stakeholders and getting buy-in is a challenge </li></ul>
  24. 24. Managing Stakeholder Expectation Jobs for life Life of jobs Employment Manage the business Change the business Management Solo working Team working Ways of working Education for life Life of education Education Functional Performance Cross-functional performance KPI’s Direction Empowerment Leadership Reference books Gateway to the world Knowledge Organisational performance Supply chain performance Vision Competitive Collaborative Relationships
  25. 25. Providing Value to End Customer Assets & Utilisation Continuous Innovation Excellence Operational Excellence End Customer Value - Seeking benefits at acceptable prices Service Excellence Cost Differentials Competitors Your Company Assets & Utilisation
  26. 26. SCM Innovation - Trends & Drivers
  27. 27. Innovation - Industry Domains <ul><li>Major Domains </li></ul><ul><ul><li>IT/Software : Enterprise Software, Embedded Software </li></ul></ul><ul><ul><li>Manufacturing : Electronics, Automotive, Aerospace </li></ul></ul><ul><ul><li>Telecom : Wireless, Data/Video </li></ul></ul><ul><ul><li>Financial Services : Banking, Insurance, Asset Management </li></ul></ul><ul><li>Emerging Domains </li></ul><ul><ul><li>Retail: CPG, Durables, Apparel </li></ul></ul><ul><ul><li>Media / Entertainment : Publishing, TV, Animation </li></ul></ul>
  28. 28. Innovation - Business Drivers <ul><li>Financial Imperatives </li></ul><ul><ul><li>Profitability & growth </li></ul></ul><ul><ul><li>Expectations </li></ul></ul><ul><ul><li>Increasing global purchasing power </li></ul></ul><ul><ul><li>Highly diverse global cost bases </li></ul></ul><ul><li>Growing Competition </li></ul><ul><ul><li>Global & Local </li></ul></ul>
  29. 29. Innovation - Challenges & Enablers <ul><li>Challenges </li></ul><ul><ul><li>Bridging language / culture </li></ul></ul><ul><ul><li>Transcending physical, political, social, IT factors </li></ul></ul><ul><ul><li>Managing global relationships / partnerships </li></ul></ul><ul><ul><li>Building & operating distributed infrastructure </li></ul></ul><ul><ul><li>Attracting & retaining talent </li></ul></ul><ul><li>Enablers </li></ul><ul><ul><li>Trade & finance liberalisation </li></ul></ul><ul><ul><li>High speed communication links </li></ul></ul><ul><ul><li>Spreading competence </li></ul></ul><ul><ul><li>Expanding partnerships </li></ul></ul>
  30. 30. Success Criteria <ul><li>Supply Chain viewed as a strategic asset and a differentiator </li></ul><ul><li>Create unique supply chain configurations that align with company’s strategic objectives </li></ul><ul><ul><li>Operations strategy </li></ul></ul><ul><ul><li>Outsourcing strategy </li></ul></ul><ul><ul><li>Channel strategy </li></ul></ul><ul><ul><li>Customer service strategy </li></ul></ul><ul><ul><li>Asset network </li></ul></ul><ul><li>Reduce uncertainty </li></ul><ul><ul><li>Forecasting </li></ul></ul><ul><ul><li>Collaboration </li></ul></ul><ul><ul><li>Integration </li></ul></ul>
  31. 31. Supply Chain Innovation Process
  32. 32. PDMA* - Best Practice <ul><li>Used a new product development process & strategy to prioritise and screen projects </li></ul><ul><li>Set high expectations and measured NPD output </li></ul><ul><li>Used cross-functional project teams </li></ul><ul><li>Emphasised market research (customer orientation) </li></ul><ul><li>Quickly implemented new market research and engineering design tools </li></ul><ul><li>Utilised cost / benefit analyses, rapid prototyping and concurrent engineering </li></ul><ul><li>Rewarded teams non-financially in multiple ways </li></ul><ul><li>Tough Go/Kill decision points </li></ul>PDMA* – Product Development and Management Association ( )
  33. 33. Engagement Model Engage Prioritise Plan Build Sustain Initial Assessment Prioritisation Business Strategy New Product Innovation Relationship building phase during which the capabilities and opportunities of the company are preliminary assessed Diagnosis and prioritisation phase to assess the company's capabilities in relation to its priorities and the environment within which it operates Strategic planning based on in-depth assessment of the company Capability development phase with targeted use of tools for business areas requiring attention Sustain phase often accompanied by periodic diagnosis audits to assess any changes and adjust the nature of the intervention as appropriate; supported by mentoring Re Prioritise Tools Process
