Executive Overview
Growth is slowing and the complexity in today’s supply chain is unprecedented. No two centers of excellence are the same, and no two supply chains are alike. There are different drivers and obstacles to building and running a Center of Excellence. However, if done right, the organization rates itself as more aligned, proactive and agile. The high-level results from our study are shown in Figure 2.
Figure 2. Centers of Excellence Infographic
Based on our qualitative interviews with clients, we find that these seven drivers to build a Center of Excellence:
• Increase in the Importance of Supply Chain Management. As growth slows, and the global multinational organization matures, more and more companies are interested in driving supply chain excellence. The reasons are many; but, at the top of the list is improving reliability in the face of volatility. How so? Demand volatility is increasing and supplier viability is growing more fragile. Driving reliability in global operations in the face of these challenges is fundamental to defining and executing supply chain excellence.
• Building of Global Teams and the Development of Supply Chain Talent. With the shortage of students from academia, and the retirement of the first- and second-generation supply chain pioneers, more and more companies are developing and executing programs to build supply chain talent. There is a shortage of mid-management talent with pressure on planning job retention. There is a limited supply of supply chain knowledge workers: leaders that are technologically savvy, analytical problem solvers, and astute in business processes.
• Continuation of Work on Enterprise Resource Planning (ERP). When companies complete a large ERP project, there is a strong impetus to get the value from the investment and ensure technology usage. The focus of the Center of Excellence often becomes an extension of the global implementation team.
• Metrics and Implementation of Analytics. While the management of supply chain excellence sounds easy, it is not. The management of order-to-cash and procure-to-pay processes and the supply chain execution processes are easier because they are well-defined. Most companies struggle with the definition of planning and the use of new forms of analytics.
• Network Design and the Orchestration of Flows. Most companies start on their supply chain design journey to save costs in logistics. With the increasing cost of transportation, and the fragility of freight networks, network design for transportation and logistics networks is paramount. One client likened it to “minting money.”
• Testing of New Technologies. Cloud technologies. Supply chain operating networks. The Internet of Things. 3D Printing. New forms of analytics. The list of technology and process disruptors could go on and on. While most companies feel stuck in their existing, and more traditional, processes they want to understand and explore technology
Talent: The Future Supply Chain's Missing Link - 13 AUG 2013Lora Cecere
Executive Overview
No supply chain leader will debate the importance of supply chain talent; they know that it is critical. Yet, we find that most companies are unaware of the current state and the criticality of immediate supply chain talent issues.
It is the dawn of a new era. Much to their chagrin, when companies go to the market to recruit, they are finding that the competition for supply chain talent has never been tougher. They simply are not able to find supply chain talent to backfill critical jobs.
In our study, we find five high-level findings that should be “stay awake issues” for the supply chain leader.
1. Opportunity for Improvement. In this study, more companies rate themselves as worse than their peer group in managing supply chain talent. The ratio is 2:1. In the study, when companies were asked to self-assess their capabilities to manage supply chain talent, 17% self-rated that they perform better than their peer group while 34% reported that they do worse than their peers.
2. High Turnover. There is currently a 15% turnover of supply chain employees. We believe it is increasing. In the study, 46% of companies attempt to hire from within the company and 17% fill roles primarily through recruiting talent from other companies.
3. Shortage of Talent. It is not easy to fill an open position in the open market for supply chain management due to current dynamics of demand and supply. The pain is more critical. The average company in the study has four positions open for five months. The most difficult positions to fill are in the areas of planning that require both a technical mastery of technology and an organizational understanding of the business drivers.
4. Stiff Competition for College Graduates. Today, there is a 6:1 demand to supply ratio for new college graduates in the supply chain field. Competition is intense and there is a lot of effort to attract the best and brightest.
5. Working on the Right Stuff? The current focus is on recruiting college graduates and high-performing talent. Less attention is being given to middle management where the shortage is the highest (see figure 2). Only 23% of companies responding to the study have a planned cross-functional training program for existing employees. This study points out the need for cross-functional skill development for mid-management supply chain leaders.
Market-driven S&OP Report - 16 July 2012Lora Cecere
A Guidebook on How to Build a Market-driven S&OP Process
For manufacturers and retailers, supply chain is business. The Sales and Operations Planning (S&OP) process aligns the organization to the business strategy. As companies have become more global and face rising complexity, volatility and uncertainty, the importance of S&OP has increased. However, business complexity has created a gap between what companies have and what is needed. From our research, here we cite examples of these gaps:
2014 Talent Study - Summary Charts - 18 AUG 2014 Lora Cecere
Executive Overview
Ask any supply chain leader, “Is the management of supply chain talent important?” and you will get an overwhelming “Yes!” as a response. Yet, only 14% of companies rate themselves as doing better than their peer group when it comes to managing supply chain talent. Surprisingly, 43% of the survey respondents believe that they perform worse on the management of supply chain talent than their peers. The ratio is 3:1. Why the gap? There are many drivers, but the primary reasons are three: management support, recruitment, and staff development. The open-ended responses from the survey are shown in Figure 2.
Sales & Operations Planning - The State of the Union - 10 June 2013Lora Cecere
Sales and Operations Planning processes are now in their fourth decade of maturity. The processes are growing more complex. Progress is slow. The infographic below shows the current state of the union of sales and operations into S&OP processes. In this world of uncertainty, good planning matters. Complexity and volatility are escalating. Improving S&OP in a systematic approach, focused on goal evolution and systemic process governance, makes a difference; but, it requires education. A barrier to improvement is the executive team not understanding the supply chain as a complex system. It is the goal of this report to help alleviate this problem.
Supply Chain Centers of Excellence Study - Summary Charts - 2014 - 2015Lora Cecere
Executive Overview
Growth is slowing and the complexity in today’s supply chain is unprecedented. No two centers of excellence are the same, and no two supply chains are alike. There are different drivers and obstacles to building and running a Center of Excellence. However, if done right, the organization rates itself as more aligned, proactive and agile. The high-level results from our study are shown in Figure 2.
Figure 2. Centers of Excellence Infographic
Based on our qualitative interviews with clients, we find that these seven drivers to build a Center of Excellence:
• Increase in the Importance of Supply Chain Management. As growth slows, and the global multinational organization matures, more and more companies are interested in driving supply chain excellence. The reasons are many; but, at the top of the list is improving reliability in the face of volatility. How so? Demand volatility is increasing and supplier viability is growing more fragile. Driving reliability in global operations in the face of these challenges is fundamental to defining and executing supply chain excellence.
• Building of Global Teams and the Development of Supply Chain Talent. With the shortage of students from academia, and the retirement of the first- and second-generation supply chain pioneers, more and more companies are developing and executing programs to build supply chain talent. There is a shortage of mid-management talent with pressure on planning job retention. There is a limited supply of supply chain knowledge workers: leaders that are technologically savvy, analytical problem solvers, and astute in business processes.
• Continuation of Work on Enterprise Resource Planning (ERP). When companies complete a large ERP project, there is a strong impetus to get the value from the investment and ensure technology usage. The focus of the Center of Excellence often becomes an extension of the global implementation team.
• Metrics and Implementation of Analytics. While the management of supply chain excellence sounds easy, it is not. The management of order-to-cash and procure-to-pay processes and the supply chain execution processes are easier because they are well-defined. Most companies struggle with the definition of planning and the use of new forms of analytics.
• Network Design and the Orchestration of Flows. Most companies start on their supply chain design journey to save costs in logistics. With the increasing cost of transportation, and the fragility of freight networks, network design for transportation and logistics networks is paramount. One client likened it to “minting money.”
• Testing of New Technologies. Cloud technologies. Supply chain operating networks. The Internet of Things. 3D Printing. New forms of analytics. The list of technology and process disruptors could go on and on. While most companies feel stuck in their existing, and more traditional, processes they want to understand and explore technology
Consultants' Voice on Supply Chain Excellence - 20 August 2012Lora Cecere
This report is the second report in a two-part series. The first report published in May 2012 and represents the Supply Chain Executives’ voice and perspectives on supply chain excellence. This report is a companion report reflecting the views of consulting partners working on supply chain across multiple industries. In this report, we contrast the two views while sharing insights from the Consultants’ Aggregate Voice on supply chain excellence.
Talent: The Future Supply Chain's Missing Link - 13 AUG 2013Lora Cecere
Executive Overview
No supply chain leader will debate the importance of supply chain talent; they know that it is critical. Yet, we find that most companies are unaware of the current state and the criticality of immediate supply chain talent issues.
It is the dawn of a new era. Much to their chagrin, when companies go to the market to recruit, they are finding that the competition for supply chain talent has never been tougher. They simply are not able to find supply chain talent to backfill critical jobs.
In our study, we find five high-level findings that should be “stay awake issues” for the supply chain leader.
1. Opportunity for Improvement. In this study, more companies rate themselves as worse than their peer group in managing supply chain talent. The ratio is 2:1. In the study, when companies were asked to self-assess their capabilities to manage supply chain talent, 17% self-rated that they perform better than their peer group while 34% reported that they do worse than their peers.
2. High Turnover. There is currently a 15% turnover of supply chain employees. We believe it is increasing. In the study, 46% of companies attempt to hire from within the company and 17% fill roles primarily through recruiting talent from other companies.
3. Shortage of Talent. It is not easy to fill an open position in the open market for supply chain management due to current dynamics of demand and supply. The pain is more critical. The average company in the study has four positions open for five months. The most difficult positions to fill are in the areas of planning that require both a technical mastery of technology and an organizational understanding of the business drivers.
4. Stiff Competition for College Graduates. Today, there is a 6:1 demand to supply ratio for new college graduates in the supply chain field. Competition is intense and there is a lot of effort to attract the best and brightest.
5. Working on the Right Stuff? The current focus is on recruiting college graduates and high-performing talent. Less attention is being given to middle management where the shortage is the highest (see figure 2). Only 23% of companies responding to the study have a planned cross-functional training program for existing employees. This study points out the need for cross-functional skill development for mid-management supply chain leaders.
Market-driven S&OP Report - 16 July 2012Lora Cecere
A Guidebook on How to Build a Market-driven S&OP Process
For manufacturers and retailers, supply chain is business. The Sales and Operations Planning (S&OP) process aligns the organization to the business strategy. As companies have become more global and face rising complexity, volatility and uncertainty, the importance of S&OP has increased. However, business complexity has created a gap between what companies have and what is needed. From our research, here we cite examples of these gaps:
2014 Talent Study - Summary Charts - 18 AUG 2014 Lora Cecere
Executive Overview
Ask any supply chain leader, “Is the management of supply chain talent important?” and you will get an overwhelming “Yes!” as a response. Yet, only 14% of companies rate themselves as doing better than their peer group when it comes to managing supply chain talent. Surprisingly, 43% of the survey respondents believe that they perform worse on the management of supply chain talent than their peers. The ratio is 3:1. Why the gap? There are many drivers, but the primary reasons are three: management support, recruitment, and staff development. The open-ended responses from the survey are shown in Figure 2.
Sales & Operations Planning - The State of the Union - 10 June 2013Lora Cecere
Sales and Operations Planning processes are now in their fourth decade of maturity. The processes are growing more complex. Progress is slow. The infographic below shows the current state of the union of sales and operations into S&OP processes. In this world of uncertainty, good planning matters. Complexity and volatility are escalating. Improving S&OP in a systematic approach, focused on goal evolution and systemic process governance, makes a difference; but, it requires education. A barrier to improvement is the executive team not understanding the supply chain as a complex system. It is the goal of this report to help alleviate this problem.
Supply Chain Centers of Excellence Study - Summary Charts - 2014 - 2015Lora Cecere
Executive Overview
Growth is slowing and the complexity in today’s supply chain is unprecedented. No two centers of excellence are the same, and no two supply chains are alike. There are different drivers and obstacles to building and running a Center of Excellence. However, if done right, the organization rates itself as more aligned, proactive and agile. The high-level results from our study are shown in Figure 2.
Figure 2. Centers of Excellence Infographic
Based on our qualitative interviews with clients, we find that these seven drivers to build a Center of Excellence:
• Increase in the Importance of Supply Chain Management. As growth slows, and the global multinational organization matures, more and more companies are interested in driving supply chain excellence. The reasons are many; but, at the top of the list is improving reliability in the face of volatility. How so? Demand volatility is increasing and supplier viability is growing more fragile. Driving reliability in global operations in the face of these challenges is fundamental to defining and executing supply chain excellence.
• Building of Global Teams and the Development of Supply Chain Talent. With the shortage of students from academia, and the retirement of the first- and second-generation supply chain pioneers, more and more companies are developing and executing programs to build supply chain talent. There is a shortage of mid-management talent with pressure on planning job retention. There is a limited supply of supply chain knowledge workers: leaders that are technologically savvy, analytical problem solvers, and astute in business processes.
• Continuation of Work on Enterprise Resource Planning (ERP). When companies complete a large ERP project, there is a strong impetus to get the value from the investment and ensure technology usage. The focus of the Center of Excellence often becomes an extension of the global implementation team.
• Metrics and Implementation of Analytics. While the management of supply chain excellence sounds easy, it is not. The management of order-to-cash and procure-to-pay processes and the supply chain execution processes are easier because they are well-defined. Most companies struggle with the definition of planning and the use of new forms of analytics.
• Network Design and the Orchestration of Flows. Most companies start on their supply chain design journey to save costs in logistics. With the increasing cost of transportation, and the fragility of freight networks, network design for transportation and logistics networks is paramount. One client likened it to “minting money.”
