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 Early in the decade there were claims that XML was going to make EDI outdated.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.
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.
State of Transportation: Where Are We on the Vision of Automation? - 7 NOV 2012Lora Cecere
For the purpose of this report, transportation management is defined as technologies that automate and improve decision making in domestic and international logistics.
This report is based on a quantitative study conducted between August 16th, 2012 and October 9th, 2012. The summary reflects responses from 75 respondents from 55 companies active in transportation freight decisions. The goal of the study was to understand how business complexity and maturity have affected the deployment and development of supply chain technologies to improve transportation management. The study contrasts the views of line-of-business transportation solution users and providers of the technologies.
The quantitative study results are enriched with insights from Supply Chain Insights’ work on supply chain ratios and interviews with business leaders to validate and clarify the results.
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.
Supply Chain Metrics That Matter: Third Party Logistics Providers-10 DEC 2013Lora Cecere
Executive Overview
Third party logistics (3PL) providers fill a critical role in today’s global supply chains. With the rise in e-commerce, the growth of global markets, and the reshaping of the retail market, dependency on 3PLs is rising. It is an industry with fierce competition. Despite the promises of technology-driven differentiation, as of yet, no 3PL has successfully been able to differentiate and create significant brand loyalty. This is the market opportunity moving forward.
Today, companies on average send 30% of goods through third party logistics (3PL) providers. The 3PL market is now $148 billion in size with single-digit annual growth. Hit hard by the Great Recession, the industry is still in recovery. The 3PL industry has matured over the last 50 years; but it operates at a low margin, struggling to balance what we term The Effective Frontier.
The ongoing inability to drive resiliency on The Effective Frontier by managing tradeoffs of growth, profitability, cycle and complexity should be a concern for those working in, or working with, the 3PL industry. Comparable results from ten industries are shown in Table 1, ranked by average operating margin. 3PLs not only occupy the second lowest ranking, they have also seen the most significant drop in operating margin as a percentage since 2000. In this report, we look more closely at the current state of the industry.
Supply Chain Metrics That Matter: A Focus on Hospitals - 6 JAN 2013Lora Cecere
Executive Overview
Growth is slowing. Profitability is tougher. Compliance mandates are growing. How do companies balance the goals for value-based outcomes for health and wellness with costs? In this environment, supply chain matters more than ever.
In this report, we share insights on healthcare supply chains. Grown out of the offices of procurement, the supply chain function of the hospital is still in its infancy; but based on increasing business requirements and complexity, it is only beginning to show its true potential.
Growth: Futures are Uncertain.
The hospital administrator is facing many challenges. Growth is slowing and pressures are growing. The question is how to balance patient outcomes with better cost management. How does a hospital move forward with an uncertain future? And, what will be the impact of healthcare reform?
In table 1, we list top line growth over the past decade for four companies operating within the hospital industry. While there are ups and downs, the general trend is downward.
The use of new forms of data is not an evolution. Instead, powering big data supply chains, and innovating through new forms of analytics, is a step change.
New forms of data do not fit traditional architectures. Traditional supply chains were architected to use structured data with software using relational databases. The big data era will make many of the investments from the last decade obsolete.
Big data offers the opportunity to redefine supply chain processes from the outside-in (from the channel back) and define the customer-centric supply chain. This is in stark contrast to the inflexible IT investments installed over the last decade to respond inside-out based on order shipments. These traditional investments in Enterprise Resource Planning (ERP), Advanced Planning Systems (APS) and traditional Business Intelligence (BI) for reporting, improved the supply chain response, but did not allow the organization to sense, shape or orchestrate outside-in. New forms of data (e.g., images, social data, sensor transmission, input from global positioning systems (GPS), the Internet of Things, and unstructured text from email, blogs and ratings and reviews) offer new opportunities. They also require new techniques and technologies.
Big data offers new opportunities for the corporation to listen, test and learn, and respond faster. In this study, companies see the greatest opportunity to use big data for “demand” (to better know the customer and improve the response); however, actual investments are in “supply” not “demand.” Respondents view supply-centric projects like product traceability (involving product serialization and traceability), supply chain visibility and temperature controlled handling as important.