  34. 34. Opportunity & Fuzzy Front End Develop / Test <ul><li>Design for X </li></ul><ul><li>Prototypes and market testing </li></ul><ul><li>Manufacturing </li></ul><ul><li>MRO </li></ul><ul><li>Reuse, recycle </li></ul>Promote <ul><li>Review projects </li></ul><ul><li>Select project(s) </li></ul><ul><li>Assign budget & time horizon </li></ul><ul><li>Approve & promote </li></ul>Capture <ul><li>Brainstorm & capture </li></ul><ul><li>Research & initial proof of concept </li></ul><ul><li>Publish & share </li></ul>Formulate <ul><li>Business case rationale/ justification </li></ul><ul><li>Cost benefit assessment </li></ul><ul><li>Reviews & rating </li></ul>Evaluate <ul><li>Review and score </li></ul><ul><li>Portfolio analysis </li></ul><ul><li>Proof of concept funding </li></ul>Define <ul><li>Build project & assign team </li></ul><ul><li>Design, marketing, legal </li></ul><ul><li>Customer feedback </li></ul><ul><li>Analyse the business </li></ul><ul><li>Set business drivers </li></ul><ul><li>Establish a strategy </li></ul>Strategise Fuzzy Front End
  35. 35. Supply Chain Innovation - Process Initial Screen Pr eliminary Inv estigation Development Detail Investig ation (Build the Business Case) Testing & Validation Full Production and Market Launch Second S creen Dec ision on Bu siness Case Post-development Review Pre-commercialise Business Analysis Post-Launch Review Idea / Discovery G1 G2 G3 G4 G5 Scoping Business Case Development Gates Stages Post Launch Review Test & Validate Launch
  36. 36. Supply Chain Innovation - Gates <ul><li>Gate 1 - Initial Screening </li></ul><ul><ul><li>Does the idea warrant any further work? </li></ul></ul><ul><li>Gate 2 – Second Screening </li></ul><ul><ul><li>Does the idea justify extensive analysis? </li></ul></ul><ul><li>Gate 3 – Business Case Decision </li></ul><ul><ul><li>Is the business case sound? </li></ul></ul><ul><li>Gate 4 – Post Development Review </li></ul><ul><ul><li>Is the project ready for pilot? </li></ul></ul><ul><li>Gate 5 – Pre-commercialise Business Analysis </li></ul><ul><ul><li>Is the supply chain ready to support the market? </li></ul></ul>
  37. 37. Supply Chain Innovation - Stages <ul><li>Stage 1 - Discovery </li></ul><ul><ul><li>It fosters idea generation </li></ul></ul><ul><ul><li>It is perpetual process of crafting new products, processes & services </li></ul></ul><ul><ul><li>It integrates partners, geographies, technologies that could deliver on the promise of an innovative supply chain </li></ul></ul><ul><li>Stage 2 - Scoping </li></ul><ul><ul><li>Quick investigation and shaping of the supply chain concept / definition </li></ul></ul><ul><ul><li>Scope definition brings together cross functional team (including customers and suppliers) </li></ul></ul><ul><ul><li>It is litmus test; to ensure the new potential value and to deliver on the promise </li></ul></ul><ul><li>Stage 3 - Build the Business Case </li></ul><ul><ul><li>Goes into detailed analysis where factual data is collected (costs, profitability, service levels) </li></ul></ul><ul><ul><li>Utilises advanced tools to model or simulate scenarios </li></ul></ul>
  38. 38. SC Innovation – Stages (Contd.) <ul><li>Stage 4 - Development </li></ul><ul><ul><li>Requires detailed mapping out of the processes, assigning the correct metrics and establishing the new or altered relationships with supply chain partners </li></ul></ul><ul><li>Stage 5 - Testing and Validation </li></ul><ul><ul><li>Undertakes pilot testing and verifies details with the business case </li></ul></ul><ul><ul><li>Provides the feedback loop and lessons, to minimise risks </li></ul></ul><ul><li>Stage 6 – Launch </li></ul><ul><ul><li>Implements the change and fine tunes the model to support full market demand  </li></ul></ul><ul><ul><li>Contingency scenarios activated in the event of a significant disruption </li></ul></ul><ul><li>Stage 7 - Post Launch Review </li></ul><ul><ul><li>A disciplined process to examine and use lesson leant for the next round of innovation in the product, process and / or services </li></ul></ul>
  39. 39. Innovative Global SCM Strategies
  40. 40. Global SC - End to End Performance Flow of information, products, services and financials Sell Multiple channels and customer touch points Single source dashboard to view overall performance Tracking from order to delivery Knowledge of total pipeline customer inventory Plan Synchronising supply and demand Integrating customer forecasts and demand with their suppliers to plan logistics requirements Participation in customer’s Sales & Operations Planning process Source Multi-source orders and fulfillment Ability to track purchase orders through their entire lifecycle Knowledge of total pipeline supplier inventory Deliver Monitoring shipment status Monitor shipment status throughout pipeline with proactive event notification Improved ability to identify short and over shipments Make Integration with manufacturer’s systems Access to order commitments & delivery schedules Visibility into order production status Service Service after Sales Management Efficiently process returns Manage Spare Parts Inventories Visibility to entire reverse logistics processes Suppliers Manufacturing Distribution Retailer Consumer