• Testing of New Technologies. Cloud technologies. Supply chain operating networks. The Internet of Things. 3D Printing. New forms of analytics. The list of technology and process disruptors could go on and on. While most companies feel stuck in their existing, and more traditional, processes they want to understand and explore technology
Consultants' Voice on Supply Chain Excellence - 20 August 2012Lora Cecere
This report is the second report in a two-part series. The first report published in May 2012 and represents the Supply Chain Executives’ voice and perspectives on supply chain excellence. This report is a companion report reflecting the views of consulting partners working on supply chain across multiple industries. In this report, we contrast the two views while sharing insights from the Consultants’ Aggregate Voice on supply chain excellence.
Imagine the Supply Chain of the Future - 21 OCT 2014Lora Cecere
Executive Overview
When we ask companies to imagine the supply chain of the future, they have to start with what they have today. Most companies today are stuck, and find it hard to conceive the supply chain of the future. To free their thinking they have to learn from the past, to unlearn what they believe is a world of best practices, and establish methodologies to imagine the supply chain of the future. Changing traditional paradigms is a starting point.
For most, the journey is not easy. As shown in Figure 1, the terms most commonly used to describe the supply chain today are traditional, tactical, and cautious. Today there is significant room for improvement, with only one in three supply chain leaders feeling that what they have now is working well. Most of the supply chain processes are inside-out which is a barrier to sensing demand and building demand-driven or market-driven processes.
The incentive to change lies in balance sheet performance. When we analyze financial balance sheet performance for the period of 2006-2013, we find that nine out of ten companies are stuck at the intersection of the two critical metrics of operating margin and inventory turns. Publicly-held companies are unable to power improvements in both metrics for more than two consecutive years. For most, improvement has become an OR condition with companies making improvements in one of the two metrics, but not both together. This is an area of frustration and disappointment for business leaders that want to leverage supply chain technologies and processes to deliver both cash and cost savings to the organization. As growth slows, this shift is more important. In this report, we share highlights on the research gathered for our recent conference, Supply Chain Insights Global Summit.
Three Techniques to Improve Organizational Alignment-9 July 2013Lora Cecere
When organizations are aligned, things happen quicker. It takes less effort. People know what to do, and there is a greater bias for action. As a result, the organization can achieve higher levels of results and better withstand the pressures of demand and supply volatility.
Line of business leaders lack alignment. While many consultants claim that business results happen through better IT and business alignment, in this study, we find that the gaps in functional alignment within the business functions of sales, marketing, finance, and supply chain are far greater than the gaps between IT and line of business.
As shown in figure 2, within the organization, demand and supply volatility reigns. It is growing worse. This pain is felt across the line of business functions. To weather the storm, functions attempt to align, but doing this is easier said than done. It requires work and leadership.
This misalignment is not equal by business function. Of the three groups in this survey—supply chain, finance and information technology (IT)—the supply chain organization feels the alignment issue to a greater degree than the other two business functions. As shown in figure 2, it is one of their top three business pains.
So, what can an organizational leader do to improve alignment? In this study, we find that when companies do three things, and focus on doing them well, they can substantially improve organizational alignment:
• Have a Clear Definition of Supply Chain Strategy. While many companies state that they want to be “agile,” it requires definition. Companies need to design a supply chain with this goal in mind. When the organization has a carefully crafted definition of agility, it is able to improve organizational alignment. The definition of “shorter cycles” is not sufficient.
• Sales and Operations Planning. Organizations with a mature S&OP process are more aligned. In this study, 61% of supply chain respondents report having an S&OP process, but 48% of that group rate their process as effective. For a more detailed analysis of S&OP, please refer to our report Sales and Operations Planning: Current State of the Union.
• Supply Chain Center of Excellence. Organizations with a supply chain center of excellence are more aligned. The greatest impacts are between marketing and finance, as well as operations and Corporate Social Responsibility.
The study shows that there is significant opportunity for organizations to improve on all three of these critical factors. The good news for supply chain leaders is that this study provides three clear actions that can deliver improved alignment.
Integrated Demand Management-When Will We Start Using Downstream Data-7 Nov 2012Lora Cecere
For the purposes of this report, downstream data is defined as data that originates downstream on the demand side of the value chain. It can include point-of-sale data, T-log data, distributor data, social and unstructured data sources, retail withdrawal data and retail forecasts. Integrated demand signal management is the use of this data in a more holistic and integrated demand management process.
The use of channel data is evolving and this report is designed to give the industry an update on progress. Data for this report is based on two inputs: quantitative survey data from twenty-nine respondents (manufacturers) that use downstream data for integrated demand signal management, and qualitative input from attendees at an Integrated Demand Signal Management event that was attended by eleven manufacturers and four retailers. Data was collected in the fall of 2012.
While the study demographic is a small number, the respondents represent an experienced panel group. In the study, 90% of the respondents were using downstream data. The average time of usage is four years.
2016 Supply Chains to Admire - Report - 26 July 2016Lora Cecere
Executive Summary
Supply chain excellence is easier to say than define. To make progress, companies need to clearly define the journey and the goals. For many this is problematic. The goals are unclear and the financial metrics are not well-understood. We want to provide research to help supply chain leaders correct these issues.
Supply chain leaders want to improve results to drive shareholder value, but there is a problem. There is no industry standard definition of supply chain excellence or clarity on the how actions of the supply chain team drive shareholder value. In this report we try to help fill in the gaps by giving definitions to both.
The Supply Chains to Admire analysis is now in its third year. It is a deep analysis of performance, improvement, and Price to Tangible Book Value (PTBV) of 320 companies across 31 industries for the period of 2009-2015. The source data for the analysis is public reporting of balance sheets and income statements. (Our source of balance sheet and income statement data is YCharts .)
Big Data and Analytics: The New Underpinning for Supply Chain Success? - 17 F...Lora Cecere
Executive Overview
Today data is everywhere: but, nowhere. The world’s per capita capacity to store information has doubled every 40 months since the 1980s; and as of 2012, every day globally, 2.5 exabytes of data are created . As a result, social and customer data piles on the doorstep of the corporation, and operational data sits in the creases and cracks between functions. While many companies invested in data warehouse technologies and advanced applications for optimization, a common complaint in qualitative interviews with business leaders is “I cannot get to my data.” One business leader likened it to a Hotel California where, “The data checks into the system, but does not check out.” In most companies with heterogeneous information technology landscapes, simple reporting is still a major problem.
In the face of growing data, companies struggle with the basics. The question is, “Why pursue a big data and analytics strategy if the company cannot do basis reporting?” No doubt about it, the current state of analytics is a barrier to building supply chain excellence. It is hard to have a data-driven discussion if you can’t get access to data.
S&OP and Agility Study- Summary Charts - May 2013Lora Cecere
Sales and Operations Planning processes are now in their fourth decade of maturity. The processes are growing more complex. Progress is slow. The infographic below shows the current state of the union of sales and operations into S&OP processes. In this world of uncertainty, good planning matters. Complexity and volatility are escalating. Improving S&OP in a systematic approach, focused on goal evolution and systemic process governance, makes a difference; but, it requires education. A barrier to improvement is the executive team not understanding the supply chain as a complex system. It is the goal of this report to help alleviate this problem.
Executive Summary
The term ‘supply chain finance’ has different definitions on each continent. In Europe, it is often used to describe ‘tax efficiency’, or the design of the supply chain to reduce the burden of taxation of cross-border shipments. In many procurement organizations the term is often used to describe the use of favorable capital rates to finance downstream trade. In this study the focus is on the management of costs by either effectiveness of a Supply Chain Finance team or Supply Chain Center of Excellence, Sales and Operations Planning (S&OP) processes, Cost-to-Serve Analysis and Supplier Development efforts.
For the supply chain leader, managing costs is job one. It is easier said than done. The supply chain is a complex system with interrelationships between growth, inventory, cost and complexity. Cross-functional processes, organizational focus, and access to data are critical to align and maintain cost effectiveness in this complex system called supply chain. We term this model the Supply Chain Effective Frontier. This is shown in Figure 2. When companies operate on the Supply Chain Effective Frontier they maximize the value of the firm . We measure value by either Price to Tangible Book Value or Market Capitalization.
Figure 2. Supply Chain Effective Frontier
As will be shown in this report, managing costs is a struggle for most companies. While 88% of companies have implemented Enterprise Resource Planning (ERP), the hard work of process evolution and maturity continues. In this report we share the current state of supply chains in managing costs, and then take a look at the processes and organizational design factors to evaluate the impact on cost management.
The Supply Chain Index: Evaluating the Healthcare Value NetworkLora Cecere
Executive Overview
Supply chain performance matters. It can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. While companies speak of best practices, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information.
By their nature, supply chain leaders are competitive. They want to drive performance improvements and increase corporate value. Their goal is to outpace competitors. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index by Supply Chain Insights, there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is.
While it is easy to say the term supply chain excellence, it is difficult to define. Many people think that they know the definition, but there is no agreed-upon standard. The lack of a clear definition, and a methodology to gauge improvement, makes progress hard to quantify and track. The Supply Chain Index is designed to help. It is an objective measurement of supply chain improvement. It enables the comparison of companies’ progress within a peer group for a given time period. The Index is based upon financial performance of companies on four metrics integral to supply chain operations: inventory turns, operating margin, Return on Invested Capital and year-over-year revenue growth. There were three goals.
1. Quantify Levels of Supply Chain Improvement. The Index is a composite metric based on the calculation of balance, strength and resiliency factors for a given time period. In the analysis, there is an underlying assumption that the companies that can sustain the best improvement in these three areas are driving the highest rates of supply chain improvement. The input metrics of inventory turns, operating margin, ROIC and year-over-year revenue growth were selected in part due to their high correlation to market capitalization.
2. Bridge the Gap between Finance and Supply Chain. Our second goal is to bridge the gap between the supply chain organization and the financial team. While the financial team is often backwards-looking at transactions, the supply chain team is forward-looking based on flows. There is often a temptation to focus on a single financial ratio in isolation, like inventory turns, not realizing that the supply chain is a complex system with tightly interrelated relationships amongst metrics based on supply chain potential.
Conquering the Supply Chain Effective FrontierLora Cecere
Conquering the Supply Chain Effective Frontier - A Handbook for the Value Chain Leader to Manage Trade-offs in Defining Supply Chain Excellence
Supply chain practices are nearing their third decade of maturation. The term supply chain excellence is bandied about by leaders, consultants and technology providers, but there is no alignment on what it means.
Conventional systems of measurement for supply chain excellence are problematic. In this report, we share insights gained during interviews with 75 supply chain pioneers. Based on their feedback we created a new framework, that we define here as the Supply Chain Effective Frontier, for supply chain leaders to use to determine supply chain excellence. This methodology is based on publicly available financial balance sheet data grouped into four sets of supply chain ratios: growth, profitability, cycle, and complexity.
We believe that supply chain excellence is best defined as the alignment of the supply chain team to deliver results to meet and exceed the requirements of the business strategy. This requires a clear vision and cross-functional coordination and alignment over a multi-year road map. It needs to be holistic. A supply chain is a complex system with increasing business complexity. The analysis needs to facilitate a clear understanding of trade-offs embedded in day-to-day decision making. It is this clarity that we find missing in many teams that we work with, and it is for this reason we wrote this report.
How Do We Heal the Healthcare Value Chain? - 9 MAY 2013Lora Cecere
Over the last decade, as shown in figure 1, the hospital supply chain has been one of the few that has improved operating margin, reduced inventory and improved revenue/employee. In contrast, the manufacturing suppliers to the hospital organization have grown inventories and struggled to preserve margins. Across the value chain from the patient to the raw material suppliers, total inventories have grown and costs have escalated. With pending regulations, hospitals are being forced to rethink processes, redefine value and work more holistically to improve sourcing practices. The suppliers to the hospital systems are having to rethink their systems to rethink the customer (from selling to the physician to selling to a more formal buying organization based on patient outcomes) and adapt to the new processes within the hospital for value analysis.
Supply chain processes within the hospitals have matured. Hospitals have made more progress on improving cash-to-cash cycles than their upstream manufacturing trading partners. They have reduced inventories and attempted to work with suppliers. As shown in figure 2, it is notable to see that this industry is one of the few where downstream trading partners have actually improved payable terms for their suppliers.
The future lies before the healthcare provider. As the provider of patient care, they have the greatest potential to lead in the healthcare value chain’s redesign to improve value. They have come a long way, but the changes have been incremental. They have focused primarily on traditional sourcing techniques; not a redesign of the healthcare value chain from the outside in, and the redefinition of complex and antiquated processes.
Research Overview:
Details: The research for this report is based on twenty-eight surveys fielded during the period of January 2012 – December 2015. The research was a progressive set of studies to understand supply chain excellence. In the report, we use responses from over 2000 respondents to understand the characteristics of a supply chain that is working well.
Objective: To better understand the levers and actions that are the most impactful for supply chain leaders to take to improve supply chain excellence.
Highlights: While many claim that consolidation of ERP instances will improve supply chain excellence, we find in this report that companies that report that their supply chains are working well have designed organizations to centralize reporting with manufacturing reporting to the supply chain leader In addition, these leaders invested in supply chain visibility, have a clearer definition of supply chain strategy to improve alignment and agility, and are better at delivering on technology projects to deliver software usability.
Supply Chain Metrics That Matter: A Focus on Medical Device Companies – 2016Lora Cecere
Executive Overview
Globalization. Compliance. Risk Management. Corporate Social Responsibility (CSR). Patient outcomes. Over the last decade the number and variety of supply chain initiatives exploded for the medical device leader. As a result, the supply chain group, and the related business imperatives, grew in importance.
