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Customer Centric Supply Chain Webinar
The document discusses the shift towards customer-centric supply chains, highlighting the complexity and customization demands from large customers across various industries. It emphasizes the necessity for manufacturers to embrace technology and B2B e-commerce solutions to enhance service delivery and adapt to rapidly changing market conditions. The conclusions suggest that understanding customer needs and improving supply chain visibility are crucial for maintaining competitiveness in a commoditized marketplace.
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Customer Centric Supply Chain Webinar
- 1. Enhancing Customer Centric SupplyChains An SCM World Research Study
- 2. 30 January 2015| Slide 2 ©2010 GXS, Inc. Today’s Speakers Led by Professor Martin Christopher SCM World Speaker Faculty Member Emeritus Professor of Marketing and Logistics at Cranfield School of Management Moderated by Steve Keifer Vice President Industry & Product Marketing GXS
- 3. 30 January 2015| Slide 3 ©2010 GXS, Inc. Customer-Centric Supply Chains Large Customers Large Customers Supplier (Manufacturer) Supplier (Distributor) Point of Sale Inventory Positions Sales Forecast Cross-Docking Floor-Ready Merchandise Mixed Pallets Inventory Position Consumption Production Forecast Vendor Managed Inventory Late Stage Configuration Evaluated Receipts Settlement Demand Planning Demand Planning Custom Services Custom Services
- 4. 30 January 2015| Slide 4 ©2010 GXS, Inc. Demographics – Primarily Manufacturing High Tech & Electronics (19%) Food & Beverage (11%) Pharmaceutical & Biotech (8%) Industrial Parts & Equipment (7%) Aerospace & Defence (5%) Automotive Parts & Vehicles (5%) Medical & Surgical Supplies (4%) Apparel & Footwear (3%) Note: The remaining 38% of survey respondents did not specify an industry
- 5. 30 January 2015| Slide 5 ©2010 GXS, Inc. Demographics - Global Perspective Asia Pacific 14% North America 28% Latin America 2% Middle East & Africa 6% Europe 36% Global 14% Over 800 Supply Chain Professionals Responded Globally
- 6. 30 January 2015| Slide 6 ©2010 GXS, Inc. Customization in the Supply Chain
- 7. 30 January 2015| Slide 7 ©2010 GXS, Inc. Balance of Power Has Shifted Large Multi- National Customers Small, Localized Customers Community of Large and Small Suppliers Large Suppliers
- 8. 30 January 2015| Slide 8 ©2010 GXS, Inc. From the Customer Backwards Large Multi- National Customers Small, Localized Customers Community of Large and Small Suppliers Large Suppliers Standardization One Size Fits All Customer-Centric Approach Custom For Large Accounts
- 9. 30 January 2015| Slide 9 ©2010 GXS, Inc. Complexity from Customers 73% Agreed 0% Disagreed Examples of New or customized Processes • Custom Packaging • VMI • ASN • Drop Ship • Self Billing In the past three years the number of requests from large customers for new or customized supply chain processes have 0% 20% 40% 60% Decreased Significantly Decreased Moderately Stayed the Same Increased Moderately Increased Significantly
- 10. 30 January 2015| Slide 10 ©2010 GXS, Inc. The “customized” Supply Chain VMI JIT Floor Ready Merchandise Evaluated Receipts Settlement Cross-Docking Supply Chain Finance Schedule Assignment Open Account Postponement & Late Stage Configuration Auctions Reverse Direct Store Delivery Mixed Pallets Direct-to-Consumer e-RFQ ACH Corporate Social ResponsibilityCall Off Supplier Managed Inventory Wire Transfer 90% of Respondents Agreed that Our Customers Increasingly Demand customized Service Solutions & Packages
- 11. 30 January 2015| Slide 11 ©2010 GXS, Inc. Example – Shipping Models 0% 20% 40% 60% 80% 100% Drop Ship to Consumer Drop Ship to Business Manufacturing Plant Retail Store Distribution Centre Which of the following shipping scenarios do your customers require? Select all that apply. No Dominant Approach Exists Suppliers Must Support Many Different Models