Is big data a problem or a new market opportunity? Like the respondents of this survey, we believe that big data represents an opportunity for all. In the study, one-fourth of respondents currently have a big data initiative. However, interest is growing. Sixty-five percent have or plan to have a big data initiative in the future. Despite the hype, and the intensity of marketing rhetoric in the market, in our year-over-year studies on big data we see very little change in activity.
Despite the fact that the IT group is more likely to see big data as a problem, 49% of those with a big data initiative report that it is headed by an IT leader.
Big data represents a new opportunity, but seizing it requires a new form of leadership. It can ignite new business models and drive channel opportunities. However, it cannot be big data for big data itself. Instead, the initiatives need to be aligned to business objectives with a focus on small and iterative projects. It requires innovation. To move forward, companies need to embrace new technologies and redesign processes. It is not the case of stuffing new forms of data into old processes.
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.
What Drives Supply Chain Excellence? A Look Back and a Look ForwardLora Cecere
This report is based on analysis of financial balance sheet and income statement data for the period of 2000-2012, quantitative survey research results, and interactions with clients in various industries in supply chain strategy sessions. We examine the performance of companies in a cross-section of industries on various metrics. We find that most companies and most industries are stuck in an environment of low results, with the exception of the hi-tech & electronics industry. Finally, we offer our perspective and advice on advancing supply chain excellence and moving the needle for better supply chain performance across company and industry lines.
Highlights
• A project-based approach has failed. Our gains are much lower than we believed in inventory management and a long-term perspective is needed to drive permanent and sustainable improvements.
• The hi-tech industry is the only of the six industries profiled to drive sustained gains across most metrics considered during the time period.
• The definition of supply chain excellence is still evolving as companies move through different maturity stages. Industrial and pharmaceutical companies are mainly stuck at low levels of maturity and could benefit greatly from applying lessons learned in other industries to their own supply chains.
Research Results
Full report
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.
State of Transportation: Where Are We on the Vision of Automation? - 7 NOV 2012Lora Cecere
For the purpose of this report, transportation management is defined as technologies that automate and improve decision making in domestic and international logistics.
This report is based on a quantitative study conducted between August 16th, 2012 and October 9th, 2012. The summary reflects responses from 75 respondents from 55 companies active in transportation freight decisions. The goal of the study was to understand how business complexity and maturity have affected the deployment and development of supply chain technologies to improve transportation management. The study contrasts the views of line-of-business transportation solution users and providers of the technologies.
The quantitative study results are enriched with insights from Supply Chain Insights’ work on supply chain ratios and interviews with business leaders to validate and clarify the results.
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.
Supply Chain Metrics That Matter: Third Party Logistics Providers-10 DEC 2013Lora Cecere
Executive Overview
Third party logistics (3PL) providers fill a critical role in today’s global supply chains. With the rise in e-commerce, the growth of global markets, and the reshaping of the retail market, dependency on 3PLs is rising. It is an industry with fierce competition. Despite the promises of technology-driven differentiation, as of yet, no 3PL has successfully been able to differentiate and create significant brand loyalty. This is the market opportunity moving forward.
Today, companies on average send 30% of goods through third party logistics (3PL) providers. The 3PL market is now $148 billion in size with single-digit annual growth. Hit hard by the Great Recession, the industry is still in recovery. The 3PL industry has matured over the last 50 years; but it operates at a low margin, struggling to balance what we term The Effective Frontier.
The ongoing inability to drive resiliency on The Effective Frontier by managing tradeoffs of growth, profitability, cycle and complexity should be a concern for those working in, or working with, the 3PL industry. Comparable results from ten industries are shown in Table 1, ranked by average operating margin. 3PLs not only occupy the second lowest ranking, they have also seen the most significant drop in operating margin as a percentage since 2000. In this report, we look more closely at the current state of the industry.