Overall the medical device supply chain fared better through the decade than other industries, despite the fact that they are smaller, more focused companies trying to become global. (see Table C in the appendix for company size). On average the industry performance on operating margin and inventory turns was better in 2006 than 2015. The reason? The medical device supply chain entered the decade as a supply chain laggard. Through focused supply chain programs they were able to catch up to the level of other industries.
Table 6. Industry Snapshot of Performance
We hope this report can be a guide to help companies understand what is possible, and how supply chain metrics drive value. In the medical device industry we find most companies to be stuck. They have either regressed in supply chain performance or they are at the same point they were a decade ago. For many supply chain leaders that attend conferences, this may seem unfathomable. There is an industry belief that companies have implemented new technologies, and evolved processes, and driven improved balance sheet results. The goal of this report is to enable benchmarking and to spark a new conversation on the definition of supply chain excellence.
The Supply Chain Index: Evaluating the Industrial Value Network - 18 AUG 2014Lora Cecere
Executive Overview
Supply chain performance matters. It can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. While companies speak of best practices, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information for any industry.
By their nature, supply chain leaders are competitive. They want to drive performance improvements and increase corporate value. Their goal is to outpace competitors. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index by Supply Chain Insights, there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is a way to gauge improvement.
While it is easy to say the term supply chain excellence, it is difficult to define. Many people think that they know the definition, but there is no agreed-upon standard. The lack of a clear definition, and a methodology to measure improvement, makes progress hard to quantify and track.
The Supply Chain Index is designed to help. It is an objective measurement of supply chain improvement. It enables the comparison of companies’ progress within a peer group for a given time period. The Index is based upon financial performance of companies on four metrics integral to supply chain operations: Year-over-Year Revenue Growth, Return on Invested Capital, Inventory Turns, and Operating Margin. In building the Supply Chain Index, we had three goals:
1. Quantify Levels of Supply Chain Improvement. The Index is a composite metric based on the calculation of balance, strength and resiliency factors for a given time period. Each factor is measuring the pattern of performance over time. In the analysis, there is an underlying assumption that the companies that can sustain the best improvement in these three areas are driving the highest rates of supply chain improvement. The input metrics of Year-over-Year Revenue Growth, Return on Invested Capital, Inventory Turns, and Operating Margin were selected in part due to their high correlation to market capitalization.
2. Bridge the Gap between Finance and Supply Chain. Our second goal is to bridge the gap between the supply chain organization and the financial team...
For the supply chain leader, Big Data is a new concept. It is not one that is currently well understood. It will be overhyped and overpromised before the concepts reach mainstream adoption. However, it is here to stay. The goal of this report is to better educate and prepare the supply chain leader for this change. In this report, we define the concepts and share insights to help leaders better understand how Big Data concepts can help solve problems in today’s supply chain.
Putting Together the Pieces: Supply Chain Analytics - 2 SEP 2017Lora Cecere
RESEARCH OVERVIEW:
Report Details: This report is the result of six months of studying the emerging supply chain analytics technology market. This report is based on qualitative research completed in the period of January-July 2016. In this research effort, we interviewed thirty-five technology analytics providers to understand their solutions. This was followed by interviews with thirty innovative supply chain leaders. To support this research and take it one step further, we augment these qualitative insights with quantitative survey analysis collected in preparation for the Supply Chain Insights Global Summit. In this research, we share insights on the importance of supply chain analytics in Supply Chain 2030 strategies. Here we share these findings.
Objective: To understand the changing role of supply chain analytics in supply chain strategy.
Highlight: With the changing face of supply chain analytics companies have greater opportunities to drive insights and gain competitive advantage. This report is designed to help companies bridge traditional thinking on supply chain analytics while embracing emerging technologies.
Executive Summary
Supply chains are drowning in data, but are low on insights. While the cost of computing memory was once a barrier to executing an analytics strategy, this is no longer the case. The largest barrier is the understanding of new forms of analytics.
Historically, the term supply chain analytics was used to describe reporting. This is no longer the case. Today there are more options and capabilities for supply chain analytics. There is a proliferation of new technologies flooding the market.
Ironically, despite the explosion of options as shown in Figure 1, the supply chain operating team is more conservative. It is a skewed distribution. When it comes to decision support, the number of late adopters outnumber the early adopters three to one. The lack of early adopters, the rapid rate of change, and the conventional architectural definitions (primarily focused on Enterprise Resource Planning or ERP-based architectures) are barriers to the adoption of new forms of supply chain analytics.
EDI: Workhorse of the Value Chain - 10 FEB 2014Lora Cecere
Executive Overview
The evolution of Electronic Data Interchange (EDI) standards and the evolution of Business-To-Business (B2B) connectivity processes are now four decades old. Most executives see the progress as slow and expensive. They are frustrated. They question the value.
Companies want to power value networks. They want to connect with trading partners. They want to make the process both faster and easier. As a result, many are asking, “Does EDI use really matter? Is there value in the automation of B2B/EDI connectivity to power value networks?” Increasingly, companies are looking for the truth. This report attempts to answer these questions.
Companies want to build value networks and connect with trading partners. In our work with manufacturing clients, we see that nine out of ten companies want to build a more effective end-to-end value network. There is a growing understanding that the enterprise-centric endeavors over the last decade have plateaued, and that there are significant costs and waste improvements to be had with the building of effective connectivity for the extended supply chain.
However, most companies see EDI, and the exchange of documents through established protocols, as old- school processes. They are looking for “a better mousetrap.” In the last decade, many techniques evolved and they were overhyped. Early in the decade there were claims that XML was going to make EDI outdated.
Similarly, the use of business portals and business networks, sometimes termed trading partner exchanges, were touted as better ways of improving trading partner connectivity. The promise was lower cost, faster onboarding, and greater partner penetration. However, today EDI is the predominate method for B2B connectivity.
No company studied uses just one method for B2B connectivity. Connectivity between trading partners is usually a mix of portal, business network, and manual processes. While companies have invested in portals, trading exchanges, and automated business networks, the adoption is low. Portals are one-way communication. The use of portals is too passive and companies struggle to synchronize the many changes that occur in sales and purchase order processing through this passive form of connectivity. Likewise, the adoption of business networks in the establishment of B2B connectivity has been too slow. The networks require a mass of partners connected as a community, and this development has been too slow.
Among the EDI/XML users surveyed for this report, EDI is used nearly six times more frequently in the connection of trading partners than portals, and eight times more frequently than the use of business networks (e.g., trading exchanges or specialized industry hubs). We also find that the process of sales order management is more mature, and better automated, than those of procurement. EDI/XML is the workhorse of the extended supply chain.
Maturity in EDI/XML matters.
Supply Chain Metrics That Matter: A Focus on Food and Beverage Companies - 2015Lora Cecere
Executive Summary: Current State of Food and Beverage Industries
Over the last decade, consumer confidence in the food and beverage industry supply chains has waned. Shopper distrust is high; and as a result, growth in many categories like carbonated beverages and cereals declined.
While these two industries have similarities, there are different underlying dynamics in business drivers. The potential of the food supply chain is different than that of beverage. As a result, in this report, we share information on the two industries separately.
For both industries, the last decade was a tough market. Despite attempts to stimulate demand through trade programs, new product launch, and product expansion into new continents, growth declined. In 2003-2006, growth in the food industry was 7% while in 2011-2014, year-over growth was 4%. In parallel, in 2003-2006, growth in the beverage industry was 22%; yet, in 2011-2014, it was 7%. As growth declined, supply chain maturity mattered more than ever. Most companies were not equal to the challenge.
Traditional marketing tactics are not as effective in these two industries as they were a decade ago. To try to stimulate growth, 33% new items were introduced into the retail chain from these two industries. This rise in complexity reduced the effectiveness of the supply chain at a time of declining volumes. In Table 4, we profile the results in the food industry, while in Table 5 we portray the trends in the beverage industry.
In both industries, operating margin declined despite improved productivity in revenue per employee. In parallel, despite multiple investments in technologies, inventory turns declined in the food industry. Companies were unable to balance metrics in times of declining volumes. The reason? Rising commodity costs and the slow development of supply chain skills.
Companies that did the best in driving improvement in key metrics in times of declining volumes have seven characteristics: core competency in network design; strong capabilities in transportation management; a focus on inventory management; use of more advanced forms of supply chain planning; balance and understanding of the trade-offs of volume, price and mix; use of channel data; and continuity of leadership.
Table 4. Progress on the Effective Frontier for Food Companies
Table 5. Progress on the Effective Frontier for Beverage Companies
When we compiled the Supply Chains to Admire Report in August 2014, two food and beverage companies—General Mills and ABInBev—made the list. To make the list, a company had to deliver performance (posting above-average results for the period of 2009-2013 when compared to their peer group on a portfolio of metrics including operating margin, inventory turns and Return on Invested Capital). They also had to drive supply chain improvement (based on the Supply Chain Index as defined in the Research Methodology section) faster than their peer group. We believe b
Supply Chain Metrics That Matter: A Focus on Food and Beverage Companies - 15...Lora Cecere
Executive Overview
Food and Beverage supply chains serve local markets. Regional taste buds drive localized assortment. While many are attempting to be global, they have strong regional governance drivers. As a result, growth agendas have driven an increase in items by 32% since 2010. Product complexity grew faster than growth. Average sales per item dropped 22% . This increase in complexity lengthened the long tail of the supply chain affecting both cost and inventory.
We hope this report can be a guide to help companies understand what is possible to determine more accurate set points, and understand the relationship between supply chain metric performance and value.
As will be seen, in the Food and Beverage industries we find most companies to be stuck on the critical metrics that drive value. They have either regressed in supply chain performance or they are at the same point they were a decade ago. For many supply chain leaders who attend conferences this may seem unfathomable. There is an industry belief that companies have implemented new technologies, and evolved processes, and driven improved balance sheet results. As will be shown in this report, this is not true.
The analysis also demonstrates the importance of outside-in supply chain excellence programs. Who does the best? Hershey outperforms within the Food group and makes the Supply Chains to Admire list for 2016; and while AB/InBev drives the strongest performance in the Beverage category, it is not sufficient to make the list. The goal of this report is to enable benchmarking and to spark a new conversation on value in the definition of supply chain excellence.
Imagine the Supply Chain of the Future - 21 OCT 2014Lora Cecere
Executive Overview
When we ask companies to imagine the supply chain of the future, they have to start with what they have today. Most companies today are stuck, and find it hard to conceive the supply chain of the future. To free their thinking they have to learn from the past, to unlearn what they believe is a world of best practices, and establish methodologies to imagine the supply chain of the future. Changing traditional paradigms is a starting point.
For most, the journey is not easy. As shown in Figure 1, the terms most commonly used to describe the supply chain today are traditional, tactical, and cautious. Today there is significant room for improvement, with only one in three supply chain leaders feeling that what they have now is working well. Most of the supply chain processes are inside-out which is a barrier to sensing demand and building demand-driven or market-driven processes.
The incentive to change lies in balance sheet performance. When we analyze financial balance sheet performance for the period of 2006-2013, we find that nine out of ten companies are stuck at the intersection of the two critical metrics of operating margin and inventory turns. Publicly-held companies are unable to power improvements in both metrics for more than two consecutive years. For most, improvement has become an OR condition with companies making improvements in one of the two metrics, but not both together. This is an area of frustration and disappointment for business leaders that want to leverage supply chain technologies and processes to deliver both cash and cost savings to the organization. As growth slows, this shift is more important. In this report, we share highlights on the research gathered for our recent conference, Supply Chain Insights Global Summit.
Three Techniques to Improve Organizational Alignment-9 July 2013Lora Cecere
When organizations are aligned, things happen quicker. It takes less effort. People know what to do, and there is a greater bias for action. As a result, the organization can achieve higher levels of results and better withstand the pressures of demand and supply volatility.
Line of business leaders lack alignment. While many consultants claim that business results happen through better IT and business alignment, in this study, we find that the gaps in functional alignment within the business functions of sales, marketing, finance, and supply chain are far greater than the gaps between IT and line of business.
As shown in figure 2, within the organization, demand and supply volatility reigns. It is growing worse. This pain is felt across the line of business functions. To weather the storm, functions attempt to align, but doing this is easier said than done. It requires work and leadership.
This misalignment is not equal by business function. Of the three groups in this survey—supply chain, finance and information technology (IT)—the supply chain organization feels the alignment issue to a greater degree than the other two business functions. As shown in figure 2, it is one of their top three business pains.
So, what can an organizational leader do to improve alignment? In this study, we find that when companies do three things, and focus on doing them well, they can substantially improve organizational alignment:
• Have a Clear Definition of Supply Chain Strategy. While many companies state that they want to be “agile,” it requires definition. Companies need to design a supply chain with this goal in mind. When the organization has a carefully crafted definition of agility, it is able to improve organizational alignment. The definition of “shorter cycles” is not sufficient.
• Sales and Operations Planning. Organizations with a mature S&OP process are more aligned. In this study, 61% of supply chain respondents report having an S&OP process, but 48% of that group rate their process as effective. For a more detailed analysis of S&OP, please refer to our report Sales and Operations Planning: Current State of the Union.
• Supply Chain Center of Excellence. Organizations with a supply chain center of excellence are more aligned. The greatest impacts are between marketing and finance, as well as operations and Corporate Social Responsibility.
The study shows that there is significant opportunity for organizations to improve on all three of these critical factors. The good news for supply chain leaders is that this study provides three clear actions that can deliver improved alignment.