  41. 41. Success Criteria <ul><li>Senior management commitment and accountability </li></ul><ul><li>Commitment to R&D spending </li></ul><ul><li>Innovative culture and climate </li></ul><ul><li>A defined new technology strategy for the business </li></ul><ul><li>Use of cross-functional project teams </li></ul><ul><li>A high-quality new technology process </li></ul><ul><li>Adequate resources </li></ul>
  42. 42. Time Based Strategies <ul><li>Cross-docking </li></ul><ul><ul><li>Rapid inventory turns contributing to lower costs </li></ul></ul><ul><ul><li>Quick flow of inventory improving customer service levels </li></ul></ul><ul><li>Quick Response </li></ul><ul><ul><li>Utilising bar coding and linking production to retail locations </li></ul></ul><ul><ul><li>improved customer service levels </li></ul></ul><ul><li>EDI / Internet </li></ul><ul><ul><li>Faster and more efficient forms of order transmission reducing the time needed to complete the transaction. </li></ul></ul><ul><li>Push to pull </li></ul><ul><ul><li>Cross-docking, JIT, VMI, CPFR etc reducing the order cycle </li></ul></ul><ul><li>Postponement </li></ul><ul><ul><li>Not completely finishing a product, until an order arrives </li></ul></ul>
  43. 43. Productivity Strategies <ul><li>Facility / Equipment Utilisation </li></ul><ul><ul><li>Effective use of logistics facilities and smarter, more sophisticated equipment thus squeezing more productivity from these assets </li></ul></ul><ul><li>Third-Party/Contract Logistics Services </li></ul><ul><ul><li>Use of 3 & 4 PLs - improving asset productivity </li></ul></ul><ul><li>VMI ( Vendor Managed Inventory ) </li></ul><ul><ul><li>Supplier replenishing stock efficiently based on buyer sales & inventory </li></ul></ul><ul><li>CPFR ( Collaborative Planning, Forecasting & Replenishment ) </li></ul><ul><ul><li>Computer supported planning & forecasting 2+ levels in supply chain </li></ul></ul><ul><li>Value Nets </li></ul><ul><ul><li>Starts with the customer and is built around customisation, service, convenience </li></ul></ul>
  44. 44. Technology Strategies <ul><li>E-commerce e-procurement and electronic marketplaces </li></ul><ul><li>XML (Extensible Markup Language) </li></ul><ul><ul><li>basis for document exchange over the Internet and is designed for electronic document exchange </li></ul></ul><ul><ul><li>fast, easy, & low cost business transactions over the Net </li></ul></ul><ul><ul><li>low cost information sharing among supply chain partners </li></ul></ul><ul><li>Trade Exchange </li></ul><ul><ul><li>Internet portal or online business-to-business (B2B) market </li></ul></ul><ul><ul><ul><li>May be public or private </li></ul></ul></ul><ul><ul><li>Public trade exchanges - buyers can find sellers & vice versa </li></ul></ul><ul><ul><li>Real-time exchange of complex data in multiple formats </li></ul></ul><ul><ul><ul><li>product designs </li></ul></ul></ul><ul><ul><ul><li>distribution plans & schedules </li></ul></ul></ul><ul><ul><li>Standard auction </li></ul></ul><ul><ul><ul><li>Buyers bid on a product or service </li></ul></ul></ul><ul><ul><li>Reverse action </li></ul></ul><ul><ul><ul><li>Sellers quote a price for a product or service </li></ul></ul></ul>
  45. 45. Earlier Supplier Involvement (ESI) <ul><li>ESI is a key element of innovation strategies </li></ul><ul><li>ESI reduces risk when New Product Development Teams are involved </li></ul><ul><ul><li>Reduces costly misunderstandings </li></ul></ul><ul><ul><li>Uses supplier competencies during design </li></ul></ul><ul><ul><li>Suppliers may have access to pertinent customer feedback </li></ul></ul><ul><ul><li>Suppliers may be aware of trends in technology or demand </li></ul></ul>
  46. 46. Concurrent NPD <ul><li>Advocated by most supply chain leaders </li></ul><ul><li>Uses cross-functional teams to develop new products with targeted cost and features </li></ul><ul><ul><li>Typical teams will include managers from marketing, R&D, engineering, production, purchasing </li></ul></ul><ul><ul><li>Many companies include customers, suppliers and service providers in NPD teams </li></ul></ul><ul><li>Use of target pricing and target costing </li></ul>
  47. 47. Design for “X” <ul><li>Modular design - increasing customer choices </li></ul><ul><li>New Product Development could consider </li></ul><ul><ul><li>Design for Manufacturability – ease of production </li></ul></ul><ul><ul><li>Design for Purchasing – support the product from the existing supply base </li></ul></ul><ul><ul><li>Design for Logistics – ease of distribution </li></ul></ul><ul><ul><li>Design for Environment – minimise environment impact </li></ul></ul><ul><ul><li>Design for Disassembly – disassemble, recycle, and reuse </li></ul></ul><ul><ul><li>Design for Reuse – new design using existing parts </li></ul></ul>