Supply Chain Metrics That Matter: A Focus on Hospitals - 6 JAN 2013Lora Cecere
Executive Overview
Growth is slowing. Profitability is tougher. Compliance mandates are growing. How do companies balance the goals for value-based outcomes for health and wellness with costs? In this environment, supply chain matters more than ever.
In this report, we share insights on healthcare supply chains. Grown out of the offices of procurement, the supply chain function of the hospital is still in its infancy; but based on increasing business requirements and complexity, it is only beginning to show its true potential.
Growth: Futures are Uncertain.
The hospital administrator is facing many challenges. Growth is slowing and pressures are growing. The question is how to balance patient outcomes with better cost management. How does a hospital move forward with an uncertain future? And, what will be the impact of healthcare reform?
In table 1, we list top line growth over the past decade for four companies operating within the hospital industry. While there are ups and downs, the general trend is downward.
The use of new forms of data is not an evolution. Instead, powering big data supply chains, and innovating through new forms of analytics, is a step change.
New forms of data do not fit traditional architectures. Traditional supply chains were architected to use structured data with software using relational databases. The big data era will make many of the investments from the last decade obsolete.
Big data offers the opportunity to redefine supply chain processes from the outside-in (from the channel back) and define the customer-centric supply chain. This is in stark contrast to the inflexible IT investments installed over the last decade to respond inside-out based on order shipments. These traditional investments in Enterprise Resource Planning (ERP), Advanced Planning Systems (APS) and traditional Business Intelligence (BI) for reporting, improved the supply chain response, but did not allow the organization to sense, shape or orchestrate outside-in. New forms of data (e.g., images, social data, sensor transmission, input from global positioning systems (GPS), the Internet of Things, and unstructured text from email, blogs and ratings and reviews) offer new opportunities. They also require new techniques and technologies.
Big data offers new opportunities for the corporation to listen, test and learn, and respond faster. In this study, companies see the greatest opportunity to use big data for “demand” (to better know the customer and improve the response); however, actual investments are in “supply” not “demand.” Respondents view supply-centric projects like product traceability (involving product serialization and traceability), supply chain visibility and temperature controlled handling as important.
Is big data a problem or a new market opportunity? Like the respondents of this survey, we believe that big data represents an opportunity for all. In the study, one-fourth of respondents currently have a big data initiative. However, interest is growing. Sixty-five percent have or plan to have a big data initiative in the future. Despite the hype, and the intensity of marketing rhetoric in the market, in our year-over-year studies on big data we see very little change in activity.
Despite the fact that the IT group is more likely to see big data as a problem, 49% of those with a big data initiative report that it is headed by an IT leader.
Big data represents a new opportunity, but seizing it requires a new form of leadership. It can ignite new business models and drive channel opportunities. However, it cannot be big data for big data itself. Instead, the initiatives need to be aligned to business objectives with a focus on small and iterative projects. It requires innovation. To move forward, companies need to embrace new technologies and redesign processes. It is not the case of stuffing new forms of data into old processes.
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.
What Drives Supply Chain Excellence? A Look Back and a Look ForwardLora Cecere
This report is based on analysis of financial balance sheet and income statement data for the period of 2000-2012, quantitative survey research results, and interactions with clients in various industries in supply chain strategy sessions. We examine the performance of companies in a cross-section of industries on various metrics. We find that most companies and most industries are stuck in an environment of low results, with the exception of the hi-tech & electronics industry. Finally, we offer our perspective and advice on advancing supply chain excellence and moving the needle for better supply chain performance across company and industry lines.
Highlights
• A project-based approach has failed. Our gains are much lower than we believed in inventory management and a long-term perspective is needed to drive permanent and sustainable improvements.
• The hi-tech industry is the only of the six industries profiled to drive sustained gains across most metrics considered during the time period.
• The definition of supply chain excellence is still evolving as companies move through different maturity stages. Industrial and pharmaceutical companies are mainly stuck at low levels of maturity and could benefit greatly from applying lessons learned in other industries to their own supply chains.
Research Results
Full 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.
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.
