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Managing the Iron Triangle
The document outlines key strategies for achieving supply chain excellence across various industries, emphasizing customer-centric approaches. It discusses the 'iron triangle' of revenue, service, and cost, and provides industry-specific examples from consumer goods, pharmaceuticals, and fashion/toys. The conclusion stresses the importance of understanding trade-offs within the triangle to manage supply chain effectiveness proactively.
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Managing the Iron Triangle
- 1. Philippe Lambotte Mattel 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.1
- 2. Agenda Ourmessage Triangle Definition Consumer Goods example – Kraft Pharmaceuticals example - Merck Fashion/Toy example – Mattel Putting it all together 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.2
- 3. Supply Chain excellence– it is all about customers 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.3
- 4. Iron Triangle Revenue Service On Time In Full Ensure products get to store at lowest landed cost Cost Cash Leverage supply chain capabilities to drive margin and top line revenue Optimize required investments in working capital 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.4
- 5. Example Consumer Goodsindustry Service Prod_All POS WM Cs_Shipmts WM Cs_Shipmts All • Short cycle time 2 • High promotional ratio • Regional/local supply chain • Focus on shelf execution 250,000 200,000 150,000 100,000 50,000 - 210000187100 7.25Z MAC & CHS 35 200740 200741 200742 200743 200744 200745 200746 200747 200748 200749 200750 200751 200752 200801 200802 200803 200804 200805 200806 200807 200808 200809 200810 200811 200812 200813 200814 200815 200816 200817 200818 200819 200820 200821 200822 200823 200824 200825 200826 200827 200828 200829 200830 200831 200832 200833 200834 200835 3 week+ reaction time 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.5
- 6. Example Pharmaceutical industry Revenue • Patent cycle/peak and cliff • High compliance management • High and complex technologies • 6 months - 3 year long supply chains Finished Goods Inventory coverage 73.0 30.0 Days Drugs Food -58% Service level % 97.5 98.0 Drugs Food 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.6 Source: Industry Census of Manufacturers, 2001
- 7. Example Fashion/Toy industry 2500 2000 1500 1000 500 0 Manufacturing production phasing Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Inventory • Huge Seasonality (Big 6) • Placing bets • Immediate write off after season • 1-3 month long supply chains 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.7
- 8. Putting it alltogether Need to understand which corner of the iron triangle is most critical for your business Educate your organization to understand trade offs and be deliberate about them Keep two corners stable while driving the third one Don’t wait for crisis to happen 9/15/2014 Supply Chain Insights Global Summit #ImagineSC September 2014, p.8