  48. 48. Customer – Sales & Marketing <ul><li>Customer information is used in planning: </li></ul><ul><ul><li>Product - design of goods and services including both tangible and intangible elements </li></ul></ul><ul><ul><li>Price - determine the value of the need which is satisfied by the product </li></ul></ul><ul><ul><li>Place - having the product where it is needed, when it is needed, and in the correct quantities </li></ul></ul><ul><ul><li>Promotion - effective advertisement and sales techniques </li></ul></ul><ul><li>Product Positioning - to create niche appeal in a market segment </li></ul>
  49. 49. Target Costing <ul><li>Once the target cost has been determined, component level costs may be calculated </li></ul><ul><li>Cross-functional teams again are employed: </li></ul><ul><ul><li>Operations - knowledge of processes employed </li></ul></ul><ul><ul><li>Purchasing - supplier and parts knowledge </li></ul></ul><ul><ul><li>NPD Team - new design knowledge </li></ul></ul><ul><ul><li>Finance - knowledge of cost accounting </li></ul></ul><ul><ul><li>Also may include members from Packaging, Engineering, Logistics, Suppliers, and Customers </li></ul></ul>
  50. 50. Calculating Target Price Input from NPD, Customer, Market Customer Input about competition Customer & Management Input Input from NPD, R&D, Buyer, Supplier, Eng. Input from NPD, R&D, Buyer, Mkt Supplier, Eng. Manufacturing. Cost contained & Product launched Use Lean / Six Sigma to remove waste and fine tune process Product Characteristics Desired Target Selling Price Desired Profit Margin Direct Cost Behaviour Cost Management Overall Target Continuous Improvement
  51. 51. Tracking & Reporting <ul><li>Communication - top management kept in the loop and supportive </li></ul><ul><li>Target Cost - margin met and competitiveness determined </li></ul><ul><li>Cross Functional Team - identify relevant issues and drive cost of goods to meet or beat the targets </li></ul><ul><li>Value and Features - key features critical to the customers identified, designed and refined </li></ul><ul><li>Manufacturing Roadmap – continuously refined </li></ul><ul><li>Suppliers – rationalised and key suppliers identified </li></ul><ul><li>Risks - cost, supply, timing, pricing etc minimised </li></ul>
  52. 52. SCM - Product Innovation
  53. 53. Product Differences <ul><li>Innovative Product </li></ul><ul><li>Short life cycles (< 1 year) </li></ul><ul><ul><li>Unpredictable demand </li></ul></ul><ul><ul><li>High gross margins (20~60%) </li></ul></ul><ul><ul><li>High variety per category (1000’s) </li></ul></ul><ul><ul><li>High forecast error when production is committed (40~100%) </li></ul></ul><ul><ul><li>High stock-out rate (10~40%) </li></ul></ul><ul><ul><li>High end of season mark down (10~25%) </li></ul></ul><ul><ul><li>E.g., Starbucks citrus flavored coffee beans </li></ul></ul><ul><li>Functional Product </li></ul><ul><ul><li>Long life cycles (> 1year) </li></ul></ul><ul><ul><li>Stable (& predictable) demand </li></ul></ul><ul><ul><li>Low gross margins (5~20%) </li></ul></ul><ul><ul><li>Low variety per category (10’s) </li></ul></ul><ul><ul><li>Low forecast error when production is committed (10%) </li></ul></ul><ul><ul><li>Low stock-out rate (1%) </li></ul></ul><ul><ul><li>Low markdown cost (0%) </li></ul></ul><ul><ul><li>E.g., Campbell’s tomato soup </li></ul></ul>
  54. 54. Challenges <ul><li>Global Competition </li></ul><ul><ul><li>Improved worldwide telecommunications </li></ul></ul><ul><ul><li>Better logistics; faster transportation of goods </li></ul></ul><ul><ul><li>Lower trade barriers </li></ul></ul><ul><li>Shorter Product Life Cycles </li></ul><ul><ul><li>Engaging in continuous product development as new products become a majority of sales and profits </li></ul></ul><ul><ul><li>Having flexibility in manufacturing processes </li></ul></ul><ul><li>Increasing demand for services </li></ul><ul><ul><li>Reducing the costs of service delivery </li></ul></ul><ul><ul><li>Using Internet to deliver current / new services </li></ul></ul><ul><li>Advances in Technology </li></ul><ul><ul><li>Products becoming obsolete faster </li></ul></ul><ul><ul><li>Improved manufacturing processes: CAD, CAM, industrial robots </li></ul></ul>
  55. 55. Opportunities <ul><li>Greater Market Share </li></ul><ul><ul><li>Early entry captures large initial market share </li></ul></ul><ul><li>Price Premiums </li></ul><ul><ul><li>Ability to initially charge more for new products </li></ul></ul><ul><li>Quick Reaction to Competition </li></ul><ul><ul><li>Rapid response to competitor’s new products </li></ul></ul><ul><li>Set Industry Standards </li></ul><ul><ul><li>Initial product sets market/industry standards </li></ul></ul>
