Supply Chain by the Numbers

Supply Chain
by the Numbers
September 2012

BRICKS Book
Publishes

Matter
December
2012

The Role of Supply Chains
in Building Market-Driven
Differentiation

LORA M. CECERE
CHARLES W. CHASE JR.

Evolving Practices

Supply Chain Insights LLC Copyright © 2012, p. 3

Agenda


Retail Shifts

• Power shifting to the shopper
• Amazon seizing “center store”
• Anytime, anywhere becoming the norm
• More and more costs are being pushed
backwards in the supply chain


Year-over-Year Growth

Years 1990-1994 1995-1999 2000-2004 2005-2009 2010-2012
RETAIL
17.05% 42.46% 12.89% 8.76% 5.15%
AVERAGE

CPG AVERAGE 2.12% 0.84% 3.91% 7.26% 2.32%

FOOD CPG
3.68% 2.97% 8.13% 2.59% 4.27%
AVERAGE

BEVERAGE CPG
12.87% 2.00% 9.59% 11.53% 4.92%
AVERAGE


Retail: Revenue Per Employee
Revenue per Employee
1200
Revenue per Employee (K$)

1000

800

600

400

200

0
1990- 1995- 2000-
2005 2006 2007 2008 2009 2010 2011 2012
1994 1999 2004
eCommerce 343 456 549 758 848 1016 998 1073
Grocery 198 182 425 479 475 520 612 611 572 518 504
Mass 112 144 253 348 379 617 487 474 533 464 348
Specialty 296 384
Source: Supply Chain Index Analysis from Annual Reports 1990-2012 414 458 479 527 534 282 312
Mean values utilized excluding outlier data


Revenue Per Store


Bar codes were first used at Marsh Supermarket in 1968


Suppliers Still Do Not Know How to Use
the Data

Weather Data Market-survey Data Contract Data
Retail Warehouse Withdrawal Data
Loyalty Data

Syndicated Data POS Data Panel Data

Enrichment Data
Social Data Distributor Data
T-Log Data
Ratings and Reviews
Coupon Redemption Web Click-through Data

Orders Shipments Returns


Mobile & Social Presence Growing


“Where’s My Bud” Viral Campaign

Campaign
Objectives:
Reduce Out of Stocks at
targeted retailers by 5%
Increase Shopper
satisfaction and brand
loyalty
Validation:
Identify a key leader or
market that wants to pilot.
50/50 shared risk in effort
and resources to pursue.
Keep costs to a minimum for
Concept: pilot, under $75K
Execute a viral campaign
focused on leveraging
shoppers to identify out of
stocks and potentially
pricing compliance issues
Leverage a combination of
consumer, internet, and in-
store technical capabilities


Retailer Experience

New text message to
612-961-7802:

A customer at Denny
and Doug’s Liquor
Emporium has just
snapped a tag. You’re
out of stock on Bud
Light.

Please contact your
wholesaler.


Here are some locations near you where you can
find Bud Light. Be sure to use this promotion code
to get your discount:
ABBL12456


Agenda


A Look at History


Price Volatility

In your best estimate, how much has commodity price volatility affected your EBIT
over the past 12 months? What do you expect over the next 12 months?

Decrease EBIT Increase

Over past
24% 34% 18% 15% 9% 12 months

Over next
17% 36% 23% 19% 5% 12 months

Decrease Decrease Increase Increase
No effect
>50 basis pts <50 basis pts <50 basis pts >50 basis pts

Percentage of Respondents


Data Latency and Distortion

Retailer DC Manufacturer DC Suppliers
Store

Demand
Signal

Accurate
Almost Weekly
Trivial Easy Difficult Impossible Forecasting
is ...

Instant 3-10 Days 10-20 Days Delay from
20-50 Days
20-45 Days Purchase to
Variable 7-20 Days 45-80 Days Signal

Red Represents Emerging Economies with
Distributor Trade

Building End-to-End Value Networks
Today

True collaboration only happens when there is a
sustaining win/win value proposition.


Collaboration: The Right Stuff

SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE

SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION

SHARED
VISION
+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY

SHARED FALSE
+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =
VISION STARTS

SHARED
VISION
+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION

SHARED GRADUAL
+ SKILLS + RESOURCES + PLAN + LEADERSHIP =
VISION CHANGE
Source: J.P. Kotter


Agenda


Evolution of Supply Chain Process
Excellence
Align: Continuous
Building Horizontal Testing Orchestrate
Market Process Connectors Learning
Improving Demand and Supply
Driven In Market

Adapt:
Demand Resilient
Reliable
Driven
Right Product Efficient
Sense Demand
Demand Volatility Cost
Right Place
and Supply

Right Time
Procure to
Shape Supply pay/order to
Demand and Volatility cash
Supply based Right Cost
on Market


Supply Chain “Excellence”
Definition


A Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity


The Effective Frontier

Profitable Growth

Revenue Cost of Goods

Working Capital

Corporate Social Responsibility

R&D Strategy and Investment Asset Strategy and Investment

Forecast Accuracy Customer Service Inventory

Channel Strategy Product and Supplier Strategy
Service Portfolio
Sales Distribution Manufacturing Logistics Procurement
Policies Policies Policies Policies Policies

Returns Backorders First Pass Yield Empty Miles Material Yield


Corporate Summary


Metric Equations


Cash-to-Cash Cycle vs. Revenue per
Employee (2000-2011)


Days of Working Capital vs. Return on
Assets (2000-2011)


Corporate Summary


Metric Equations


Cash-to-Cash Cycle vs. Revenue per
Employee (2002-2011)


Cash-to-Cash Cycle vs. Gross
Margin (2000-2011)


Value Network Strategy

Business Strategy
What are the right things to do to increase company value?