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
Building Business-To-Business Supply Chain Networks - Who Are the Players? 24...Lora Cecere
Executive Overview
Today, supply chains are networked. They are not linear. Instead, there are interdependencies with outsourced contract manufacturing companies, third-party logistics providers (3PLs), freight forwarders, and transportation providers. While our relationships are outsourced, our information technology systems are not. Companies have automated the enterprise; but the automation of the extended value chain remains an opportunity.
It is now possible. B2B network solutions are now in their second decade of maturity. Yet, only 7% of flows move through B2B networks0F0F0F . They are maturing and should be considered as a part of a supply chain IT architecture.
Today, most of the networks depend on ad hoc, manual processes. Despite a decade of technology evolution on B2B connectivity, the majority of the flows in the extended network move through spreadsheets, email, and Electronic Data Interchange (EDI). As a result, as things change in the network, it is hard for trading partners to keep the information synchronized. It may be integrated, but it is not synchronized. Why? There is no network system of record. The flows are point-to-point. Data latency is high. As a result, when the data is received, it is often out-of-sync and out-of-date. The links are fragile. As a result, multi-party process automation is not possible.
Most companies know the problem, but they are confused on where to start to solve it. They lack clarity on three basic questions:
1. Why a B2B Supply Chain Business Network Solution versus EDI?
2. Why a B2B Supply Chain Business Network Solution versus ERP?
3. Which B2B Supply Chain Business Network Solution to use?
Answering these questions is the goal of this report.
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.
Supply Chain Metrics That Matter: The Cash-to-Cash Cycle 30 NOV 2012Lora Cecere
When it comes to supply chain, no two industries are the same; but, improving Cash-to-Cash cycle (C2C) metrics matters across all industries. With over a decade of investment in technology and process improvements, we can now assess progress. In this report, we examine the financial data in three time frames:
2000-2003 Dawn of Business-to-Business (B2B) commerce and Global Connectivity
2004-2007 Pre-recession
2008-2011 Post-recession
The health of the supply chain can be quickly assessed through the analysis of the C2C metric. It is a composite metric that combines decisions on receivables, payables and inventory management. Overall, while supply chain leaders have focused on the reduction of C2C cycles, little progress has been made. For most, despite a decade of investments in channel connectivity and supply chain optimization, there is limited progress on receivables and inventory. Instead, we find that the most mature companies have turned to increasing Days of Payables in an effort to reduce C2C. This can be detrimental to the overall health of the supply chain.
Over the last fifteen years, the only industry that has shown dramatic and continuous improvement in reducing C2C cycles is high-tech and electronics. While there are slight improvements in consumer packaged goods (CPG) and chemical supply chains, the results in pharmaceutical and automotive are much worse. While many supply chain professionals may claim that the changes in the supply chain—offshoring of manufacturing, cost of capital, increasing product complexity and decreasing product life cycle—are reasons that there was not more progress, the interesting fact is that the industry that had the greatest obstacles made the most progress. The reason? We believe it mattered more in the high-tech industry. With short life cycles and declining margins over the course of the product life cycle, it is just too expensive for a high-tech company to neglect inventory management. As a result, the high-tech and electronics industry has developed better and more comprehensive planning processes overall.
In this report, we share insights on the trends in five industries: automotive, high-tech and electronics, chemical, CPG and pharmaceutical. The data supports three facts:
Supply Chain Metrics That Matter - A Focus on Contract Manufacturing - 13 AUG...Lora Cecere
Executive Overview
Growth is stalled. Margin pressure is high. Shorter life cycles, as well as increasing compliance and regulatory pressure, provide additional challenges to the contract manufacturing industry. Finally, excess capacity is a significant problem. Is this a recipe for opportunity or a disaster for the brand owner using outsourced manufacturing partners? We think the latter.
Over the last decade, brand owners from consumer electronics to medical devices have grown more dependent on outsourced contract manufacturing. In fact, the contract manufacturing industry grew up out of a desire to mitigate risk and improve costs for brand owners. However, the market has shifted significantly in recent years and the contract manufacturing industry is struggling. As a result, they pose a risk to brand owners. In this report, we illustrate how the lack of resiliency affecting contract manufacturers represents a serious risk to brand owners and offer advice on what can be done to mitigate the problem.