Integrated Demand Management-When Will We Start Using Downstream Data-7 Nov 2012Lora Cecere
For the purposes of this report, downstream data is defined as data that originates downstream on the demand side of the value chain. It can include point-of-sale data, T-log data, distributor data, social and unstructured data sources, retail withdrawal data and retail forecasts. Integrated demand signal management is the use of this data in a more holistic and integrated demand management process.
The use of channel data is evolving and this report is designed to give the industry an update on progress. Data for this report is based on two inputs: quantitative survey data from twenty-nine respondents (manufacturers) that use downstream data for integrated demand signal management, and qualitative input from attendees at an Integrated Demand Signal Management event that was attended by eleven manufacturers and four retailers. Data was collected in the fall of 2012.
While the study demographic is a small number, the respondents represent an experienced panel group. In the study, 90% of the respondents were using downstream data. The average time of usage is four years.
2016 Supply Chains to Admire - Report - 26 July 2016Lora Cecere
Executive Summary
Supply chain excellence is easier to say than define. To make progress, companies need to clearly define the journey and the goals. For many this is problematic. The goals are unclear and the financial metrics are not well-understood. We want to provide research to help supply chain leaders correct these issues.
Supply chain leaders want to improve results to drive shareholder value, but there is a problem. There is no industry standard definition of supply chain excellence or clarity on the how actions of the supply chain team drive shareholder value. In this report we try to help fill in the gaps by giving definitions to both.
The Supply Chains to Admire analysis is now in its third year. It is a deep analysis of performance, improvement, and Price to Tangible Book Value (PTBV) of 320 companies across 31 industries for the period of 2009-2015. The source data for the analysis is public reporting of balance sheets and income statements. (Our source of balance sheet and income statement data is YCharts .)
Big Data and Analytics: The New Underpinning for Supply Chain Success? - 17 F...Lora Cecere
Executive Overview
Today data is everywhere: but, nowhere. The world’s per capita capacity to store information has doubled every 40 months since the 1980s; and as of 2012, every day globally, 2.5 exabytes of data are created . As a result, social and customer data piles on the doorstep of the corporation, and operational data sits in the creases and cracks between functions. While many companies invested in data warehouse technologies and advanced applications for optimization, a common complaint in qualitative interviews with business leaders is “I cannot get to my data.” One business leader likened it to a Hotel California where, “The data checks into the system, but does not check out.” In most companies with heterogeneous information technology landscapes, simple reporting is still a major problem.
In the face of growing data, companies struggle with the basics. The question is, “Why pursue a big data and analytics strategy if the company cannot do basis reporting?” No doubt about it, the current state of analytics is a barrier to building supply chain excellence. It is hard to have a data-driven discussion if you can’t get access to data.
S&OP and Agility Study- Summary Charts - May 2013Lora Cecere
Sales and Operations Planning processes are now in their fourth decade of maturity. The processes are growing more complex. Progress is slow. The infographic below shows the current state of the union of sales and operations into S&OP processes. In this world of uncertainty, good planning matters. Complexity and volatility are escalating. Improving S&OP in a systematic approach, focused on goal evolution and systemic process governance, makes a difference; but, it requires education. A barrier to improvement is the executive team not understanding the supply chain as a complex system. It is the goal of this report to help alleviate this problem.
Executive Summary
The term ‘supply chain finance’ has different definitions on each continent. In Europe, it is often used to describe ‘tax efficiency’, or the design of the supply chain to reduce the burden of taxation of cross-border shipments. In many procurement organizations the term is often used to describe the use of favorable capital rates to finance downstream trade. In this study the focus is on the management of costs by either effectiveness of a Supply Chain Finance team or Supply Chain Center of Excellence, Sales and Operations Planning (S&OP) processes, Cost-to-Serve Analysis and Supplier Development efforts.
For the supply chain leader, managing costs is job one. It is easier said than done. The supply chain is a complex system with interrelationships between growth, inventory, cost and complexity. Cross-functional processes, organizational focus, and access to data are critical to align and maintain cost effectiveness in this complex system called supply chain. We term this model the Supply Chain Effective Frontier. This is shown in Figure 2. When companies operate on the Supply Chain Effective Frontier they maximize the value of the firm . We measure value by either Price to Tangible Book Value or Market Capitalization.
Figure 2. Supply Chain Effective Frontier
As will be shown in this report, managing costs is a struggle for most companies. While 88% of companies have implemented Enterprise Resource Planning (ERP), the hard work of process evolution and maturity continues. In this report we share the current state of supply chains in managing costs, and then take a look at the processes and organizational design factors to evaluate the impact on cost management.
The Supply Chain Index: Evaluating the Healthcare Value NetworkLora Cecere
Executive Overview
Supply chain performance matters. It can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. While companies speak of best practices, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information.
By their nature, supply chain leaders are competitive. They want to drive performance improvements and increase corporate value. Their goal is to outpace competitors. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index by Supply Chain Insights, there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is.
While it is easy to say the term supply chain excellence, it is difficult to define. Many people think that they know the definition, but there is no agreed-upon standard. The lack of a clear definition, and a methodology to gauge improvement, makes progress hard to quantify and track. The Supply Chain Index is designed to help. It is an objective measurement of supply chain improvement. It enables the comparison of companies’ progress within a peer group for a given time period. The Index is based upon financial performance of companies on four metrics integral to supply chain operations: inventory turns, operating margin, Return on Invested Capital and year-over-year revenue growth. There were three goals.
1. Quantify Levels of Supply Chain Improvement. The Index is a composite metric based on the calculation of balance, strength and resiliency factors for a given time period. In the analysis, there is an underlying assumption that the companies that can sustain the best improvement in these three areas are driving the highest rates of supply chain improvement. The input metrics of inventory turns, operating margin, ROIC and year-over-year revenue growth were selected in part due to their high correlation to market capitalization.
2. Bridge the Gap between Finance and Supply Chain. Our second goal is to bridge the gap between the supply chain organization and the financial team. While the financial team is often backwards-looking at transactions, the supply chain team is forward-looking based on flows. There is often a temptation to focus on a single financial ratio in isolation, like inventory turns, not realizing that the supply chain is a complex system with tightly interrelated relationships amongst metrics based on supply chain potential.
Conquering the Supply Chain Effective FrontierLora Cecere
Conquering the Supply Chain Effective Frontier - A Handbook for the Value Chain Leader to Manage Trade-offs in Defining Supply Chain Excellence
Supply chain practices are nearing their third decade of maturation. The term supply chain excellence is bandied about by leaders, consultants and technology providers, but there is no alignment on what it means.
Conventional systems of measurement for supply chain excellence are problematic. In this report, we share insights gained during interviews with 75 supply chain pioneers. Based on their feedback we created a new framework, that we define here as the Supply Chain Effective Frontier, for supply chain leaders to use to determine supply chain excellence. This methodology is based on publicly available financial balance sheet data grouped into four sets of supply chain ratios: growth, profitability, cycle, and complexity.
We believe that supply chain excellence is best defined as the alignment of the supply chain team to deliver results to meet and exceed the requirements of the business strategy. This requires a clear vision and cross-functional coordination and alignment over a multi-year road map. It needs to be holistic. A supply chain is a complex system with increasing business complexity. The analysis needs to facilitate a clear understanding of trade-offs embedded in day-to-day decision making. It is this clarity that we find missing in many teams that we work with, and it is for this reason we wrote this report.
How Do We Heal the Healthcare Value Chain? - 9 MAY 2013Lora Cecere
Over the last decade, as shown in figure 1, the hospital supply chain has been one of the few that has improved operating margin, reduced inventory and improved revenue/employee. In contrast, the manufacturing suppliers to the hospital organization have grown inventories and struggled to preserve margins. Across the value chain from the patient to the raw material suppliers, total inventories have grown and costs have escalated. With pending regulations, hospitals are being forced to rethink processes, redefine value and work more holistically to improve sourcing practices. The suppliers to the hospital systems are having to rethink their systems to rethink the customer (from selling to the physician to selling to a more formal buying organization based on patient outcomes) and adapt to the new processes within the hospital for value analysis.
Supply chain processes within the hospitals have matured. Hospitals have made more progress on improving cash-to-cash cycles than their upstream manufacturing trading partners. They have reduced inventories and attempted to work with suppliers. As shown in figure 2, it is notable to see that this industry is one of the few where downstream trading partners have actually improved payable terms for their suppliers.
The future lies before the healthcare provider. As the provider of patient care, they have the greatest potential to lead in the healthcare value chain’s redesign to improve value. They have come a long way, but the changes have been incremental. They have focused primarily on traditional sourcing techniques; not a redesign of the healthcare value chain from the outside in, and the redefinition of complex and antiquated processes.
Research Overview:
Details: The research for this report is based on twenty-eight surveys fielded during the period of January 2012 – December 2015. The research was a progressive set of studies to understand supply chain excellence. In the report, we use responses from over 2000 respondents to understand the characteristics of a supply chain that is working well.
Objective: To better understand the levers and actions that are the most impactful for supply chain leaders to take to improve supply chain excellence.
Highlights: While many claim that consolidation of ERP instances will improve supply chain excellence, we find in this report that companies that report that their supply chains are working well have designed organizations to centralize reporting with manufacturing reporting to the supply chain leader In addition, these leaders invested in supply chain visibility, have a clearer definition of supply chain strategy to improve alignment and agility, and are better at delivering on technology projects to deliver software usability.
Supply Chain Metrics That Matter: A Focus on Medical Device Companies – 2016Lora Cecere
Executive Overview
Globalization. Compliance. Risk Management. Corporate Social Responsibility (CSR). Patient outcomes. Over the last decade the number and variety of supply chain initiatives exploded for the medical device leader. As a result, the supply chain group, and the related business imperatives, grew in importance.
Overall the medical device supply chain fared better through the decade than other industries, despite the fact that they are smaller, more focused companies trying to become global. (see Table C in the appendix for company size). On average the industry performance on operating margin and inventory turns was better in 2006 than 2015. The reason? The medical device supply chain entered the decade as a supply chain laggard. Through focused supply chain programs they were able to catch up to the level of other industries.
Table 6. Industry Snapshot of Performance
We hope this report can be a guide to help companies understand what is possible, and how supply chain metrics drive value. In the medical device industry we find most companies to be stuck. They have either regressed in supply chain performance or they are at the same point they were a decade ago. For many supply chain leaders that attend conferences, this may seem unfathomable. There is an industry belief that companies have implemented new technologies, and evolved processes, and driven improved balance sheet results. The goal of this report is to enable benchmarking and to spark a new conversation on the definition of supply chain excellence.
The Supply Chain Index: Evaluating the Industrial Value Network - 18 AUG 2014Lora Cecere
Executive Overview
Supply chain performance matters. It can make or break corporate performance. Now 30-years old, the practice of supply chain management is still evolving. While companies speak of best practices, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information for any industry.
By their nature, supply chain leaders are competitive. They want to drive performance improvements and increase corporate value. Their goal is to outpace competitors. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index by Supply Chain Insights, there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is a way to gauge improvement.
While it is easy to say the term supply chain excellence, it is difficult to define. Many people think that they know the definition, but there is no agreed-upon standard. The lack of a clear definition, and a methodology to measure improvement, makes progress hard to quantify and track.
The Supply Chain Index is designed to help. It is an objective measurement of supply chain improvement. It enables the comparison of companies’ progress within a peer group for a given time period. The Index is based upon financial performance of companies on four metrics integral to supply chain operations: Year-over-Year Revenue Growth, Return on Invested Capital, Inventory Turns, and Operating Margin. In building the Supply Chain Index, we had three goals:
1. Quantify Levels of Supply Chain Improvement. The Index is a composite metric based on the calculation of balance, strength and resiliency factors for a given time period. Each factor is measuring the pattern of performance over time. In the analysis, there is an underlying assumption that the companies that can sustain the best improvement in these three areas are driving the highest rates of supply chain improvement. The input metrics of Year-over-Year Revenue Growth, Return on Invested Capital, Inventory Turns, and Operating Margin were selected in part due to their high correlation to market capitalization.
2. Bridge the Gap between Finance and Supply Chain. Our second goal is to bridge the gap between the supply chain organization and the financial team...
For the supply chain leader, Big Data is a new concept. It is not one that is currently well understood. It will be overhyped and overpromised before the concepts reach mainstream adoption. However, it is here to stay. The goal of this report is to better educate and prepare the supply chain leader for this change. In this report, we define the concepts and share insights to help leaders better understand how Big Data concepts can help solve problems in today’s supply chain.
Putting Together the Pieces: Supply Chain Analytics - 2 SEP 2017Lora Cecere
RESEARCH OVERVIEW:
Report Details: This report is the result of six months of studying the emerging supply chain analytics technology market. This report is based on qualitative research completed in the period of January-July 2016. In this research effort, we interviewed thirty-five technology analytics providers to understand their solutions. This was followed by interviews with thirty innovative supply chain leaders. To support this research and take it one step further, we augment these qualitative insights with quantitative survey analysis collected in preparation for the Supply Chain Insights Global Summit. In this research, we share insights on the importance of supply chain analytics in Supply Chain 2030 strategies. Here we share these findings.
Objective: To understand the changing role of supply chain analytics in supply chain strategy.
Highlight: With the changing face of supply chain analytics companies have greater opportunities to drive insights and gain competitive advantage. This report is designed to help companies bridge traditional thinking on supply chain analytics while embracing emerging technologies.
Executive Summary
Supply chains are drowning in data, but are low on insights. While the cost of computing memory was once a barrier to executing an analytics strategy, this is no longer the case. The largest barrier is the understanding of new forms of analytics.