  56. 56. New Product (NPD) - Categories Incremental / Derivative Next Generation / Platform Products Breakthrough / Radical Products
  57. 57. NPD – Incremental / Derivative <ul><ul><li>Are hybrids or enhancements of existing products. </li></ul></ul><ul><ul><li>Require minimal changes in design or process, allowing for quick development. </li></ul></ul><ul><ul><li>Require fewer resources to develop new features or functions. </li></ul></ul><ul><ul><li>Help ensure near-term cash flows by maintaining current market share. </li></ul></ul>Incremental / Derivative Next Generation / Platform Products Breakthrough / Radical Products
  58. 58. NPD – Next Generation / Platform <ul><ul><li>Create new product categories as core businesses. </li></ul></ul><ul><ul><li>Require substantial design and process change. </li></ul></ul><ul><ul><li>Render existing products obsolete in long-term . </li></ul></ul>Incremental / Derivative Next Generation / Platform Products Breakthrough / Radical Products
  59. 59. NPD – Breakthrough / Radical Represent new “system” solutions for customers. Require more resources to develop. Are key to continued product revenue growth. Incremental / Derivative Next Generation / Platform Products Breakthrough / Radical Products
  60. 60. NPD Categories <ul><ul><li>Create new product categories as core businesses. </li></ul></ul><ul><ul><li>Require substantial design and process change. </li></ul></ul><ul><ul><li>Render existing products obsolete in long-term. </li></ul></ul>Represent new “system” solutions for customers. Require more resources to develop. Are key to continued product revenue growth. <ul><ul><li>Are hybrids or enhancements of existing products. </li></ul></ul><ul><ul><li>Require minimal changes in design or process, allowing for quick development. </li></ul></ul><ul><ul><li>Require fewer resources to develop new features or functions. </li></ul></ul><ul><ul><li>Help ensure near-term cash flows by maintaining current market share. </li></ul></ul>Incremental / Derivative Next Generation / Platform Products Breakthrough / Radical Products
  61. 61. NPD Process <ul><li>Idea Generation </li></ul><ul><ul><li>Market pull: the “voice of the customer” in providing feedback to determine product specifications </li></ul></ul><ul><ul><li>Technology push: a product developed by the firm’s R&D is “pushed” into the market </li></ul></ul><ul><li>Concept Development </li></ul><ul><ul><li>Initial product design developed and tested </li></ul></ul><ul><ul><li>Analysis of the market and customer requirements </li></ul></ul>
  62. 62. Quality Function Deployment (QFD) Process <ul><li>Quality Function Deployment (QFD) </li></ul><ul><ul><li>The process for translating customer requirements into a product’s design </li></ul></ul><ul><ul><li>Customer feedback is used in the QFD process to determine product specifications </li></ul></ul><ul><ul><ul><li>Customer attributes: </li></ul></ul></ul><ul><ul><ul><ul><li>Product needs </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Product preferences </li></ul></ul></ul></ul><ul><li>House of Quality </li></ul><ul><ul><li>The part of the QFD process that uses customer feedback for product design criteria and uses QFD teams </li></ul></ul><ul><ul><ul><li>Identify important customer attributes </li></ul></ul></ul><ul><ul><ul><li>Design superior product </li></ul></ul></ul><ul><ul><ul><li>Shorten product design time </li></ul></ul></ul><ul><ul><ul><li>Facilitate inter-functional cooperation </li></ul></ul></ul>
  63. 63. Product Development <ul><li>New Product Planning </li></ul><ul><ul><li>Build models of new product </li></ul></ul><ul><ul><li>Test new elements and components </li></ul></ul><ul><ul><li>Conduct detailed investment and financial analyses of product’s anticipated life cycle </li></ul></ul><ul><ul><li>Get project / program approved by management </li></ul></ul><ul><li>Early Design Collaboration </li></ul><ul><ul><li>Benefits of partnering with suppliers and customers </li></ul></ul><ul><ul><ul><li>Reduced engineering costs of product design </li></ul></ul></ul><ul><ul><ul><li>Reduced costs for later engineering changes </li></ul></ul></ul><ul><ul><ul><li>Increased efficiencies in choosing most effective production processes </li></ul></ul></ul>
  64. 64. Product Development (Contd.) <ul><li>Design for X (DFX) </li></ul><ul><ul><li>Choosing manufacturing methods and materials </li></ul></ul><ul><ul><li>Minimising the number of individual parts </li></ul></ul><ul><ul><ul><li>Reduces assembly time </li></ul></ul></ul><ul><ul><ul><li>Increases reliability </li></ul></ul></ul><ul><ul><li>Setting product specifications </li></ul></ul><ul><ul><ul><li>Output from the design activity that states all criteria for building a product </li></ul></ul></ul>