- 12. 30 January 2015| Slide 12 ©2010 GXS, Inc. Example – Replenishment Models 0% 20% 40% 60% 80% 100% Scan Based Trading Schedule Assignment Call-Off Just-In-Time Consignment Vendor Managed Inventory Traditional Order Management Which of the following replenishment models do your customers require? Select all that apply. No Dominant Approach Exists Suppliers Must Support Many Different Models
- 13. 30 January 2015| Slide 13 ©2010 GXS, Inc. How Do You Differentiate? 65% of Respondents Agreed that There is a general trend towards ‘commoditization’ in our markets Product differentiation has become weaker Product Price Promotion Place The Traditional 4Ps of Marketing
- 14. 30 January 2015| Slide 14 ©2010 GXS, Inc. The New Competitive Advantage Product Price Promotion Place Customer Service Process 94% of Respondents Agreed that Increasingly companies will compete as much through superior processes and service solutions as through superior products
- 15. 30 January 2015| Slide 15 ©2010 GXS, Inc. Master Complexity with Technology
- 16. 30 January 2015| Slide 16 ©2010 GXS, Inc. The impact of e-business on the supply chain Source: Barrat Demand The ability to reduce transaction processing and meet supply requirements more effectively The ability to generate and fulfill demand The opportunity to create and drive visibility across the supply chain Supply
- 17. 30 January 2015| Slide 17 ©2010 GXS, Inc. Traditional supply chain interaction
- 18. 30 January 2015| Slide 18 ©2010 GXS, Inc. Inventory hides demand
- 19. 30 January 2015| Slide 19 ©2010 GXS, Inc. Longer supply chains put the supplier at risk
- 20. 30 January 2015| Slide 20 ©2010 GXS, Inc. Achieving synchronisation through shared information 1. Before synchronization Key: OEM – Original Equipment Manufacturer Tier 1 & 2 – Supplier echelons 2. After synchronization
- 21. 30 January 2015| Slide 21 ©2010 GXS, Inc. Technology & customization
- 22. 30 January 2015| Slide 22 ©2010 GXS, Inc. Challenges with Data Sharing Suppliers Retailer Very Large Files 1GB+ choking the IT infrastructure Many Different Formats EDI, CD, Vendor Portal Many Different Protocols AS2, FTP/S, S/FTP, Proprietary MFT Speed of Data Availability Hours, Days, Weeks, Months Data Fields Vary Between 10-1000 fields available Poor Data Quality Before use – cleansing required Incomplete Data Set Missing stores or days of sales Retailer Fees Some demand compensation
- 23. 30 January 2015| Slide 23 ©2010 GXS, Inc. B2B E-Commerce Standards
- 24. 30 January 2015| Slide 24 ©2010 GXS, Inc. 0% 20% 40% 60% 80% Other Standard GDSN Portal EDI Spreadsheet Product & Price Sync Technology No Dominant Approach Exists Suppliers Must Support Many Different Models Source: 54 Food & Beverage Respondents – SCM World Study – Enhancing Customer Centric Supply Chains - September 2010 Which of the following methods do your customers require to share product catalog and pricing information? Select all that apply.
- 25. 30 January 2015| Slide 25 ©2010 GXS, Inc. Order Management Technology Source: 107 High Tech Respondents – SCM World Study – Enhancing Customer Centric Supply Chains - September 2010 0% 20% 40% 60% 80% 100% Punchout XML Phone Portal Fax EDI E-Mail No Dominant Approach Exists Suppliers Must Support Many Different Models Which of the following technologies do you offer customers to place orders? Select all that apply.
- 26. 30 January 2015| Slide 26 ©2010 GXS, Inc. Shipment Labeling Technology 0% 10% 20% 30% 40% 50% 60% 70% 80% RFID/EPC 2-Dimensional Barcode Customer-Specific Barcode Text Label Industry Standard GS1-128 Packing List No Dominant Approach Exists Suppliers Must Support Many Different Models Source: 304 Cross-Industry Respondents – SCM World Study – Enhancing Customer Centric Supply Chains - September 2010 Which of the following shipment labeling technologies do your customers require? Select all that apply.