Over the last decade, many contract manufacturers have attempted to differentiate services and refine their business model to gain competitive advantage. However, in looking at the financial results, we find that most companies are struggling. As a result, it is time to redesign the business model and relationships of contract manufacturers and brand owners. While companies can outsource the role of manufacturing, they cannot outsource the responsibility of managing the extended supplier network. This is one of the many challenges the industry now faces.
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.
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.
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.
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.
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 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 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
Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (20...Lora Cecere
Executive Overview
When it comes to metrics that matter, the cash-to-cash cycle is one of the top metrics cited by supply chain professionals. It is among the best financial metrics to provide a comprehensive picture of a company’s supply chain and the management of working capital.
The supply chain is a complex system. Successful management requires both orchestration and balance. To drive supply chain excellence, companies are required to balance four competing priorities: growth, profitability, cycle management and complexity. Several popular metrics, including the cash-to-cash cycle, for a variety of industries are presented in table 1.
Big Data Survey/Handbook Summary Charts - 8 JULY 2013Lora Cecere
Big data is more of an opportunity than a problem -- 76% consider it an opportunity, 28% already have a big data initiative in place and another 37% plan to. The possibilities of big data are endless. It starts with thinking about how to use different data in a differentiated way.
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.
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.
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.
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
Building Business-To-Business Supply Chain Networks - Who Are the Players? 24...Lora Cecere
Executive Overview
Today, supply chains are networked. They are not linear. Instead, there are interdependencies with outsourced contract manufacturing companies, third-party logistics providers (3PLs), freight forwarders, and transportation providers. While our relationships are outsourced, our information technology systems are not. Companies have automated the enterprise; but the automation of the extended value chain remains an opportunity.
It is now possible. B2B network solutions are now in their second decade of maturity. Yet, only 7% of flows move through B2B networks0F0F0F . They are maturing and should be considered as a part of a supply chain IT architecture.
Today, most of the networks depend on ad hoc, manual processes. Despite a decade of technology evolution on B2B connectivity, the majority of the flows in the extended network move through spreadsheets, email, and Electronic Data Interchange (EDI). As a result, as things change in the network, it is hard for trading partners to keep the information synchronized. It may be integrated, but it is not synchronized. Why? There is no network system of record. The flows are point-to-point. Data latency is high. As a result, when the data is received, it is often out-of-sync and out-of-date. The links are fragile. As a result, multi-party process automation is not possible.
Most companies know the problem, but they are confused on where to start to solve it. They lack clarity on three basic questions:
1. Why a B2B Supply Chain Business Network Solution versus EDI?
2. Why a B2B Supply Chain Business Network Solution versus ERP?
3. Which B2B Supply Chain Business Network Solution to use?
Answering these questions is the goal of this report.
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.
Supply Chain Metrics That Matter: The Cash-to-Cash Cycle 30 NOV 2012Lora Cecere
When it comes to supply chain, no two industries are the same; but, improving Cash-to-Cash cycle (C2C) metrics matters across all industries. With over a decade of investment in technology and process improvements, we can now assess progress. In this report, we examine the financial data in three time frames:
2000-2003 Dawn of Business-to-Business (B2B) commerce and Global Connectivity
2004-2007 Pre-recession
2008-2011 Post-recession
The health of the supply chain can be quickly assessed through the analysis of the C2C metric. It is a composite metric that combines decisions on receivables, payables and inventory management. Overall, while supply chain leaders have focused on the reduction of C2C cycles, little progress has been made. For most, despite a decade of investments in channel connectivity and supply chain optimization, there is limited progress on receivables and inventory. Instead, we find that the most mature companies have turned to increasing Days of Payables in an effort to reduce C2C. This can be detrimental to the overall health of the supply chain.