  65. 65. Manufacturing Process Selection <ul><li>Project process </li></ul><ul><ul><li>Process that focuses on making one-of-a-kind products </li></ul></ul><ul><li>Intermittent process </li></ul><ul><ul><li>Process that produces products in small lot sizes (e.g., job and batch operations) </li></ul></ul><ul><li>Line-flow process </li></ul><ul><ul><li>Continuous process that produces high volume, highly standardised products (e.g., assembly-line and continuous operations) </li></ul></ul>
  66. 66. SCM - Service Innovation
  67. 67. New Service Categories <ul><li>Incremental </li></ul><ul><li>Service line extensions </li></ul><ul><li>New services that augment current services </li></ul><ul><li>Service improvements </li></ul><ul><li>New services where features have changed relative to existing services </li></ul><ul><li>Style changes </li></ul><ul><li>change in the appearance of the service </li></ul><ul><li>Radical </li></ul><ul><ul><ul><li>Major innovations </li></ul></ul></ul><ul><ul><ul><li>New services in markets not fully defined </li></ul></ul></ul><ul><ul><li>Start-up services </li></ul></ul><ul><ul><ul><li>New services in established markets already served by existing services </li></ul></ul></ul><ul><ul><li>New services -current markets </li></ul></ul><ul><ul><ul><li>Added services to current customers </li></ul></ul></ul>
  68. 68. New Service Development Process New Service Development Process Design Analysis Launch Develop Consider the financial implications of the new service Examine supply chain issues for delivery of service Test service design, train personnel, conduct pilot runs Release the service to the market place Formulate objectives and strategies for the new service
  69. 69. Designing New Services <ul><li>“ Service Vision” </li></ul><ul><ul><li>Identify target market </li></ul></ul><ul><ul><ul><li>Who is the customer? </li></ul></ul></ul><ul><ul><li>Define service concept </li></ul></ul><ul><ul><ul><li>How to differentiate service in the market? </li></ul></ul></ul><ul><ul><li>Develop service strategy </li></ul></ul><ul><ul><ul><li>What is the service package and its operating focus? </li></ul></ul></ul><ul><ul><li>Create service delivery system </li></ul></ul><ul><ul><ul><li>What processes, staff, and facilities are needed? </li></ul></ul></ul>
  70. 70. SCM - Competency / Performance Relationships
  71. 71. Supply Chain Competence <ul><li>Business Strategy Alignment </li></ul><ul><ul><li>SCM goals are aligned with corporate strategy </li></ul></ul><ul><ul><li>Corporate strategy leverages supply chain capabilities while recognising constraints </li></ul></ul><ul><li>Strategic Customer Integration </li></ul><ul><ul><li>Pursue strategic relationships that go beyond sales transactions </li></ul></ul><ul><li>Strategic Supplier Integration </li></ul><ul><ul><li>Exchange operational information and synchronise activities with suppliers unique capabilities </li></ul></ul><ul><li>Cross-functional Integration </li></ul><ul><ul><li>Reorganise internal functional groups around core processes to facilitate information sharing, cross-functional planning and seamless execution </li></ul></ul>
  72. 72. Supply Chain Competence (Contd.) <ul><li>Supply Chain Responsiveness </li></ul><ul><ul><li>Reduced lead-times and improved responsiveness that are triggered by customer orders rather than by schedules (based on forecasts) </li></ul></ul><ul><li>Supply Chain Rationalisation / Segmentation </li></ul><ul><ul><li>Develop separate pricing, service, and inventory policies along with dedicated channels for meeting demands for different product / market segments in the overall portfolio </li></ul></ul><ul><li>Planning / Execution Process and Technology </li></ul><ul><ul><li>Formalised, disciplined planning processes including variance analysis and what-if scenario planning </li></ul></ul><ul><li>Risk Management </li></ul><ul><ul><li>Anticipate and analyse potential root causes for failures and disruptions in the supply chain, and develop contingency plans accordingly </li></ul></ul>
  73. 73. Integration Fulfillment Product Quality Asset Utilisation Flexible Response Cost Management Strategic Alignment Customer Integration Internal Integration Planning Process SC Network Integration Tactical Planning Relationship Management Competencies SC Performance Technologies Execution Systems Supplier Integration Supply Chain Segmentation Strategic Planning