Historically, the term supply chain analytics was used to describe reporting. This is no longer the case. Today there are more options and capabilities for supply chain analytics. There is a proliferation of new technologies flooding the market.
Ironically, despite the explosion of options as shown in Figure 1, the supply chain operating team is more conservative. It is a skewed distribution. When it comes to decision support, the number of late adopters outnumber the early adopters three to one. The lack of early adopters, the rapid rate of change, and the conventional architectural definitions (primarily focused on Enterprise Resource Planning or ERP-based architectures) are barriers to the adoption of new forms of supply chain analytics.
EDI: Workhorse of the Value Chain - 10 FEB 2014Lora Cecere
Executive Overview
The evolution of Electronic Data Interchange (EDI) standards and the evolution of Business-To-Business (B2B) connectivity processes are now four decades old. Most executives see the progress as slow and expensive. They are frustrated. They question the value.
Companies want to power value networks. They want to connect with trading partners. They want to make the process both faster and easier. As a result, many are asking, “Does EDI use really matter? Is there value in the automation of B2B/EDI connectivity to power value networks?” Increasingly, companies are looking for the truth. This report attempts to answer these questions.
Companies want to build value networks and connect with trading partners. In our work with manufacturing clients, we see that nine out of ten companies want to build a more effective end-to-end value network. There is a growing understanding that the enterprise-centric endeavors over the last decade have plateaued, and that there are significant costs and waste improvements to be had with the building of effective connectivity for the extended supply chain.
However, most companies see EDI, and the exchange of documents through established protocols, as old- school processes. They are looking for “a better mousetrap.” In the last decade, many techniques evolved and they were overhyped. Early in the decade there were claims that XML was going to make EDI outdated.
Similarly, the use of business portals and business networks, sometimes termed trading partner exchanges, were touted as better ways of improving trading partner connectivity. The promise was lower cost, faster onboarding, and greater partner penetration. However, today EDI is the predominate method for B2B connectivity.
No company studied uses just one method for B2B connectivity. Connectivity between trading partners is usually a mix of portal, business network, and manual processes. While companies have invested in portals, trading exchanges, and automated business networks, the adoption is low. Portals are one-way communication. The use of portals is too passive and companies struggle to synchronize the many changes that occur in sales and purchase order processing through this passive form of connectivity. Likewise, the adoption of business networks in the establishment of B2B connectivity has been too slow. The networks require a mass of partners connected as a community, and this development has been too slow.
Among the EDI/XML users surveyed for this report, EDI is used nearly six times more frequently in the connection of trading partners than portals, and eight times more frequently than the use of business networks (e.g., trading exchanges or specialized industry hubs). We also find that the process of sales order management is more mature, and better automated, than those of procurement. EDI/XML is the workhorse of the extended supply chain.
Maturity in EDI/XML matters.
Supply Chain Metrics That Matter: A Focus on Food and Beverage Companies - 2015Lora Cecere
Executive Summary: Current State of Food and Beverage Industries
Over the last decade, consumer confidence in the food and beverage industry supply chains has waned. Shopper distrust is high; and as a result, growth in many categories like carbonated beverages and cereals declined.
While these two industries have similarities, there are different underlying dynamics in business drivers. The potential of the food supply chain is different than that of beverage. As a result, in this report, we share information on the two industries separately.
For both industries, the last decade was a tough market. Despite attempts to stimulate demand through trade programs, new product launch, and product expansion into new continents, growth declined. In 2003-2006, growth in the food industry was 7% while in 2011-2014, year-over growth was 4%. In parallel, in 2003-2006, growth in the beverage industry was 22%; yet, in 2011-2014, it was 7%. As growth declined, supply chain maturity mattered more than ever. Most companies were not equal to the challenge.
Traditional marketing tactics are not as effective in these two industries as they were a decade ago. To try to stimulate growth, 33% new items were introduced into the retail chain from these two industries. This rise in complexity reduced the effectiveness of the supply chain at a time of declining volumes. In Table 4, we profile the results in the food industry, while in Table 5 we portray the trends in the beverage industry.
In both industries, operating margin declined despite improved productivity in revenue per employee. In parallel, despite multiple investments in technologies, inventory turns declined in the food industry. Companies were unable to balance metrics in times of declining volumes. The reason? Rising commodity costs and the slow development of supply chain skills.
Companies that did the best in driving improvement in key metrics in times of declining volumes have seven characteristics: core competency in network design; strong capabilities in transportation management; a focus on inventory management; use of more advanced forms of supply chain planning; balance and understanding of the trade-offs of volume, price and mix; use of channel data; and continuity of leadership.
Table 4. Progress on the Effective Frontier for Food Companies
Table 5. Progress on the Effective Frontier for Beverage Companies
When we compiled the Supply Chains to Admire Report in August 2014, two food and beverage companies—General Mills and ABInBev—made the list. To make the list, a company had to deliver performance (posting above-average results for the period of 2009-2013 when compared to their peer group on a portfolio of metrics including operating margin, inventory turns and Return on Invested Capital). They also had to drive supply chain improvement (based on the Supply Chain Index as defined in the Research Methodology section) faster than their peer group. We believe b
Supply Chain Metrics That Matter: A Focus on Food and Beverage Companies - 15...Lora Cecere
Executive Overview
Food and Beverage supply chains serve local markets. Regional taste buds drive localized assortment. While many are attempting to be global, they have strong regional governance drivers. As a result, growth agendas have driven an increase in items by 32% since 2010. Product complexity grew faster than growth. Average sales per item dropped 22% . This increase in complexity lengthened the long tail of the supply chain affecting both cost and inventory.
We hope this report can be a guide to help companies understand what is possible to determine more accurate set points, and understand the relationship between supply chain metric performance and value.
As will be seen, in the Food and Beverage industries we find most companies to be stuck on the critical metrics that drive value. They have either regressed in supply chain performance or they are at the same point they were a decade ago. For many supply chain leaders who attend conferences this may seem unfathomable. There is an industry belief that companies have implemented new technologies, and evolved processes, and driven improved balance sheet results. As will be shown in this report, this is not true.
The analysis also demonstrates the importance of outside-in supply chain excellence programs. Who does the best? Hershey outperforms within the Food group and makes the Supply Chains to Admire list for 2016; and while AB/InBev drives the strongest performance in the Beverage category, it is not sufficient to make the list. The goal of this report is to enable benchmarking and to spark a new conversation on value in the definition of supply chain excellence.
State of Business Networks in Process Industries 2014 - Summary ChartsLora Cecere
Executive Summary
Today, the performance of an organization hinges more than ever on the effectiveness of flows between, and amongst, trading partners. It is not easy. The supply chain is not linear, and the relationships extend across geographic borders and industry sectors.
Outsourcing relationships have grown in the last decade; however, the automation of these networks has not kept pace. In the words of one respondent interviewed for this report in a facilitated workshop to review the data, “Today, we connect trading partners through spreadsheets, email, phone and fax. It is antiquated. I liken it to baling wire, chewing gum and duct tape. I need solutions that can synchronize and harmonize data across trading partners in real-time. My operating committee does not think that it is sexy to invest in B2B solutions, but it is needed. Today, it is almost impossible for us to understand the manufacturing status of purchase orders, and have accurate information readily on supply chain visibility of in-transit shipments. As a result, we make the wrong decisions, and have unnecessary wait times to get information.”
These comments echo the findings in this study. Respondents operate value networks, but they struggle to get to the data they need. The outsourcing of logistics is greater than manufacturing. Eighty-one percent of companies outsource logistics. The volume of outsourced logistics is 48% on average. In contrast, 66% of companies outsource manufacturing. The outsourced volume manufacturing volume varies, but averages 15%.
While the networks are complex, and the goals are many, progress is hard to track. This leads many supply chain leaders to ask, “What is the current state? What is the opportunity?” Answering these questions is the goal of this report.
Let’s start with the current state. As seen in Figure 2, the average respondent in this report believes that the supply chain today is more controlled and global than compared to two years ago. While they have made improvements in agility and proactivity, there is much more left to do. The largest challenges are in the use of outside-in data to improve channel sensing and reduce risk. While the supply chain today has made progress in transactional efficiency, companies are less competent at sensing opportunities and mitigating risks.
Supply Chains to Admire - An Analysis of Supply Chain Excellence for 2006-2013Lora Cecere
Executive Overview
Supply chain excellence matters. It can make or break corporate performance. To drive improvements, companies need a clear definition of supply chain competency. It is easier to state than to define, and the market is full of beliefs that are not grounded by hard, cold facts.
Now 30-years old, the practice of supply chain management is still evolving. While companies speak of ‘best practices’, and boast about improvements in operating margin, inventory levels and asset management in conference after conference, we do not see it in our analysis of balance sheet information for any industry. The reason? The supply chain is not well-understood by executive teams, and many companies have pursued a project-based approach (implementing multiple projects with ROI above a threshold) or a focus on vertical excellence (where functional charters create very strong functional excellence); however, this is misguided. We do not find that these two approaches make a difference. Instead, we find that it is supply chain leadership driving resilient, predictable, and forward-looking processes that drives sustained balance sheet improvement. We find that for top performers that it happens in a slow and steady pattern versus the big-bang approach.
Supply chain leaders want to drive excellence. By their nature, these leaders are competitive. They want to drive performance improvements, increase corporate value and outpace competitors. It is not easy. The rate of business change is intense and the personal stakes are high. Day after day, leaders must answer questions like, “Which path should I to take? What are the best technologies to use? What is an acceptable rate of performance? How am I doing against my peer group? And, what can I learn from others that I can use to improve the performance of my own operation?” Until the development of the Supply Chain Index there was no independent and objective data-driven methodology that could answer these questions. With the development of this methodology, there now is a way to gauge improvement.
Collecting the data and doing the analysis in this report is the result of a 24-month effort. We were fearful at the end of the process that it would be difficult to pick the top performers, but we should not have worried. When we applied the methodology, the top companies hopped off the page. They were easy to spot. Listed by industry, the Companies to Admire are listed in Table 4. Within a peer group, we place them within alpha order. Due to the complexity of the analysis it is hard to rate them more granularly.
No companies made the list from the contract manufacturing, medical device, paper, pharmaceutical or retail peer groups. Likewise, there were more companies that made the list in the industrial than the consumer value networks.
Unicom Conference - Delhi, July 2012. Data Center Automation by creating Center Of Excellence. How to radically improve Data Center efficiency? How to go about proceeding with Automation. Is it easy for Automation projects to succeed? The process, people, and technology of Automation explained in brief.
What Drives Inventory Effectiveness in a Market-Driven World? Summary ChartsLora Cecere
Survey Details: The research for this report was conducted from February 12 – October 8, 2015. Surveys were conducted among Manufacturers, Retailers, and Wholesalers/Distributors/Co-operatives with $250M+ in revenue and who use (and are familiar with) inventory optimization software (n=64). Respondents were evenly split between those using basic (ERP or ERP+APS) and advanced (software in addition to ERP/APS) software. All surveys were conducted by Supply Chain Insights.
Objective: To understand the impact of inventory optimization software on supply chain excellence. NOTE: inventory optimization software was defined as “any form of ERP (Enterprise Resource Planning), APS (Advanced Planned Software), or sophisticated inventory planning tools.”
Highlight: Companies who use advanced software are more likely to be satisfied with their software, to be effective at making inventory decisions and to drive a return on investment for their software.
How to Build an HR Analytics Center of ExcellenceAPEX Global
Using analytics to turn data into insights regularly provides strategic advantage to all areas of organizations, from marketing to supply chain management and finance.
The formation of an HR Analytics Center of Excellence can enable firms to derive strategic insights from workforce data and justify the investments made in HR programs and technology.
Supply Chain Talent Study - MARCH 2017 - Preliminary Summary ChartsLora Cecere
• Report Details: The research for this report was conducted via an online survey from February 20 - March 20, 2017. Surveys were conducted among all those working in or studying the supply chain industry -- including business, academia, and students (n=386).
• Objective: To understand the generational differences among supply chain professionals in terms of what's important, where the gaps are, and satisfaction with their supply chain careers.
• Highlight: While 70% of supply chain employees are satisfied with their careers, there are notable differences by generation in terms of job, satisfaction and what matters in their careers. For example, Generation X and Millennials want more work-life balance, fewer hours, and greater flexibility to work from home compared to Baby Boomers. In additional, Millennials are seeking more coaching and on-the-job training, suggesting an opportunity for employers seeking to recruit top talent. Check out the full report for more details, insights, and recommendations.
What Drives Inventory Effectiveness in a Market-Driven World? Lora Cecere
Survey Details: The research for this report was conducted from February 12 - October 8, 2015. Surveys were conducted among Manufacturers, Retailers, and Wholesalers/Distributors/Co-operatives with $250M+ in revenue and who use (and are familiar with) inventory optimization software (n=64). Respondents were evenly split between those using basic (ERP or ERP+APS) and advanced (software in addition to ERP/APS) software. All surveys were conducted by Supply Chain Insights.
Objective: To understand the impact of inventory optimization software on supply chain excellence. NOTE: inventory optimization software was defined as "any form of ERP (Enterprise Resource Planning), APS (Advanced Planned Software), or sophisticated inventory planning tools."
Highlight: Companies who use advanced software are more likely to be satisfied with their software, to be effective at making inventory decisions and to drive a return on investment for their software.
In Search of Supply Chain Excellence - Report - 17 MAR 2016Lora Cecere
Executive Summary
No two supply chains are alike. While business is changing quickly, the supply chain processes are evolving slowly. The average supply chain organization is 14-years old, and as is shown in Figure 2, one out of three companies state that there is room for improvement in their supply chain.