Value-network Supply Chain Strategy
What are the right ways to support the business strategy?
What are the right trade-offs between value drivers for each value network?

Align demand Right product Design the Build Align supply
Supply chain strategy
relationships platforms supply organizational relationships
response systems and
manage talent
Effective Supply
Demand Networks Design Networks Continuous Networks
Improvement
Joint Value Creation Innovation Supply Chain Execution of buy-
Strategies Methodologies Network Design Capabilities Required side strategies

Business Process
How do I do the right things right?
Source: Supply Chain Insights, LLC


Rethinking Manufacturing Strategies

Lean Short Cycles
High
Volume (Cases/Week)

Outsource
Manufacturing

Theory of Lean for Make
Constraints to Order
(TOC)

Low

Low High
Demand Capabilities

Agenda


The Supply Chain of the Future

World
Population

North America Europe Asia
2007 2020 2007 2020 2007 2020
339M 342M 731M 722M 4.0B 4.6B

L America
2007 2020 Africa Oceania
572M 660M 2007 2020
2007 2020
965M 1.3B 34M 40M
Source: “The World at Six Billion” United Nations, 2004; The World UN Population Assessment 2006; “Unsustainable World,” 04/15/08, BBC

MARCO TRENDS

Supply Chain Tipping Points

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

JIT Supply Chain Internet/Email
RFID
Organization
Evolution of eProcurement
the PC

Re-Engineering the Total Quality
S&OP Organization Management
Theory of
Constraints (Michael Hammer)

Supply Chain Excellence = Supply Chain Excellence =
Islands of Manufacturing Vertical Silo Efficient Order to
+ +
Excellence Excellence Excellence Cash Processes

Inside-Out Inside-Out


Supply Chain Tipping Points

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

.com Social
Responsibility
Y2K
Demand Driven
Concepts CSCO
Lean Six Sigma
Market-Driven
Value Networks

Supply Chain Excellence = Supply Chain Excellence =
Vertical Silo Outsourcing Value-Based Outcomes
+
Excellence Effectiveness Delivered by Horizontal Processes

Inside-Out Outside-In


What is a Market-driven Value Network?

An adaptive network focused on a value-
based outcome that senses and translates
market changes (buy and sell-side markets)
bi-directionally with near-real time data
latency to align sell, deliver, make and
sourcing operations.

41

Supply Chain 2020 Tipping Points

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Orchestration Internet of Things
Talent
Shortage Big Data Learning
Supply Chains Supply Chains
Compliance on
Safe & Secure
Digital Manufacturing

Supply Chain Excellence =

Value-Based Outcomes
Delivered by Value Networks

Outside-In


Current State of Planning


Future State of Planning


Scenario Planning


IT Trends Excited About (Top 3)


Evolution of Visibility

Value Networks

Value Network
Sense/Act/Response
Supply Chain
Supply Chain
Visualization

Single Function
Visibility

Vertical
Functions

Where is My Stuff? Please Alert me of a Early Warning Learn a Better Way
Track and Trace Problem Predictive Analytics
Query Advanced Analytics


Connecting the Extended Supply Chain

49

Connecting the Extended Supply Chain


Opportunity
at the Intersection
of the Social and Interest Graph(s)


Newell Rubbermaid Gets IT!

• Newell Rubbermaid

#Future15SB @bwdumars


Newell Rubbermaid Gets IT!

#Future15SB @bwdumars


Agenda


Historically, We Have…

• Tried to get precise on inaccurate data.
• Been sales-driven or marketing-driven not market-
driven
• Believed that the most efficient supply chain is the
most effective supply chain.
• Built efficient chains, but not effective networks.
• Focused inside-out, not outside-in.
• Rewarded the urgent, not the important.

55

Where is Your Opportunity?


Who is Lora?

• Founder of Supply Chain Insights
• Partner at Altimeter Group (leader in open
research)
• 7 years of Management Experience leading
Analyst Teams at Gartner and AMR Research
• 8 years Experience in Marketing and Selling
Supply Chain Software at Descartes Systems
Group and Manugistics (now JDA)
• 15 Years Leading teams in Manufacturing and
Distribution operations for Clorox, Kraft/General
Foods, Nestle/Dreyers Grand Ice Cream and
Procter & Gamble.


Where Do You Find Lora?

Contact Information: loracecere@gmail.com
Blog: www.supplychainshaman.com
(4000 pageviews/month)
Twitter: lcecere 3300 followers. Rated as the
top rated supply chain social network user.
LinkedIn: linkedin.com/pub/lora-
cecere/0/196/573 (2300 in the network)


Supply Chain by the Numbers

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