  74. 74. Competency / Performance <ul><li>Customer Integration </li></ul><ul><ul><li>Relationships beyond sales transactions </li></ul></ul><ul><ul><li>Planning for individual customer requirements </li></ul></ul><ul><ul><li>Synchronising activities with customers </li></ul></ul><ul><ul><li>Continuously exploring new working relationships </li></ul></ul><ul><li>Better Fulfillment Performance </li></ul><ul><ul><li>Delivery to promise </li></ul></ul><ul><ul><li>Fill rate </li></ul></ul><ul><ul><li>Perfect order fulfillment </li></ul></ul><ul><li>Internal Integration </li></ul><ul><ul><li>Cross functional awareness of responsibilities </li></ul></ul><ul><ul><li>Common prioritisation of customers </li></ul></ul><ul><ul><li>Common product roadmaps </li></ul></ul><ul><ul><li>Sharing of operational information </li></ul></ul><ul><ul><li>Performance metrics that promote cost / service trade-offs </li></ul></ul><ul><li>SC Network Integration Technology </li></ul><ul><ul><li>Dist order management </li></ul></ul><ul><ul><li>Event management </li></ul></ul><ul><ul><li>Enterprise app integration </li></ul></ul><ul><ul><li>RFID </li></ul></ul>
  75. 75. Competency / Performance (Contd.) <ul><li>Supplier Integration </li></ul><ul><ul><li>Developing relationships to build on key supplier capabilities </li></ul></ul><ul><ul><li>Exchanging operational information </li></ul></ul><ul><ul><li>Synchronising activities with suppliers </li></ul></ul><ul><ul><li>Continuously exploring new working relationships </li></ul></ul><ul><li>Better Product Quality </li></ul><ul><ul><li>Product conformance </li></ul></ul><ul><ul><li>Product design (performance and features) </li></ul></ul><ul><ul><li>Product reliability </li></ul></ul><ul><li>Internal Integration </li></ul><ul><ul><li>X-functional awareness of responsibilities </li></ul></ul><ul><ul><li>Common prioritisation of customers </li></ul></ul><ul><ul><li>Common product roadmaps </li></ul></ul><ul><ul><li>Sharing of operational information </li></ul></ul><ul><ul><li>Performance metrics that promote cost / service trade-offs </li></ul></ul>
  76. 76. Competency / Performance (Contd.) <ul><li>Supply Chain Segmentation </li></ul><ul><ul><li>Continuously updating customer segmentation strategy </li></ul></ul><ul><ul><li>Segmenting products based on profit contributions and lifecycle stage </li></ul></ul><ul><li>Better Asset Utilisation </li></ul><ul><ul><li>Cash-to-cash cycle </li></ul></ul><ul><ul><li>Inventory days of supply </li></ul></ul><ul><ul><li>Asset turns </li></ul></ul><ul><ul><li>Forecast accuracy </li></ul></ul><ul><li>Supplier Integration </li></ul><ul><ul><li>Developing relationships to build on key supplier capabilities </li></ul></ul><ul><ul><li>Exchanging operational information </li></ul></ul><ul><ul><li>Synchronising activities with suppliers </li></ul></ul><ul><ul><li>Continuously exploring new working relationships </li></ul></ul><ul><li>Planning Effectiveness </li></ul><ul><ul><li>Formalised, disciplined processes addressing both long and short term planning </li></ul></ul><ul><ul><li>Contingency and risk analysis with scenario evaluations </li></ul></ul><ul><ul><li>Feedback loops addressing variances </li></ul></ul><ul><ul><li>Vulnerability and continuity planning </li></ul></ul><ul><li>SC Network Integration Technology </li></ul><ul><ul><li>Dist order management </li></ul></ul><ul><ul><li>Event management </li></ul></ul><ul><ul><li>Enterprise app integration </li></ul></ul><ul><ul><li>RFID </li></ul></ul><ul><li>Strategic Planning Technology </li></ul><ul><ul><li>Bus & SC intelligence </li></ul></ul><ul><ul><li>PLM </li></ul></ul><ul><ul><li>Network optimisation </li></ul></ul><ul><li>Tactical Planning Technology </li></ul><ul><ul><li>S&OP </li></ul></ul><ul><ul><li>APS </li></ul></ul><ul><ul><li>Distribution planning </li></ul></ul>
  77. 77. Competency / Performance (Contd.) <ul><li>Strategic Alignment </li></ul><ul><ul><li>Clear SC goals and objectives driven by business strategy </li></ul></ul><ul><ul><li>Business strategy exploits SC capabilities and constraints </li></ul></ul><ul><ul><li>Strategies communicated to all employees </li></ul></ul><ul><li>Better Flexibility </li></ul><ul><ul><li>Order fulfillment lead time </li></ul></ul><ul><ul><li>Supply chain response time </li></ul></ul><ul><ul><li>Production flexibility </li></ul></ul><ul><li>Supplier Integration </li></ul><ul><ul><li>Developing relationships to build on key supplier capabilities </li></ul></ul><ul><ul><li>Exchanging operational information </li></ul></ul><ul><ul><li>Synchronising activities with suppliers </li></ul></ul><ul><ul><li>Continuously exploring new working relationships </li></ul></ul><ul><li>Planning Effectiveness </li></ul><ul><ul><li>Formalised, disciplined processes addressing both long and short term planning </li></ul></ul><ul><ul><li>Contingency and risk analysis with scenario evaluations </li></ul></ul><ul><ul><li>Feedback loops addressing variances </li></ul></ul><ul><ul><li>Vulnerability and continuity planning </li></ul></ul><ul><li>Relationship Management Technology </li></ul><ul><ul><li>CPFR </li></ul></ul><ul><ul><li>CRM </li></ul></ul><ul><ul><li>SRM </li></ul></ul><ul><ul><li>Supplier Performance </li></ul></ul>