Figure 2. Descriptors Used by Supply Chain Leaders to Describe Their Supply Chains
While companies desire a supply chain that is more aligned, fast, agile, and proactive, today the supply chain is controlled and becoming more global. In the building of today’s supply chain, as will be seen in this report, the tightly integrated IT infrastructure defined in the last two decades is an impediment to building an agile, proactive and aligned supply chain. In Figure 3 we contrast the current state of the supply chain with the desired state of supply chain leaders.
Figure 3. Supply Chain Descriptors: Current State versus Desired Operation
As shown in Figure 3, while supply chain leaders desire a more proactive, aligned and faster supply chain, these are areas for improvement. The current supply chain is controlled and global, but with significant opportunity for improvement. Ironically, despite the gaps in overall performance, many supply chain leaders term current practices as “best practices.” In this report we challenge the status quo. We do this by teasing out the data to understand business drivers. For example, in Table 1 we can see that a company which rates itself as “having a supply chain working well” is more likely to be in the process industry, and have a supply chain organization where manufacturing reports to the overall supply chain leader. In addition, within the organization there is a greater understanding of the supply chain by the executive leadership team, stronger alignment of metrics cross-functionally, stronger capabilities in supply chain visibility, and the organization is better at managing change. The companies that outperform are also better at accessing and using data.
It is also significant to note that we do not find a correlation between “working well” and the presence of a Supply Chain Center of Excellence, fewer ERP instances, or maturity in Sales and Operations planning. The reason? These processes and practices are evolving.
The Journey Towards Supply Chain Excellence. So What? Who Cares? - Webinar Sl...Lora Cecere
The Journey Towards Supply Chain Excellence. So What? Who Cares?
It’s the nature of supply chain leaders to be competitive and improve processes, however it’s not always their nature to know how to start and progress on the journey. Often leaders think, “So What? Who Cares?” and accept the status quo. In this webinar we’ll discuss the reasons why this should be mission critical and how leaders can start on their journey towards improving performance. Webinar Slide Deck - 57 minutes - recorded on September 21, 2016.
Executive Summary
No two supply chains are alike, but supply chain leaders across all industries face common challenges. The supply chain is becoming more strategic—an engine of growth and the driver of new business models—to drive new opportunities. For supply chain leaders, it is no longer just a discussion of cost and inventory management.
However, frustration abounds. Companies struggle to improve balance sheet results in the face of rising complexity and slowing growth. While all companies have improved revenue per employee, this efficiency improvement has not translated into operating margin improvements; and while cash-to-cash cycles have improved, it is not due to improvements in inventory positions. Most companies feel stuck, as if they are being held hostage by traditional supply chain practices.
Table 1. Industry Progress Across the Last Decade
In this report, we highlight the current state of supply chains—the supply chain organization, technologies, and process evolution—to enable supply chain leaders to take the next step in their strategy development. This report reflects the current state of supply chains, and is designed as a foundational document for supply chain leaders to build their 2015 strategies.
Understanding the Supply Chain Organization
Improving corporate performance is the driver of today’s supply chain organization. Increasingly, supply chain leaders are adopting new business models—ecommerce, digital business, and growth in new economies—to drive the top line.
Today, for the leader, it is about more than cost management. Instead, it is about the management of a portfolio of metrics to drive corporate performance. The supply chain is a complex system, with increasing complexity, and an increasing importance of driving balance sheet results. It is not easy. Improvement is hard work, and many are stuck. When we analyze financial balance sheet performance for the period of 2000-2013, we find that nine out of ten companies are stuck at the intersection of the two critical metrics of operating margin and inventory turns. Cash flow has been improved through elongating payables, and most companies are struggling to improve inventory in the face of complexity. This is an area of frustration and disappointment for business leaders who want to leverage supply chain technologies and processes to deliver both growth opportunities along with cash and cost savings to the organization.
The reason why? Today, the supply chain organization is traditional, tactical and cautious (see Figure 2). Most leaders would like to have a supply chain that is more agile and proactive. This is not possible with the current state of technologies and processes. To make the shift, companies need to reinvent the supply chain. The processes need to be redesigned outside-in with open sharing through business networks. These new forms of business networks, with many-to-many data models supported by canonical infrastructure, a
Executive Summary
Supply chain management it is now three decades old. The processes are maturing. With the increase in complexity in markets and new product launch, supply chain excellence matters more than ever.
Manufacturing and distribution companies are looking for insights on how to parlay advances in supply chain management into balance sheet results. This is the goal of this report.
This report is a summary of research conducted during 2015. It provides a short summary of the major insights gathered from six quantitative and four qualitative studies. For more in-depth analysis reference the full reports outlined in the appendix.
Today only one in three business leaders are satisfied with their supply chain. One of the issues is the lack of agility. In this report, we share case studies on how to improve supply chain agility. This report first defines supply chain agility and then shares case studies of agility techniques that work to improve the ability to deliver the same cost, quality and customer service given the rising levels of demand and supply volatility. Each case study is supported by the Supply Chains to Admire financial analysis.
While agility is bandied about in supply chain discussions, it is often meaningless because companies do not define and execute agility strategies. In this report, we share case studies of companies successfully implementing agility strategies.
Supply Chain Metrics That Matter: A Focus on the Retail Industry - 16 FEB 2017Lora Cecere
Report Details: This report is based on analysis of financial balance sheet and income statement data within the Retail industry, for the period of 2006-2015. The data is collected from YCharts.
Objective: To use financial balance sheet and income statement data to better understand the state of Grocery Retailers' and Mass Merchants' supply chains and to determine which companies’ supply chains did the best on the delivery of a portfolio of metrics over the last decade.
Highlight: During the Great Recession retailers faced strong declines in spending. It was a critical time, but for many it was an opportunity to emerge stronger. Those who redefined their stores for the dollar-conscious customer or built new and innovative formats while driving supply chain innovation, drove strong balance sheet results. Others learned that doing traditional retail more efficiently was not enough.
Why Is Supply Chain Planning So Hard? 16 FEB 2016Lora Cecere
RESEARCH OVERVIEW:
Details: The research for this report is based on five surveys fielded during the period of January 2014 – December 2015. The research was a progressive set of studies on supply chain planning. What are the barriers and what drives success. While the path to supply chain planning excellence is fraught with issues, the expected Return on Investment (ROI) for a successful supply chain planning project is nine months. In this report, we share insights on why supply chain planning is so difficult and how to maximize the ROI..
Objective of the report: To share insights with supply chain leaders on how to maximize the value from a supply chain planning implementation. The report shares insights on five barriers and then gives recommendations to overcome the barriers to maximize the ROI.
Highlights: While many approach supply chain planning as a technology project, successrequires companies to rethink how they make operational decisions and plan for future outcomes. The bigger issues in executing a supply chain planning project is how work is organized and how reward systems shape behavior.
A presentation by Lora Cecere, Founder, Supply Chain Insights, USA, delivered during the 38th annual SAPICS event in Sun City, South Africa.
Today, nine out of ten supply chains are stuck in delivering corporate performance objectives of improvements in inventory turns or operating margin, but could this change in the future based on the evolution of technologies and new processes? Join this session to gain insights on how five trends will reshape supply chain thinking: – Predictive to Cognitive Modeling, – Networks of Networks with Interoperability, – Autonomous Supply Chains, Outside-in Processes and Shifts in Analytics.
Supply Chain Metrics That Matter: A Focus on the High-Tech Industry - 2016Lora Cecere
Executive Overview
High-Tech supply chains serve global markets with regional preferences. They include some of the most advanced processes and strongest supply chain leadership across all industries. As a result, the value chain made more progress than others in the course of the last decade.
Unlike other value chains, all four segments of this value chain improved inventory turns. It was through hard work, network design, and a focus on planning. While other industries implemented supply chain planning and then turned to spreadsheets, this industry got good at managing inventories. The stakes were higher. As inventories sit in the channel for the High-Tech industry, prices fall. As a result, this industry has developed some of the best inventory practices across all industries.
On the flip-side, the lack of growth and the declining margins of the Contract Manufacturing industry is a risk for this value chain. Within the High-Tech value chain, Contract Manufacturing is the weak link.
The industry will drive the autonomous supply chain. These leaders will make the digital pivot first. With some of the earliest technology adopters, and with more to gain from the adoption of technology, look for companies like Apple, Cisco, Dell, EMC, Emerson, Intel, and Samsung to drive cloud-based computing, cognitive computing, the Internet of Things (IoT), sensor development, and prescriptive analytics. The industry is also driving a shift through wide adoption and use of Open Source code from the Apache Software Foundation. These manufacturing leaders will pave the way for others. Their ability to lead will drive cross-industry demand and growth agendas.
We hope that this report is a useful guide for companies in other industries to understand the impact of technology adoption on supply chain excellence.
Supply Chain Metrics That Matter: A Focus on the High-Tech Industry - 2015Lora Cecere
Executive Summary: Current State of the High-Tech Industry
Globalization. Commodity inflation. Margin squeeze. Economic uncertainty. Warranty issues. Shortening product life cycles. Recalls. Labor arbitrage and outsourcing. The list of market pressures could go on and on, but one thing is clear: the high-tech industry was redefined over the course of the last decade. In Table 4 we show the progress of discrete industries for the periods of 2006-2014 and 2011- 2014. Notice there is more red (lack of progress) than green (progress) in the industry trends.
Table 4. Supply Chain Performance by Industry within the Discrete Industries
High-tech companies have the most advanced practices for inventory management, planning and analytics. They are just treading water (keeping slightly ahead of the market dynamics). The rate of change drives innovation. Within this industry there are more supply chain innovators taking a hard look and driving the adoption of prescriptive analytics and canonical value network infrastructures.
Taking a closer view at the value chain of the sub-industries within high-tech, i.e. consumer electronics, B2B Electronics, and semiconductor industries, the impact of the industry drivers and the importance of supply chain performance becomes clearer.
Table 5. Supply Chain Performance by Industry within the High-Tech Sector
The entire value chain is struggling to maintain margins and improve inventory turns. For consumer electronics and B2B electronics, growth is down, operating margins are degrading and inventory turns worsening. Supply chain matters more than ever.
What Is the Value Proposition of Sales and Operations Planning?Lora Cecere
Survey Details: The research for this report was conducted online from January 6 - September 14, 2015 by Supply Chain Insights. Surveys were conducted among Manufacturers and Wholesalers/Distributors/Co-operatives with $250M+ in revenue and who have at least one S&OP process (n=73). For the purpose of analysis, respondents were split between those with a self-reported "effective" S&OP (n=31) and those without (n=42).
Objective: To understand the value proposition of an effective S&OP (Sales and Operations Planning) process. NOTE: An S&OP process was defined as a "tactical planning process to forecast sales and plan operations."
Highlight: Companies with a more effective S&OP process are more aligned, agile and balanced, which leads to greater control and improved response.
Orchestrating a Supply Chain Competitive EdgeCognizant
An effective supply chain is the key to creating business value. This paper will help you benchmark your performance today and take a methodical organizational approach to improving your supply chain effectiveness.
Driving a Customer-Centric Supply Chain - 7 NOV 2016Lora Cecere
Report Details: The research for this report was conducted via an online survey from August 12 - October 14, 2016. Surveys were conducted among Manufacturers, Wholesalers/Distributors/Co-operatives and Third-Party Logistics Providers (n=56).
Objective: To determine how companies build a customer-centric supply chain and how well it is working for them.
Highlight: In this study, 80% of companies have a customer-centric strategy; yet the majority (54%) state that there is room for improvement to drive performance changes in their supply chain. Companies struggle to drive alignment and build constancy of purpose.
Inventory Optimization in a Market-Driven World - 27 APR 2015Lora Cecere
Executive Overview
Growth is slowing and the complexity in today’s supply chain is unprecedented. As a result, within a company, inventory management is often a hot issue. Shrinking inventory spins off a one-time, and highly desirable, cash windfall. In most industries there is a connection between market capitalization and inventory management. This drives pressure to reduce inventory and question existing practices. However, while companies are quick to ask questions, they often make the wrong judgements about inventory strategies. The goal of this report is to improve this dialogue.
Most companies have invested in many inventory optimization solutions over the last decade. Within the company, there is mounting frustration about the failure of these projects to actualize and maintain targets. What most companies fail to realize is that the technology strategy needs to be worked in concert with supply chain strategy. Often we find while companies improve inventory levels through the deployment of inventory technologies, operational decisions to widen the item master or lengthen the supply chain will undermine the project targets.
There are many drivers of inventory, and the management of inventory levels requires discipline and a cross-functional focus. It is a story of people, process, and technology. Let’s start with people. Today, fewer than 5% of companies have an end-to-end focus (as defined from the customer’s customer to the supplier’s supplier), and most companies lack alignment and balance. The largest gaps between are between operational and commercial groups. (Cecere L. , Three Techniques to Improve Organizational Alignment, 2013). As companies close the organizational gap, progress is made on inventory. Likewise, when it comes to balance, 68% of organizations surveyed lack balance in Sales and Operations Planning between the commercial groups (the “S”) and the operational groups (the “OP), When balance is achieved, the organization rates itself as more agile, and aligned, and there is an 11% improvement in inventory turns (Cecere L. , Research in Review, 2014).