- 27. 30 January 2015| Slide 27 ©2010 GXS, Inc. The Supplier’s Dilemma Ship to DC, Store, Plant, Consumer Mixed Pallets, Floor Ready, X-Dock Buyer or Supplier Generated Orders VMI, Consignment, Scan Based Trading Supplier Generated Invoice or Self-Bill Early Payment, Supply Chain Finance Open Account or Letter of Credit Check, ACH or Wire Transfer Customized SKUs & Part Numbers CSR, KPIs & Scorecard Metrics Contract Terms Replenishment Logistics Invoicing Payments Customers ANSI X12 EDIFACT Tradacoms EAIJ CIDX PIDX VDA RosettaNet E-Mail Fax Vendor Portal Data Sync EDI VAN Direct Connect Marketplace SaaS Application B2B Standards B2B ModelNetwork Protocol (AS2, FTP) Security Policy Document Types Data Fields Choreography Timing of Response Supplier ERP 1 Supplier ERP 2 Supplier ERP 3
- 28. 30 January 2015| Slide 28 ©2010 GXS, Inc. Being Easy to Do Business With AS2 EDI Electronic Invoicing Advanced Shipment Notice DESADV eXtensible Markup Language Industry Exchange OAGi XML Global Data Synchronisation Network RosettaNet PIPs Zengin Protocol Punchout Vendor Portal PRICAT VAN GS1 128 Barcode LabelElectronic Product Code SWIFT Connectivity 856 OFTP 2 93% of Respondents Agreed that Flexibility of our B2B e-Commerce program demonstrates how easy we are to do business with cXML
- 29. 30 January 2015| Slide 29 ©2010 GXS, Inc. Differentiating with B2B E-Commerce 89% of Respondents Agreed that Flexibility of our B2B e-Commerce program enables us to differentiate from competitors on service On-Time Delivery ASN Timeliness Correct Carrier Authorized Substitutions Barcode Label ASN Accuracy Supplier Scorecard Perfect Orders Overall Score 0 5 10 2010 2009 2008 Perfect Imperfect
- 30. 30 January 2015| Slide 30 ©2010 GXS, Inc. Growing Revenues & B2B E-Commerce 2010 2011 2012 2013 2014 Revenue from Top 10 Accounts 92% of Respondents Agreed that Strength of our B2B e- Commerce program is important to growing our business at key accounts
- 31. 30 January 2015| Slide 31 ©2010 GXS, Inc. Complexity – Challenge or Opportunity? Technology Capability ProcessFlexibility HighLow LowHigh Complexity Masters can turn customization into opportunity Laggards will struggle with customer service and cost structure Technology Masters will excel in scenarios with high automation potential Process Masters will excel in scenarios with high process customization 84% state Supply Chain Complexity Will Increase in Next 3 Years • Opportunity to differentiate based upon process excellence and superior service • Sustainable differentiation that cannot be easily replicated • Requires ability to leverage technology for advantage
- 32. 30 January 2015| Slide 32 ©2010 GXS, Inc. Pushing Complexity to the Cloud ANSI EDI Tradacoms E-InvoicingASN CPFR XML AS2 Data Sync E-Marketplace Cloud-Based B2B e-Commerce Service Customer A Customer B Customer C Manufacturer’s ERP Systems RosettaNet Fax-to-EDI EDIFACT Galia/VDA E-Mail SANNA Zengin OAGi OFTPSAP IDOC Consider having a Cloud-Based B2B e-Commerce Provider Manage Customer-Specific Requests
- 33. 30 January 2015| Slide 33 ©2010 GXS, Inc. Conclusions
- 34. 30 January 2015| Slide 34 ©2010 GXS, Inc. Conclusions • New sources of low cost competition mean that the pressure on price will continue and … • Continued concentration of markets means that bigger, more powerful customers will demand more from their suppliers whilst... • Conventional marketing strategies have less effect in a time- sensitive, on-demand world. • Companies will compete as much through superior process and service solutions as through superior products. • As complexity increases, manufacturers must further embrace technology to sustain high customer satisfaction ratings while maintaining appropriate profit margins. • A flexible B2B e-Commerce capability is a critical requirement in devising a strategy for managing complexity.