Over the last fifteen years, the only industry that has shown dramatic and continuous improvement in reducing C2C cycles is high-tech and electronics. While there are slight improvements in consumer packaged goods (CPG) and chemical supply chains, the results in pharmaceutical and automotive are much worse. While many supply chain professionals may claim that the changes in the supply chain—offshoring of manufacturing, cost of capital, increasing product complexity and decreasing product life cycle—are reasons that there was not more progress, the interesting fact is that the industry that had the greatest obstacles made the most progress. The reason? We believe it mattered more in the high-tech industry. With short life cycles and declining margins over the course of the product life cycle, it is just too expensive for a high-tech company to neglect inventory management. As a result, the high-tech and electronics industry has developed better and more comprehensive planning processes overall.
In this report, we share insights on the trends in five industries: automotive, high-tech and electronics, chemical, CPG and pharmaceutical. The data supports three facts:
Supply Chain Metrics That Matter - A Focus on Contract Manufacturing - 13 AUG...Lora Cecere
Executive Overview
Growth is stalled. Margin pressure is high. Shorter life cycles, as well as increasing compliance and regulatory pressure, provide additional challenges to the contract manufacturing industry. Finally, excess capacity is a significant problem. Is this a recipe for opportunity or a disaster for the brand owner using outsourced manufacturing partners? We think the latter.
Over the last decade, brand owners from consumer electronics to medical devices have grown more dependent on outsourced contract manufacturing. In fact, the contract manufacturing industry grew up out of a desire to mitigate risk and improve costs for brand owners. However, the market has shifted significantly in recent years and the contract manufacturing industry is struggling. As a result, they pose a risk to brand owners. In this report, we illustrate how the lack of resiliency affecting contract manufacturers represents a serious risk to brand owners and offer advice on what can be done to mitigate the problem.
Over the last decade, many contract manufacturers have attempted to differentiate services and refine their business model to gain competitive advantage. However, in looking at the financial results, we find that most companies are struggling. As a result, it is time to redesign the business model and relationships of contract manufacturers and brand owners. While companies can outsource the role of manufacturing, they cannot outsource the responsibility of managing the extended supplier network. This is one of the many challenges the industry now faces.
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.
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.
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.
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.
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 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 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
Supply Chain Metrics That Matter: A Closer Look at the Cash-To-Cash Cycle (20...Lora Cecere
Executive Overview
When it comes to metrics that matter, the cash-to-cash cycle is one of the top metrics cited by supply chain professionals. It is among the best financial metrics to provide a comprehensive picture of a company’s supply chain and the management of working capital.
The supply chain is a complex system. Successful management requires both orchestration and balance. To drive supply chain excellence, companies are required to balance four competing priorities: growth, profitability, cycle management and complexity. Several popular metrics, including the cash-to-cash cycle, for a variety of industries are presented in table 1.
Big Data Survey/Handbook Summary Charts - 8 JULY 2013Lora Cecere
Big data is more of an opportunity than a problem -- 76% consider it an opportunity, 28% already have a big data initiative in place and another 37% plan to. The possibilities of big data are endless. It starts with thinking about how to use different data in a differentiated way.
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.
The P2P landscape is changing. The significant developments in technology that have been widely adopted in B2C environments are now changing the game in B2B environments and shared services.
The way businesses buy, pay, manage data, and leverage increasingly agile technology is changing in P2P.
In 2016 P2P organizations are going beyond transactional cost and concentrate on supporting the overall enterprise objectives: digitalization of information, process automation but also internal customer centricity and a balanced efficiency/risk/control approach are key practices in this new era.
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Digital Supply Chain - Insights on Driving the Digital Supply Chain Transform...Lora Cecere
Executive Summary
It started with the internet, and the drum beat continues. Mobile. Social. Cloud. Digital Products. Telematics. The Internet of Things. The list of enablers is endless.
Over the last decade, digital marketing departments quickly took advantage of new technologies to power marketing capabilities. As a result, companies have new products and services; but, over the last decade there has been little change in supply chain processes.