Supply chain processes are now over 30-years old. While there is a generalized belief that maturity of supply chain processes has improved inventory turns, as can be seen in Figure 2, the improvements in cash-to-cash have primarily been driven by lengthening payables. In industries like beverage, pharmaceuticals, consumer packaged goods and medical device, the industry averages have gone backwards (inventory turns have decreased not increased). Only the food and apparel industries have posted double-digit improvements in inventory turns. Why? Food and apparel are largely regional supply chains which are maturing. They lag consumer packaged goods in supply chain maturity. While consumer packaged goods companies are more mature, they are more global. The rise of the global multinational has greatly impacted inventory requirements.
Supply Chain Metrics That Matter: A Focus on the Automotive Industry – 2015 Lora Cecere
RESEARCH OVERVIEW:
Report Details: This report is based on analysis of financial balance sheet and income statement data for the period of 2006-2014 and interactions with clients in the automotive industry in supply chain strategy engagements. The report applies the Supply Chain Index and the Supply Chains To Admire methodology to the automotive industry. In the analysis there are clear distinctions between automotive companies with European, Asian and North American heritages. The European-based companies are top performing with Audi making the Supply Chains to Admire listing for two consecutive years.
Objective: To use financial balance sheet and income statement data coupled with recent research to better understand the state of automotive industry supply chains.
Hypothesis: The automotive industry struggled during the Great Recession and continues the bumpy ride of an ongoing boom-and-bust cycle. With current high growth levels, now is the time to reflect on the lessons of the 2007 recession and build a resilient and agile supply chain for the future.
Supply Chain Metrics That Matter: A Focus on Pharmaceutical Companies - 2016Lora Cecere
Supply Chain Metrics That Matter: A Focus on Pharmaceutical Companies – 2016
2006-2015
This report is based on analysis of financial balance sheet data and income statements for the pharmaceutical industry over the period of 2006-2015. (Data is sourced from YCharts). The report reflects insights from the pre- and post-recession periods and compares the progress of companies within the peer group(s).
RESEARCH OVERVIEW:
Report Details: This report is based on analysis of financial balance sheet and income statement data within the pharmaceutical industry, for the period of 2006-2015. The data is collected from YCharts.
Objective: To use financial balance sheet and income statement data to better understand the state of pharmaceutical supply chains and to determine which Pharmaceutical company’s supply chain did the best on the delivery of a portfolio of metrics over the last decade.
Hypothesis: The supply chain within the pharmaceutical industry is increasing in importance to deliver on the objectives of quality, drug efficacy and reliability. Risk mitigation, and counterfeiting are important cornerstones for the end-to-end supply chain vision.
Executive Overview
Analytic strategies are at the core of digital innovation. It is a building block in digital manufacturing, autonomous supply chains, and digital path to purchase. New forms of analytics are defining new capabilities.
Traditional supply chains do not sense. They respond. The response is usually late, and out of step with the market. Today’s supply chains are dependent on structured data and Excel spreadsheets. Despite spending 1.7% of revenue on Information Technology (IT), Excel ghettos are scattered across the organization. Most organizations are held hostage by long and grueling ERP implementations only to find out at the end of the project that the business users cannot get to the data.
The traditional supply chain paradigm is an extension to the three-letter acronyms which dominated the client-server architected world of the 1990s—ERP, APS, PLM, SRM, and CRM—while the more enlightened business user understands that analytics are not an extension of yesterday’s alphabet soup.
Historically, analytics has only meant reporting. In contrast, today, analytic strategies are at the core. As analytics capabilities morph and change, analytics technologies are at the core of the architecture, sandwiched between the conventional applications and workforce productivity tools as shown in Figure 2.
Figure 2. Analytic Strategies at the Core of Digital Transformation
Current State
Today, the focus of analytics implementations is on data visualization, unstructured data mining, and data lake technologies. As will be seen in this report, this is rapidly changing. Within five years, the most disruptive technologies will be Blockchain and cognitive computing. New forms of analytics will make many of today’s technology approaches obsolete. Few companies, mainly early adopters, are working in these areas.
Similar to Driving Supply Chain Excellence Report -18 June 2015 (20)
A critical look at three years of supply chain disruption. Using quantitative and qualitative research, Lora Cecere, Founder of Supply Chain Insights, looks critically at the factors within companies that drove resilience and the factors less successful. Companies that won were aligned, used market signals, decreased process latency, used scenario planning, and implemented descriptive analytics. Those that fared worse, had tight integration of supply chain planning to ERP, were not aligned, and were focused on a digital transformation strategy.
River of Demand - ALL RIVERS with QR.pdfLora Cecere
Drawings of demand as a river depicting the issues with flow with the voice overlay of the planner. To hear the voice, scan the QR code at the bottom of the drawing.
Presentation was given at the Longbow presentation on the future of supply chain management and the value of changing processes to make decisions a the speed of business decisions
At the Supply Chain Insights Global Summit, we challenged the audience to think about "social tokens" using this presentation from Luke Layden of Coin Desk.
Today's supply chain processes are inside-out. Outside-in processes, using channel and market data, improve the time to respond. This presentation reflects two years of testing using machine learning to understand the impact on the bullwhip effect and Forecast Value Added.
Now in its ninth year, the Supply Chains to Admire analysis is a study of the progress of each industry sector on the balanced scorecard of growth, operating margin, inventory turns, and Return on Invested Capital (ROIC). Twenty-two companies outperform their peer group, defining and exemplifying supply chain excellence.
Supply Chains to Admire Analysis 2022_2022 presentation.pptxLora Cecere
Supply Chains to Admire is a data-driven analysis based on public reporting of manufacturing and retail companies. The research evaluates which public companies drove improvement while outperforming their peer groups on performance metrics and value for the ten-year period of 2012-2021. The 25 winners are a testimonial to supply chain resilience.
The Role of Analytics In Defining The Art Of The PossibleLora Cecere
Analytics capabilities are evolving faster than organizations can adopt them into their processes. Here we share the research of 92 respondents in their journey to use new forms of analytics in their digital transformation journey.
RMD24 | Debunking the non-endemic revenue myth Marvin Vacquier Droop | First ...BBPMedia1
Marvin neemt je in deze presentatie mee in de voordelen van non-endemic advertising op retail media netwerken. Hij brengt ook de uitdagingen in beeld die de markt op dit moment heeft op het gebied van retail media voor niet-leveranciers.
Retail media wordt gezien als het nieuwe advertising-medium en ook mediabureaus richten massaal retail media-afdelingen op. Merken die niet in de betreffende winkel liggen staan ook nog niet in de rij om op de retail media netwerken te adverteren. Marvin belicht de uitdagingen die er zijn om echt aansluiting te vinden op die markt van non-endemic advertising.
Enterprise Excellence is Inclusive Excellence.pdfKaiNexus
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Driving Supply Chain Excellence Report -18 June 2015
1. Driving Supply Chain Excellence
Insights on the Use of a Supply Chain Center of Excellence
06/18/2015
By Lora Cecere
Founder and CEO
Supply Chain Insights LLC
2. Page 2
Contents
Research Methodology
Disclosure
Executive Overview
A Clear Supply Chain Strategy Means Greater Success
What Is the Value Proposition for a Center of Excellence?
What Does a Center of Excellence Do Well?
Current State
Organizational Design, Structure and Governance
Evolution of Supply Chain Design: A Maturity Model
Recommendations
Summary
Other Relevant Reports
Appendix
About Supply Chain Insights, LLC
About Lora Cecere
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5
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20
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3. Page 3
Research Methodology
This report shares the results of a quantitative survey on supply chain Centers of Excellence (COE)
along with insights gathered through roundtable discussions. In Figure 1 we share the objectives,
methodology, and demographics of the study.
Figure 1. Survey Overview
Disclosure
Your trust is important to us. In our business, we are open and transparent about our financial
relationships and our research operations. To develop this research we partnered with Chainalytics
to drive a response rate. Throughout this research process we maintain anonymity of the
respondents. It is our policy to validate the research participants, but to never share the names of
respondents or give attribution to the open comments collected in the research study.
This report is written and shared using the principles of Open Content research. It is intended for you
to read and share freely with your colleagues and through social channels like LinkedIn, Facebook
and Twitter. When you use the report, all we ask for in return is attribution. We publish under the
4. Page 4
Creative Commons License Attribution-Noncommercial-Share Alike 3.0 United States and you will
find our citation policy here.
In the development of research, our philosophy is “You give to us, and we give to you.” We empower
the spirit of the crowd. Participants in our research always receive the final reports; and, if interested,
we will share our insights with the respondents of our quantitative surveys and qualitative interviews
in a one-hour phone call with their team. Participants in this research also had an option to participate
in a networking roundtable. Forty-one supply chain leaders participated in these roundtables. Where
appropriate we share their feedback on the quantitative study.
We remain committed to delivering thought-leading content for the supply chain leader. It is our goal
for Supply Chain Insights to be the place where visionaries turn to gain an understanding of the future
of supply chain management.
5. Page 5
Executive Overview
Growth is slowing and the complexity in today’s supply chain is unprecedented. No two centers of
excellence are the same, and no two supply chains are alike. There are different drivers and
obstacles to building and running a Center of Excellence. However, if done right, the organization
rates itself as more aligned, proactive and agile. The high-level results from our study are shown in
Figure 2.
Figure 2. Centers of Excellence Infographic
6. Page 6
Based on our qualitative interviews with clients, we find that these seven drivers to build a Center of
Excellence:
Increase in the Importance of Supply Chain Management. As growth slows, and the global
multinational organization matures, more and more companies are interested in driving supply
chain excellence. The reasons are many; but, at the top of the list is improving reliability in the face
of volatility. How so? Demand volatility is increasing and supplier viability is growing more fragile.
Driving reliability in global operations in the face of these challenges is fundamental to defining and
executing supply chain excellence.
Building of Global Teams and the Development of Supply Chain Talent. With the shortage of
students from academia, and the retirement of the first- and second-generation supply chain
pioneers, more and more companies are developing and executing programs to build supply chain
talent. There is a shortage of mid-management talent with pressure on planning job retention. There
is a limited supply of supply chain knowledge workers: leaders that are technologically savvy,
analytical problem solvers, and astute in business processes.
Continuation of Work on Enterprise Resource Planning (ERP). When companies complete a
large ERP project, there is a strong impetus to get the value from the investment and ensure
technology usage. The focus of the Center of Excellence often becomes an extension of the global
implementation team.
Metrics and Implementation of Analytics. While the management of supply chain excellence
sounds easy, it is not. The management of order-to-cash and procure-to-pay processes and the
supply chain execution processes are easier because they are well-defined. Most companies
struggle with the definition of planning and the use of new forms of analytics.
Network Design and the Orchestration of Flows. Most companies start on their supply chain
design journey to save costs in logistics. With the increasing cost of transportation, and the fragility
of freight networks, network design for transportation and logistics networks is paramount. One
client likened it to “minting money.”
Testing of New Technologies. Cloud technologies. Supply chain operating networks. The Internet
of Things. 3D Printing. New forms of analytics. The list of technology and process disruptors could
go on and on. While most companies feel stuck in their existing, and more traditional, processes
they want to understand and explore technology possibilities to define a digital supply chain
transformation road map. The supply chain Center of Excellence is a natural starting point.
Mergers and Acquisitions. Mergers and acquisitions drive change for the supply chain requiring
the design and orchestration of the value network to gain synergy. With heightened politics, and the
need to rationalize the processes in the time of M&A, the supply chain Center of Excellence is
essential to rationalize process definition and technology adoption.
7. Page 7
One out of two companies surveyed for this study reported having a supply chain Center of
Excellence; but, only one in two believe they are successful. Despite the strong and compelling
drivers, success can only happen when there is a supportive culture. The goal of this report is to help
supply chain leaders beat the odds.
A Clear Supply Chain Strategy Means
Greater Success
While it is easy to define “What Good Looks Like” for transactional systems, defining the End-to-End
vision for the Supply Chain Value Network is more difficult. The typical steps for the End-to-End
Journey are outlined in Figure 3.
Figure 3. Journey for End-To-End Supply Chain Processes
These steps are more nebulous than the definition of transactional systems, requiring a clear
definition of the supply chain strategy as it ties to the business strategy. When successful, there is a
clear definition of the goals: well-defined process orchestration with new product launch,
processes/product platform rationalization, and clarity of business policies in supplier/commercial
relationships.
As new forms of analytics evolve, new capabilities are being defined in the Center of Excellence and
the processes of supply chain planning, inventory management, and network design are evolving. For
the successful Center of Excellence this is at the heart of the mission.
In Figure 4, for the purposes of this report, we define supply chain strategy. In the areas of planning
8. Page 8
and network design the questions in the green and white boxes must be answered before companies
tackle the definition of business process. When this is completed, there is clarity of outcomes and the
optimizers within the technologies can be tuned to manage conscious trade-offs. However, if this
does not happen, the tools and technologies work at cross-purposes: optimizing different things with
varied outcomes.
Figure 4. Definition of the Supply Chain Strategy
What Is the Value Proposition for a Center of
Excellence?
The differences in organizational alignment are marked based on the inclusion of a network design
group within the center of excellence. Maturity in network design improves alignment. In companies
greater than $10 billion in revenue, three out of four Centers of Excellence includes a group focused
on network design. They average two, not one, and the centers are four-years old on average. Two-
fifths of companies have both a Center of Excellence and a Network Design group. They are closely
coupled and work together to drive alignment improvements.
A ‘supply chain Center of Excellence’, for the purposes of this report, is defined as a dedicated team
that is focused on improving process excellence. The average company staffing for a Center of
9. Page 9
Excellence is 19 full-time employees.
Navigating the journey is important. Today, nine out of ten companies are stuck. They are unable to
power supply chain improvement at the intersection of operating margin and inventory turns. As
shown in Figure 5, companies in this report describe themselves as reactive, tactical, and stuck in
functional silos. This is today’s reality for most companies, not just the companies in this study.