  78. 78. Competency / Performance (Contd.) <ul><li>Customer Integration </li></ul><ul><ul><li>Relationships beyond sales transactions </li></ul></ul><ul><ul><li>Planning for individual customer requirements </li></ul></ul><ul><ul><li>Synchronising activities with customers </li></ul></ul><ul><ul><li>Continuously exploring new working relationships </li></ul></ul><ul><li>Better Cost Performance </li></ul><ul><ul><li>Supply chain cost </li></ul></ul><ul><ul><li>COGS </li></ul></ul><ul><ul><li>Warranty & returns processing cost </li></ul></ul><ul><li>Internal Integration </li></ul><ul><ul><li>X-functional awareness of responsibilities </li></ul></ul><ul><ul><li>Common prioritisation of customers </li></ul></ul><ul><ul><li>Common product roadmaps </li></ul></ul><ul><ul><li>Sharing of operational information </li></ul></ul><ul><ul><li>Performance metrics that promote cost / service trade-offs </li></ul></ul><ul><li>Planning Effectiveness </li></ul><ul><ul><li>Formalised, disciplined processes addressing both long and short term planning </li></ul></ul><ul><ul><li>Contingency and risk analysis with scenario evaluations </li></ul></ul><ul><ul><li>Feedback loops addressing variances </li></ul></ul><ul><ul><li>Vulnerability and continuity planning </li></ul></ul><ul><li>Execution Systems Technology </li></ul><ul><ul><li>WMS </li></ul></ul><ul><ul><li>TMS </li></ul></ul><ul><ul><li>ERP </li></ul></ul><ul><ul><li>eProcurement </li></ul></ul><ul><ul><li>JIT/Kanban </li></ul></ul>
  79. 79. Example – Increase Customer Satisfaction Increase Customer Satisfaction Develop new products Eliminate stockouts Enter new markets Reduce overall supply chain costs Improve pricing Improve service levels Reduce order lead time Vendor managed FG inventory Time to Market Time to Volume Easier test runs Increase Equip . Flexibility Improve warehouse plan Improve forecasting # Compliants Product Customer Order Shipments Partial Shipment Stockouts On time R & D to Production Setup time / SKU
  80. 80. Manage Change & Risks
  81. 81. Need for Change & Communication Supplier Rationalisation Flexible Manufacturing Strategies Cross- docking Activity- Based Costing DSD Strategy Salesforce Planning Production Scheduling Inventory Planning Distribution Scheduling Integrated- Micro Marketing Customer-Focused Planning Vendors Inbound Logistics Manufacturing Transportation Warehousing Delivery Retailer Consumer Quick Response Forecasting EDI Category Management, Continuous Replenishment Net Landed Cost Palletisation, Bar Coding Vendor Managed Inventory Supply Chain Systems Selection and Implementation Promotion Planning Information, Finance & Product flows
  82. 82. Planned Changes Incremental change Efforts to gradually improve basic operational and work processes in different parts of the company <ul><ul><li>Transformational change </li></ul></ul><ul><ul><li>Redesigning and renewing the entire organisation </li></ul></ul>
  83. 83. Change Process Environmental Forces Internal Forces Need for change Initiate change Implement change Monitor global competition, and other factors Consider plans, goals, company problems, and needs Evaluate problems and opportunities, define needed changes in technology products, structure, and culture Facilitate search, creativity, idea champions, venture teams, skunk works and idea incubators Use force field analysis, tactics for overcoming resistance
  84. 84. Overcoming Resistance Crisis exists; initiators clearly have power; other techniques have failed Coercion Involves multiple departments or reallocation of resources; users doubt legitimacy of change Top Management Support Group has power over implementation; will lose out in the change Negotiation Users need to feel involved; design requires information from others; have power to resist Participation Change is technical; users need accurate information & analysis Communication / Education When to Use Approach
  85. 85. Assess Assumptions & Risk 5. Communicate (what, to whom, when, how) 4. Assess what’s changing & who is impacted? 8. Assess if behavior has changed & how to adjust the plan 7. Identify actions that motivate employees to change 6. Develop/Deliver specific training for new process / tool 1. Identify risks & develop strategies/plans to mitigate risks 3 Stakeholder Analysis 2 Organisational Alignment 7 Employee Commitment 8 User Adoption Assessment 4 Change Impact Assessment 5 Communication Plan 6 User Training 3. Document expectations and issues 2. Engage sponsors for their support 1 Assess Assumptions, Risks, Contingencies and Plan
  86. 86. <ul><li>“ Perseverance is not a long race; it is many short races one after another. &quot; </li></ul><ul><ul><li>Walter Elliott </li></ul></ul>
  87. 87. <ul><li>Good Luck </li></ul><ul><li>http:// </li></ul>