There is a great divide in organizations today. There are digital teams in marketing while there are traditional supply chain processes in operations. Many supply chain leaders are asking how they digitize their supply chain practices. This report is designed to help. Here we share a five-step process to get started, and we provide insights from recent research on how to transform manufacturing processes.
What Is Digital Business?
Digitization transforms businesses. A digital business model uses new forms of technology to create new forms of revenue and business value. It is about the use of combinations of technologies to sense changes in real-time and shape a meaningful output.
Digital business is about much, much more than the redefinition of business processes for B2B and B2C. While e-business strategies are foundational, and necessary, it is about more than e-business. In today’s supply chain, while B2C models are well defined and new supply chain models have embraced and redefined e-commerce delivery, B2B processes lag B2C. Today, only 9% of B2B commerce business flows through business networks. There are no digital B2B officers. Companies have been slow to adopt new forms of B2B.
Physical Distribution management helps in delivering the customer what is wanted in specific time and cost.
The Objective of distribution management is to design & operate a distribution system that attains the required level of customer services & does so at least cost
Physical distribution management (PDM) caters to the actual movement of products through the various channels of distribution. This field of study is concerned with various aspects related to transportation of the goods, the main of which is transportation cost.
White paper on a new solution to EDI communications using a newly introduced SOAP API for sending EDI Docs anywhere, to any trading partner. Low cost, easy to implement.
THE NEXT INDUSTRIAL REVOLUTION. HOW E-COMMERCE IS TRANSFORMING B2BCEO Magazyn Polska
Forrester Research estimates that cross-border B2B e-com-
merce transactions will reach US $1.2 trillion by 2021.1
With the advent of the internet and digitalization, the
opportunity for companies to boost revenues by tapping
global markets and to drive down costs through greater
efficiency has also opened up new prospects for earnings
growth. This huge potential is forcing B2B companies to
adapt their supply chains to be more like a business-to-
consumer (B2C) channel i.e. flexible, agile, scalable, quick-
er, mobile and global. More significantly, digitally-aware
B2B customers are expecting ‘Amazon-like’ experiences
including seamless commercial transactions when buy-
ing, receiving and returning products.2 Businesses have
shifted their purchasing research and transaction activi-
ties towards online3 especially when customer expecta-
tions for a full spectrum of services and support that are
hosted online have continued to increase.4 Despite these
customer expectations, there are fundamental differences
between B2B and B2C commercial transactions which
need to be understood and managed.
Digital Procure-To-Pay - report - 15 AUG 2017Lora Cecere
• Report Details: The research for this report was primarily conducted via an online survey from August 1, 2016 - January 27, 2017. Surveys were conducted among a mix of manufacturers, retailers, and wholesalers/distributors/co-operatives (n=114), including a focus on those who use B2B methods to process purchase orders AND have/plan to have a program to support digital procure-to-pay processes (n=45).
• Objective: To identify the adoption levels of digital business-to-business (B2B) methods and determine the business benefits of digital procure-to-pay (P2P) processes.
• Highlight: Overall for companies with more advanced digital procure-to-pay initiatives, the benefits of the program are as follows: improved visibility, process accuracy, and speed; better quality customer service; and lower cost.
At one time, the physical store defined the retailer. It was the brand. Today, this has changed. Now the store is a part of a cross-channel experience. It is a combination of goods and services. The impact of the change is different by retail sector, but it is pervasive.
While changes in other industries have happened incrementally through continuous improvement and process innovation, retail has been transformed by new business models. The pace is faster and the customer demands higher.
Redefining the role of the store is critical. It requires partnerships of both retailers and manufacturers. It is for this reason that we wrote this report.
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.
What are the main advantages of using HR recruiter services.pdfHumanResourceDimensi1
HR recruiter services offer top talents to companies according to their specific needs. They handle all recruitment tasks from job posting to onboarding and help companies concentrate on their business growth. With their expertise and years of experience, they streamline the hiring process and save time and resources for the company.