Figure 5. Current Descriptors of Supply Chain Excellence
While it is difficult to place hard numbers and drive a hard ROI, teams with a successful Center of
Excellence are significantly more agile and aligned. When companies have a supply chain Center of
Excellence, supply chain teams are more likely to state that they are strategic, proactive, and aligned.
They are also more likely to describe themselves as outside-in, from the customer back.
10. Page 10
Table 1. Current Descriptors of Supply Chain Excellence with and Without a Center of Excellence
When there is an effective supply chain Center of Excellence group there is an impact on
organizational alignment between the finance group and the operations group. In addition, where
there is an effective network design group there is better alignment between marketing and finance.
When we compare companies with and without a supply chain Center of Excellence, as shown in
Figure 6, we see there is greater alignment for those with a supply chain Center of Excellence. The
larger the company, the greater the impact on alignment. For the large global multinational, this is a
significant benefit.
11. Page 11
Figure 6. Impact of the Supply Chain Center of Excellence on Alignment
What Does a Center of Excellence Do Well?
What Are the Issues?
The management of the supply chain Center of Excellence has their challenges. They face political
and cultural issues. As shown in Figure 7, change management, executive alignment and support,
and cross-functional alignment top the list. Others include regional/global governance and talent
development.
Based on qualitative interviews, when a supply chain Center of Excellence performs well there is a
high level of executive support, clarity of strategy, a strong focus on a business imperative, support
from the human resource team for talent development, and mature skills in supply chain
planning/network design.
It requires balance between ‘push’ and ‘pull’ within the organization. The supply chain Center of
Excellence has a higher success rate when it is focused on ‘pull’. (‘Pull’ is defined as the business
teams pulling the Center of Excellence into business projects and priorities while ‘push’ is an
12. Page 12
auditing/standardization focus.). Navigation of service pitfalls across divisions and product lines
requires a very skilled manager in driving cross-functional alignment and managing change. This
leader also needs strong skills to influence and educate the executive team on supply chain options
and issues.
Figure 7. Center of Excellence Issues
Current State
One of the first questions that we get on the functioning of the supply chain Center of Excellence is
“What is the Center of Excellence responsible for?” This is closely followed by the question “What and
when does a supply chain Center of Excellence excel?”
No two centers of excellence are alike. In Figure 8, when companies were asked to self-assess the
performance and importance of supply chain Center of Excellence responsibilities, we find that
companies rate their capabilities on network design, metrics modeling, and supply chain planning as
both important and highly performing. Talent management, new technology evaluations, and
inventory management are lower performing, but still important. The group in this study had low
13. Page 13
importance on the management of horizontal processes—revenue management, Sales and
Operations Planning and Supplier Development—and the respondent group is grappling with the
fundamentals of cost, inventory, and service.
Figure 8. Performance versus Importance of Center of Excellence Roles and Responsibilities
In this study, 48% of the work focus was push and 45% was pull. When the Center of Excellence is
focused on push-based processes, it is usually process auditing. The auditing can include demand
and supply plan auditing, the use of a new technology, and S&OP maturity. The auditing objectives of
the survey respondents are outlined in Figure 9.
14. Page 14
Figure 9. Push-Based or Auditing Objectives of the Supply Chain Center of Excellence
Organizational Design, Structure and
Governance
The reporting relationships of the Center of Excellence are typically cross-functional with direct
reporting to a Chief Operating Officer, Profit Center Manager, or Chief Supply Chain Officer. As
shown in Figure 10, they are seldom at the divisional or functional level. The focus of the Center of
Excellence is more end-to-end, from the customer’s customer to the supplier’s supplier, with close
support by the leadership team. Based on prior analysis, this is a shift. The old reporting structures
were more likely reporting to Information Technology groups completing major Enterprise Resource
Planning (ERP) and analytics projects.
15. Page 15
Figure 10. Reporting Relationships of the Center of Excellence
For a supply chain Center of Excellence to thrive in a global multinational company, the group needs
to carefully define regional/global governance. Each organization has a unique culture. For example,
while Johnson & Johnson is more focused on governance at a divisional and a regional level, P&G is
more regional rolling-up into global planning hubs, and Cisco/Dow are more global with a focus on
corporate initiatives. Getting this right is essential. It needs to be a conscious choice. Groups are
more effective when they know how decisions are made. The lack of clarity on governance is the
primary reason that we have seen Centers of Excellence fail in our work with clients.
16. Page 16
Figure 11. Definition of Regional/Global Governance
Evolution of Supply Chain Design:
A Maturity Model
Supply chain design also looks very different by company. The differences are marked with varying
levels of maturity. Based on this study, we know that today, three out of four companies with a
network design group have 10B$ or greater revenue (vs. 30% for those without a network design
group). The network design groups within the Center of Excellence average seven people. There is
very little outsourcing; the work is done in-house within the organization. The efforts are coordinated
by internal teams. So, how do companies get good at supply chain design? Where are the supply
chain architects of the future?
For clarity, let's start with a definition. For the purposes of this study, we define the processes of
network design as the use of analytic tools to model and optimize the supply chain. The work can use
multiple technologies and combine cognitive learning, simulation and optimization. Based on
interviews with manufacturing clients, we find that companies move through a five-stage maturity
17. Page 17
cycle. There is an opportunity to design our supply chains, and our value networks. As the work of
network design matures within the supply chain Center of Excellence, the capabilities rapidly
progress. The design maturity model is outlined in Figure 12.
Figure 12. Maturity Model of Network Design Processes
Start by defining your current state. This shift will not happen overnight. It is about changing
traditional paradigms and building the processes to make design a priority. To understand the
stages, we share more insights:
Stage 1: What Are the Right Bricks and Mortar? The earliest form of network design is a
focus on the bricks and mortar. The focus is on the right locations for factories and distribution
centers. It is on the physical flows of the supply chain. This analysis is ad hoc is usually stimulated
by the launch of a new product or a shift in capacity. The design efforts are usually coordinated by a
central group like a Center of Excellence.
Stage 2: All About Transportation. In this phase of network design, the focus is functional. It is
usually driven by the logistics and transportation functions. The focus is to rationalize the flows from
the distribution center to the customer. The flows are typically linear and the analysis is on alternate
18. Page 18
modes and best shipping lanes. This work is typically periodic to accompany a freight bid or an end-
to-end project.
Stage 3: Effective B2B Networks. At this level of maturity, companies are looking at
the complexities of supply networks—manufacturing outsourcing, supplier development, and the
management of complex distribution, or demand networks—customer shipment alternatives,
distributors, and free trade zones. The focus is on the definition of business policy. It is often
stimulated by failure. The projects explore the alternatives for risk management, tax efficiency,
social responsibility, and the complexities of outsourcing. The growth of e-commerce puts pressure
on networks for a quicker and more accurate response. Companies need multi-tier Available-to-
Promise (ATP) and real-time inventory management. Network complexity grows quickly which rules
out many of the available technologies. In this work, the use of linear optimization (which usually is
about averages) is augmented with simulation to test network feasibility (the ability of the network
design to manage demand and supply volatility). However, the work is still periodic. It is not an
embedded systemic enterprise approach.
Stage 4: All About Flows. In the next phase and evolution of design maturity, companies realize
that product flows are only a piece of the puzzle. There are more flows than materials to make
products. In this evolution, cash, information, and inventory flows grow in importance. At this stage,
network design efforts become an enterprise-class process with a monthly analysis of the network.
This is often coupled with Sales and Operations Planning (S&OP) processes. Terms like ‘push/pull
decoupling points’, ‘form and function of inventory’, and ‘buffer analysis’ become a part of the
lexicon. (For more on this level of sophistication on inventory management check out our recent
inventory management report.) Companies like Cisco Systems, Intel, Hewlett-Packard, SanDisk
and Seagate are at this level of sophistication.
Figure 13 is a good overview of the current state of network design in the industry.
19. Page 19
Figure 13. Focus of Network Design Efforts
Stage 5: What Should the Network Be? In the last and final stage of network design maturity,
the focus is on a clean sheet of paper. The idea is "not to optimize what exists, but to develop a
roadmap of what should exist." This work is useful to baseline the current state of the business and
brainstorm higher levels of performance. In this analysis, the evaluation of partnerships and design
partners is holistic, optimized from the customer's customer to the supplier's supplier. The focus is
on value and understanding supply chain potential. While this may seem academic, it is very useful
for an executive team to see the difference between an ‘efficient network that operates at the lowest
cost per case’, a ‘responsive network that can shift with the quickest cycle time to market demands’,
and an ‘agile network that can deliver the same cost, quality and customer service levels given the
levels of demand and supply volatility’. These are three different designs. While executive
leadership teams will often use these terms interchangeably, seeing the impact on a geographical
map for a global network stimulates a different level of dialogue. It is an awakening. Why?
Executive teams are guilty of using these terms frequently without realizing the difference. Seeing
the difference in a tangible network design stimulates a new discussion.
20. Page 20
Recommendations
One in two supply chain Centers of Excellence is successful. Based on the qualitative discussions
with manufacturing companies using this data, here we share seven recommendations:
1. Clearly Define the Supply Chain Strategy and Operating Charter for the Supply Chain Center
of Excellence. Spend time understanding the organizational goals and define how to deliver the
business strategy through supply chain excellence. In the building of your charter, avoid buzzword
bingo. Define all terms and focus on delivery. Measure the impact and market the successes.
2. Focus on Maturing Your Planning and Supply Chain Design Processes. Maximize the
effectiveness of more advanced network technologies. Build a group of specialists and actively and
intentionally design the network. Over time, connect this analysis to cross-functional processes.
3. Clearly Define the Governance Model and Market the Group’s Efforts. Success is all about
adaptation to cultural norms. Spend time to define the role of regional, global, and divisional teams for
supply chain planning and network design decisions.
4. Have the Right Balance of Push and Pull. Focus more on pull than push and train the group to
serve the larger organization.
5. Grow and Retain Talent. While business process outsourcing of planning sounds good, we know of
no client where it has been successful. While you may use external talent to learn technologies, focus
on building in-house capabilities.
6. Mature Your Supply Chain Design Capabilities. Companies that are mature in the network design
processes drive alignment and agility faster.
7. Align to a Corporate Initiative to Make a Difference. Align the supply chain Center of Excellence
to drive success on a burning platform and align the effort to drive the guiding coalition.
Summary
Design with the goal in mind while respecting the organizational culture and norms. It is clear that he
supply chain Center of Excellence improves supply chain agility and alignment. In this world, where
nine out of ten supply chains are stuck and most are labeled ‘traditional’, it matters. Make your
journey successful by sidestepping the change management issues to drive a faster rate of supply
chain excellence. The greater the maturity in network design thinking, the faster the progress.
21. Page 21
Other Relevant Reports
If you like this report, we think you will like others. Readers may gain added value by accessing
complimentary, and related, reports on the Supply Chain Insights website:
Voice of the Supply Chain Leader 2014
Supply Chains to Admire
Maximizing the Return on Investment in Supply Chain Planning
Three Techniques to Improve Organizational Alignment
Supply Chain Visibility in Business Networks
22. Page 22
Appendix
In this section, we share the demographic information of survey respondents, along with research
findings to support the key insights listed in this report. Our motto is “You give to us, and we give to
you.” Companies responding to this survey received final results and had the option to participate in
global roundtables to network with other supply chain leaders.
The names, both of individual respondents and companies participating, are held in confidence. We
never share the name of the respondents. In this section, the demographics are shared to help the
readers of this report gain a better perspective on the results. The demographics and additional
charts are found in Figures A–N. To help the reader, at the bottom of each image are the specific
questions asked in the survey with the survey demographics.
Figure A. Company Size and Industry
24. Page 24
Figure C. Respondent by Role
Figure D. Presence of a Center of Excellence
25. Page 25
Figure E. Center of Excellence Effectiveness
Figure F. Staffing
26. Page 26
Figure G. Center of Excellence Focus
Figure H. Impact on Agility
27. Page 27
Figure I. Center of Excellence Distribution by Company Size
Figure J. Center of Excellence Focus
28. Page 28
Figure K. Presence of a Network Design and a Center of Excellence
Figure L. Most Likely Characteristics of a Center of Excellence
29. Page 29
Figure M. Characteristics of a Network Design Group
Figure N. Network Design Group Staff and Outsourcing
30. Page 30
About Supply Chain Insights, LLC
Founded in February, 2012 by Lora Cecere, Supply Chain Insights LLC is focused on delivering
independent, actionable, and objective advice for supply chain leaders. If you need to know
which practices and technologies make the biggest difference to corporate performance, turn to us.
We are a company dedicated to this research. Our goal is to help you understand supply chain
trends, evolving technologies and which metrics matter.
About Lora Cecere
Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights LLC and
the author of popular enterprise software blog Supply Chain Shaman currently read
by 5,000 supply chain professionals. She also writes as a Linkedin Influencer and
is a a contributor for Forbes. She has written three books. The first book, Bricks
Matter, (co-authored with Charlie Chase) published in 2012. The second book, The
Shaman’s Journal published in September 2014, and the third book, Supply Chain
Metrics Metrics That Matter, which published in December 2014.
With over twelve years as a research analyst with AMR Research, Gartner Group, and Altimeter
Group, and now as a Founder of Supply Chain Insights, Lora understands supply chain. She has
worked with over 600 companies on their supply chain strategy and speaks at over 50 conferences a
year on the evolution of supply chain processes and technologies. Her research is designed for the
early adopter seeking first mover advantage.