2. Common Views on Supply Chain
• “Supply Chain” is just another term for “Logistics”
• Supply Chain includes other functions such as
purchasing, engineering, finance and marketing,
and related control activities in the single company
• The Supply Chain is all the functions in definition #2,
plus those in a company’s suppliers’ suppliers and a
company’s customers’ customer as well
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Sustainable Performance Improvement
3. Do you have Supply Chain Practices
like this?
Sales &
Distribution
(Demand)
Manufacturing
(Capacity)
Procurement
(Material)
C
U
S
T
O
M
E
RSubordinate to
Manufacturing
objectives
Subordinate to
Sales & Distribution
objectives
Subordinate to
Sales & Marketing
objectives
The approach leads to achieving ‘Local’ rather than
‘Global’ Optima
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Sustainable Performance Improvement
4. Consequences of Supply Chain
Practices
• Huge Buffers
– Raw, WIP, and Finished-Goods Inventories
– Capacity Buffers
– Lead-time Buffers
• Practice
– Inexperienced with Models & Computers
– Confused by Models
– Suspicious of Models
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Sustainable Performance Improvement
5. How does the future look
like?
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6. Supply Chains importance will increase as
that’s where the money is
• Supply-chain generally accounts for between 60% and
90% of all company costs
• A 2% improvement in supply-chain processes has 3000% -
5000% the impact of a 2% improvement in efficiency for…
IT, HR, Finance… Sales…
Fortune-10 Company Supply-Chain Cost % Total Costs1
GM Ford Conoco Wal-Mart Chevron IBM Exxon GE
94% 93% 90% 90% 88% 77% 75% 63%
1 Source: Hoovers2006 FinancialData, Supply-Chain Council 2006 SCM Benchmarkdata on SCM cost for discrete & process industries
SPARK
Sustainable Performance Improvement
7. Supply Chain Trends
• Volatility & Uncertainty have permanently increased
• Securing Growth Requires Truly Global Customer and
Supplier Networks
• Market Dynamics Demand Regional, Cost-Optimized
Supply Chain Configurations
• Risk Management Involves the End-to-End Supply Chain
• Supply Chain Organizations will need to be truly
Integrated and Empowered
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Sustainable Performance Improvement
8. Comparing BRIC nations
• China invested in Infrastructure, communication &
transportation. India’s agenda is Social Welfare driven.
• In contrast to India, China has a Command & Control political
structure.
• Russia has a per capita income of $12,000. India is $ 1,400.
On top, Russia has a ageing population in contrast to India with
half of the population being less than 25 years age.
• Brazil & India have similarities of welfare spending, ‘high
context societies’ although Brazil has a high per capita.
Remember Brazil went into a deep tailspin till 1994 when the new
currency was born.
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Sustainable Performance Improvement
9. What are leaders saying?
Cost
Containment
Customer
Intimacy
Visibility
Globalization Risk
Source:An IBM report
The Top of the agenda Supply Chain Challenges
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Sustainable Performance Improvement
11. The Complexity Challenge
Increase in
customer &
customer
locations
Increase in
product variety
offered
High
fluctuations in
customer
orders
Increase in
strategic
suppliers
Increase in
manufacturing
facilities
Increase in
inventory
locations
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Sustainable Performance Improvement
12. The Flexibility Challenge
• Forecasts will be more inaccurate
• Need to improve visibility to the current market
demand
• Product development & SC will have to be integrated
• Customers will be more demanding
• Management needs to move away from the focus on
cash flow & margins
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Sustainable Performance Improvement
14. The Talent Challenge
• Supply Chain Talent is one of the major
challenges of future.
• Skills & Competencies of People in the
Supply Chain may become the single largest
bottleneck to manage future supply chains
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Sustainable Performance Improvement
16. SCM for Future
SCM for
future
SC
Excellence
Model
Risk
Management
People
Supply
Chain
Innovation
led model
Profit
Protection
Plan
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Sustainable Performance Improvement
17. Adopt a Supply Chain Excellence Model
Supply Chain
Leadership
Revenue
Growth
through
Partner
Collaboration
Lay down a
Process
Driven Model
Reduce
Supply Chain
Complexity
Need to speak
the financial
lingo
Develop Supply
Strategies with
congruent goals
Phase out ‘Hero’
model, Phase in
‘Process Model’
Idealized design,
Reduce layers,
Improve visibility
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Sustainable Performance Improvement
18. Risk Management
Identify your
risk appetite
Identify Risks
Evaluate &
Quantify
Plan your risk
response
Continuously
Monitor
•Modern Supply Chain Practices have reduced buffers in the Supply Chain.
•More than 50% executives think that they don’t have any Supply Chain Risk
management process
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Sustainable Performance Improvement
19. People Supply Chain
• SCM for Future will be differentiated ONLY of this
dimension.
• All hard supply chain aspects will work only if the
Soft (People) aspects are attended to.
• Get ready with mapping skills & competencies of
your people.
• Train & re-train. You will never train any one enough.
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Sustainable Performance Improvement
20. Adopt an Innovation-led Model
• With the dramatic rise in wages & operating
costs in India, Cost arbitrage model for
Supply Chain success is over.
• Innovate everything –
– Product
– Services
– Supply Chain Design
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Sustainable Performance Improvement
21. Lay down a Profit Protection Plan
Profit
Protection
Plan
Target
Volume
Price
Reduce
COGS
Rationalize
Assets
Reduce
Working
Capital cycle
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Sustainable Performance Improvement
22. Supply Chain organization of future
Supply Chains
In-house global In-house local Outsourced
Product Development /
NPI
Warehousing /
Transportation
Strategic Sourcing
Shared services
(Finance / IT)
Demand Planning
S & OP
After sales return & repair
Manufacturing
Final Assembly / Configuration
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Sustainable Performance Improvement
23. The final thought..
• Managing anything can be viewed as 4 related
activities
– Getting Information
– Making Decisions
– Implementing Decisions
– Buffering against Imperfections in information,
decision-making, or implementation
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Sustainable Performance Improvement