This document discusses outside-in processes and their importance for supply chain planning. It is authored by Lora Cecere, founder of Supply Chain Insights. Some key points:
- An outside-in process starts with market data from sources like weather patterns, geolocation data, and product reviews to understand demand. This is opposed to starting from a supply-side view.
- Outside-in processes are important because assumptions about logistics and demand are no longer valid given increased volatility. Starting from customer demand provides more accuracy for planning.
- Most companies still operate with functional silos rather than taking a holistic, outside-in view of planning across the end-to-end supply chain. This can
5. 2 years Partner at Altimeter
Group (leader in open
research)
8 years as an Analyst at
Gartner and AMR Research
8 years Experience in
Marketing and Selling
Supply Chain Software at
Descartes Systems Group
and Manugistics (now Blue
Yonder)
Who Is Lora?
Founder of Supply Chain
Insights (10 years)
“LinkedIn Influencer”, Guest
blogger for Forbes, Author:
Bricks Matter (2012), Supply
Chain Metrics That Matter
(2014), and Shaman’s
Journal (2014-20)
15 Years Leading Teams in
Manufacturing and
Distribution for Clorox,
Kraft/General Foods,
Nestle/Dreyers Grand Ice
Cream and Procter &
Gamble.
7. Outside in Process
The start of an outside-in process is market data. Market data surrounds the
business but is not used. Examples include, but are not limited to:
The relative importance varies by industry and changes over time. New
forms of analytics means that data does not have to be perfect and that
multiple data sources can be used together over time.
Weather
Patterns
Geolocation
Data
Rating And Review
Feedback
Consumption
Analysis
Pallet and
Truck Sensors
Intelligent
Devices
12. Market-Driven: When channel and supply-side
market signals can be orchestrated from the
customer’s customer to the supplier’s supplier bi-
directionally to improve value.
Demand-Driven: The use of channel data to
drive the value chain.
Sales-Driven: The use of sales input and
forecasts to drive the value chain.
Marketing-Driven: The use of marketing
programs to drive and stimulate demand.
13. Market Potential
Market Potential is at the core of a market-driven process. It represents the likely
unconstrained demand in the marketplace for the defined segment of the business that
is being managed.
• A baseline forecast is the translation of market potential into an accurate
representation of market demand with minimal distortion and latency.
The question that answers the difference between shaping
and shifting:
• Demand shaping occurs when the baseline lift (or consumer interest)
increases through marketing, advertising, positioning, prizing, and trade
programs.
• Was there an increase in consumption?
If no, the program shifted demand.
If yes, the program shaped demand.
Three key terms in Market Potential:
• Demand shifting happens when demand is shifted period-to-period without an
increase in baseline lift. Demand shifting increases costs without increasing the
market potential.
? • Was it an effective Demand Shaping
Program?
Analysis of the increase in demand against Program
Goals considering share, cost, and execution.
14. Demand Latency
Demand
Latency
Demand latency is the time from channel purchase to demand translation of channel
replenishment to drive order to an upstream trading partner.
While most companies believe that an order is a good predictor of demand, the increase
in the supply chain's long-tail increases demand latency elongation. With product
proliferation, globalization, and micro-segmentation, demand latency dramatically
increased over the past decade.
For a turn item at a mass retailer, like Wal-Mart, the demand latency is twenty days,
while for a long-tail product, the demand latency can be over one hundred days.
As a result, the order is not as good a predictor of demand as ten years ago. As a result,
increasingly, the order is out of sync with the market.
18. Learnings
Unlearning is Hard
● Organizations are hard-wired for
traditional process definitions.
Organizational Silos
● Process latency was greater than
demand or data latency.
1 2
Using Consumer Demand Data
● Functions are using consumer data
differently. There is no holistic
understanding of how to use consumer
data.
Market Drivers
● The distortion of the signal and the
latency were not known before the
pilot.
3 4
25. Inflation
Port Snarls
Risk Management Events
Global Unrest
Energy Outages
Headwinds and
Tailwinds New Forms of Analytics
Heightened Awareness of
Supply Chain Impacts
Infrastructure Bill
Vaccines and Treatments
28. 67%
55%
40%
37%
35%
32%
31%
29%
21%
19%
19%
15%
15%
14%
Demand and supply volatility
Supply chain visibility
Risk management
Cross-functional alignment
Ability to use data
Increasing speed of business
Management of value network relationships
Executive team understanding of the supply…
Availability of skilled people to do the job
Organizational change management
Globalization
Software usability
Product quality and supplier reliability
Clarity of business strategy
TOP 5 ELEMENTS OF BUSINESS PAIN
__________________________________________________________
Source: Supply Chain Insights LLC, Pandemic Research (Sept-Oct, 2020)
Base: All Respondents -- (N=118)
Q22: When it comes to doing your job during the pandemic, which of the following are your top 5 elements of business pain?
40. Think Holistically About Interfaces, Rules,
Engines, and Workflows
Interface Rules Engines Workflows
41.
42. The Need for Bi-directional Orchestration
Orchestration
Channel Sensing
Sensing Supply Sensing
Variability: Cycles, conversions, and grades
Growth
Customer
Service
Margin
Inventory
Turns
Safety
Return on
Invested
Capital
Balanced Scorecard
Listening Post
Pattern
Recognition of
Channel Data
Interest Social
Graph Mining
Contract
Manufacturing
Alternate
Sourcing
Alternate Bill of
Materials
Bi-Directional Orchestration
Unified Data Model
Planning Master Data
Baseline Demand Plan Feasibility
Events
Risk Sensing
Demand
Shaping
Portfolio Shifts
Quality
Sensing
Logistics
Sensing
Leadtime
Variability
Commodity
Price Shifts
Platform
Changes
Social
Sentiment
Weather
Conversion
Rates
Yield
Maintenance
Schedules
Reverse Bill of
Materials
Alternate
Routing
Factory
Reliability/Capabilities
Alternate
Distribution
Alternate
Channel
Images Market
Shifts
Weather
Pattern
Recognition
Images
Postponement
Calendar(s)
Replenishment
Policies
Allocation
43. What Was Your Greatest Learning From the
Outside-in Workshops?
0% 5% 10% 15% 20% 25% 30% 35% 40%
Use of market data
The ability to connect models to rules and policies
Models based on multiple inputs to drive multiple outputs
Functional silos create effective supply chains
Data does not have to be perfect
44. Most Relevant Concepts for Your Organization
(Pick Two)
0% 10% 20% 30% 40% 50% 60%
Bi-Directional Orchestration
Market-driven Demand Management
Balanced Scorecard
Market-driven Knowledge Graph
Planning Master Data
Listening Posts