- 35. 30 January 2015| Slide 35 ©2010 GXS, Inc. Recommendations for Manufacturers • Look at your supply chain from the customer backwards and ask the question "What do specific customers value? How does this differ by customer type?” • Complexity is a major source of cost in the supply chain but its effects can be mitigated through improved visibility enabled by b2b e-commerce solutions • In a 'commoditized' marketplace a major opportunity for differentiation can be created by closer collaboration through shared information. Both the customer and the supplier can benefit through substituting information for inventory. • Develop a deeper understanding of the true 'transaction' costs that lie at the interfaces between entities in the supply chain.
- 36. 30 January 2015| Slide 36 ©2010 GXS, Inc. Download the Full Report “Enhancing Customer- Centric Supply Chains” will be available for download the week of 5 October. Watch your inbox for details on how to download a copy of the full report.
- 37. 30 January 2015| Slide 37 ©2010 GXS, Inc. Questions
Editor's Notes
- #8 At the same time it was often the case that the power in the distribution channel was with the supplier rather than the customer. The reason being, that in many markets the customer base was fragmented and the purchasing power of any one single customer was generally low. In the past, certainly in consumer packaged goods (CPG), it was the brand owners who held the power, e.g. companies such as Procter and Gamble, Unilever and Nestle. Today that power has shifted down the channel to the retailer and, increasingly, beyond to the shopper.
- #9 This fundamental shift is partly a result of a general decline in brand loyalty and the ‘commoditisation’ of many markets but mainly through the consolidation of the customer base and the subsequent concentration of demand and hence purchasing power. As a result of this shift in the power balance, there has been a growing recognition that to remain competitive companies have to move to a much more ‘customer centric’ approach. This is particularly true when it comes to the design of supply chains.Traditionally, most supply chains have been designed from the factory outwards. In other words they were designed to enable the operations of the supplier to be optimised – particularly in terms of costs and efficiency. Now, with the change in the balance of power, the supply chain needs to be designed from ‘the customer backwards’. The implication of this is that companies have to move away from the ‘one size fits all’ mindset when it comes to supply chain design and instead recognize that key accounts will require customized solutions that meet their specific needs.
- #10 As customers have grown larger and more powerful, they have fine-tuned their supply chain to optimize their operations.Each large customer approaches supply chain optimization differently.To minimize inventory some require VMI while others request goods be “drop shipped” directly to the end customerThe result is that suppliers have to support a variety of customized models for their large accountsOver recent years the number and diversity of the requests continue to increase
- #11 As companies strive for supply chain optimization there have been a number of process innovations which provide competitive advantageOrdering – Enabling the supplier to manage inventory positions through VMI, JIT, Consignment modelsShipping – Reducing manual processing of goods through cross-docking, floor ready merchandise, mixed palletsSettlement – Eliminating the invoice with self-billing or offering accelerated payment to a vendor via supply chain financeOf course, there is no standard for VMI or self-billing or cross-dockingEach OEM or retailer implements these processes slightly differentlyIt should be no surprise then that 90% of respondents indicating an increase in requests for customized, complex services from large accounts
- #12 Consider the various different shipping models that a consumer products company might need to support for its retail customers:Certain Fast Moving Consumer Goods may need to be shipped directly to a storeOther FMCG products may be routed through a DC, but with a cross-docking approach that requires retailer-specific packagingApparel products typically must be “floor ready” ticketed with prices, staged on hangers before arriving at a retailerIncreasingly, retailers are seeking to reduce their inventory on-hand, by requesting “drop ship” of goods directly to the end-consumerDrop-ship is particularly popular for the growing B2C e-Commerce on-line retailing approach for soft goods, home accessories, movies, CDsMost consumer products manufacturers will have to support 2, 3 or perhaps 4 of these modelsThe result is significantly more complexity for outbound logistics operations
- #13 Consider the various different replenishment models that an industrial parts supplier might need to support for its various OEM customers:Many have moved to pull-based replenishment modelsSome may require VMIJapanese auto OEMs may require kanbanOthers will use variations of VMI – consignment, JIT, schedule assignmentOf course, there are still many companies using push-based models with traditional order management modelsMost industrial manufacturers will have to support 2, 3 or perhaps 4 of these modelsThe result is significantly more complexity for outbound logistics operations
- #14 The rules of competition are changing. Success in the marketplace today requires much more than innovative products and a strong brand identity. It has become increasingly difficult to differentiate the business using the classic ‘4Ps’ of marketing – Product, Price, Promotion and Place. Customers are more demanding, products are often easily cloned or imitated and markets have become ‘commoditized’.