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It is crucial for the taxpayers to understand about the TDS Return Filing Due Date, so that they can fulfill your TDS obligations efficiently. Taxpayers can avoid penalties by sticking to the deadlines and by accurate filing of TDS. Timely filing of TDS will make sure about the availability of tax credits. You can also seek the professional guidance of experts like Legal Pillers for timely filing of the TDS Return.
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It is a sample of an interview for a business english class for pre-intermediate and intermediate english students with emphasis on the speking ability.
Tata Group Dials Taiwan for Its Chipmaking Ambition in Gujarat’s DholeraAvirahi City Dholera
The Tata Group, a titan of Indian industry, is making waves with its advanced talks with Taiwanese chipmakers Powerchip Semiconductor Manufacturing Corporation (PSMC) and UMC Group. The goal? Establishing a cutting-edge semiconductor fabrication unit (fab) in Dholera, Gujarat. This isn’t just any project; it’s a potential game changer for India’s chipmaking aspirations and a boon for investors seeking promising residential projects in dholera sir.
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RMD24 | Retail media: hoe zet je dit in als je geen AH of Unilever bent? Heid...BBPMedia1
Grote partijen zijn al een tijdje onderweg met retail media. Ondertussen worden in dit domein ook de kansen zichtbaar voor andere spelers in de markt. Maar met die kansen ontstaan ook vragen: Zelf retail media worden of erop adverteren? In welke fase van de funnel past het en hoe integreer je het in een mediaplan? Wat is nu precies het verschil met marketplaces en Programmatic ads? In dit half uur beslechten we de dilemma's en krijg je antwoorden op wanneer het voor jou tijd is om de volgende stap te zetten.
LA HUG - Video Testimonials with Chynna Morgan - June 2024Lital Barkan
Have you ever heard that user-generated content or video testimonials can take your brand to the next level? We will explore how you can effectively use video testimonials to leverage and boost your sales, content strategy, and increase your CRM data.🤯
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Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
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
Enterprise excellence and inclusive excellence are closely linked, and real-world challenges have shown that both are essential to the success of any organization. To achieve enterprise excellence, organizations must focus on improving their operations and processes while creating an inclusive environment that engages everyone. In this interactive session, the facilitator will highlight commonly established business practices and how they limit our ability to engage everyone every day. More importantly, though, participants will likely gain increased awareness of what we can do differently to maximize enterprise excellence through deliberate inclusion.
What is Enterprise Excellence?
Enterprise Excellence is a holistic approach that's aimed at achieving world-class performance across all aspects of the organization.
What might I learn?
A way to engage all in creating Inclusive Excellence. Lessons from the US military and their parallels to the story of Harry Potter. How belt systems and CI teams can destroy inclusive practices. How leadership language invites people to the party. There are three things leaders can do to engage everyone every day: maximizing psychological safety to create environments where folks learn, contribute, and challenge the status quo.
Who might benefit? Anyone and everyone leading folks from the shop floor to top floor.
Dr. William Harvey is a seasoned Operations Leader with extensive experience in chemical processing, manufacturing, and operations management. At Michelman, he currently oversees multiple sites, leading teams in strategic planning and coaching/practicing continuous improvement. William is set to start his eighth year of teaching at the University of Cincinnati where he teaches marketing, finance, and management. William holds various certifications in change management, quality, leadership, operational excellence, team building, and DiSC, among others.
Putting the SPARK into Virtual Training.pptxCynthia Clay
This 60-minute webinar, sponsored by Adobe, was delivered for the Training Mag Network. It explored the five elements of SPARK: Storytelling, Purpose, Action, Relationships, and Kudos. Knowing how to tell a well-structured story is key to building long-term memory. Stating a clear purpose that doesn't take away from the discovery learning process is critical. Ensuring that people move from theory to practical application is imperative. Creating strong social learning is the key to commitment and engagement. Validating and affirming participants' comments is the way to create a positive learning environment.
1. EDI: Workhorse of the Value Chain
A Closer Look at B2B Connectivity Benchmarks
in the Extended Supply Chain
11/20/2013
By Lora Cecere
Founder and CEO
Supply Chain Insights LLC