- #15 To succeed in this challenging environment companies need to go beyond the conventional marketing mix and to recognize that competitive advantage is gained through the strength of the relationships that can be forged with their key accounts.
- #23 Data sharing is the right approach, but various technology challenges create barriers to collaboration
- #24 There are too many competing standards. Suppliers have to support a multitude of legacy EDI and new XML standards to comply with the various customers’ B2B e-Commerce requirements
- #25 Suppliers have to support numerous different approaches to exchange product and price data with customers.The technology diversity adds complexity to the supply chain.
- #26 Suppliers offer a myriad of technologies to enable customers to place orders. It seems that e-mail and fax predominate but with a significant number of respondents (61%) offering EDI capability or Order Management Portals (55%).
- #27 A variety of shipment labelling technologies such as serialized barcodes, human-readable text labels and electronic product codes were used by the respondents. Whilst the traditional packing list and barcode labels still predominate, 30% of respondents reported that they were using RFID or some type of electronic product code. Most manufacturers are required to support multiple labelling models to satisfy the policies of their customers.
- #28 The demand for customization is reflected in the discussion earlier in the report as well. For each business process from ordering to shipping to invoicing there are multiple different models used within the supply chain, none of which appear to be dominant. For example, there are six different technologies (e.g. Portals, EDI, Fax) used to exchange purchase orders between buyers and suppliers. Also, there are six different shipment labelling technologies (e.g. Barcodes, Text, RFID) used by 30% or more of respondents. Each customer selects the combination of processes and technologies that best suit their needs. However, suppliers do not enjoy the same freedom of choice. Suppliers must support multiple different processes and technologies to service the preferences and policies of each of their different customers.
- #29 To contend with this increased complexity, manufacturers must further embrace technology in order to sustain high customer satisfaction ratings while maintaining appropriate profit margins. A more flexible B2B e-commerce capability is critical. Respondents agreed that this flexibility not only enables them to demonstrate to customers how easy they are to do business with but also enables them to differentiate themselves from competitors on service.
- #31 The natural outcome of being “easier to do business with” is a differentiated customer service experience which should lead to revenue growth with large accounts. Almost 88% of respondents agreed (or strongly agreed) with the idea that strong B2B e-commerce capabilities are important for growing business with key accounts.
- #35 The survey has revealed a number of important developments in the way that supply chains are managed. A majority of respondents agreed with the view that there is a general trend towards ‘commoditization’ in the markets in which they compete and that product differentiation has got weaker. As a consequence of this commoditization there was strong support for the view that going forward companies will compete as much through superior processes and service solutions as through superior products. One way in which organisations may be able to gain competitive advantage in this changed environment is through the provision of a much higher level of customized and tailored solutions for individual accounts. In the coming years, the need for tailored solutions will become a critical as there continues to be an overall increase in demand for customized supply chain processes (.e.g. VMI, collaborative forecasting, drop ship, self billing). One price that may have to be paid as the trend towards customization continues is that the level of complexity in the supply chain will increase. To contend with this increased complexity, manufacturers must further embrace technology in order to sustain high customer satisfaction ratings while maintaining appropriate profit margins. A more flexible B2B e-commerce capability is a critical underpinning of a successful customer-facing technology platform. Respondents agreed that a flexible B2B e-commerce program not only enables them to demonstrate to customers how easy they are to do business with, but also enables them to differentiate themselves from competitors on service. Almost 88% of respondents agreed (or strongly agreed) with the idea that strong B2B e-commerce capabilities are important for growing business with key accounts.