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Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
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Definition and Theory is Important
“Everything is vague to a degree you do not
realize until you have tried to make it precise.”
Bertrand Russel
“All science is either physics or stamp-
collecting.”
Ernest Rutherford
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A Definition for Supply Chain Visibility
“The practice of capturing and integrating data, creating intelligence, and
altering decisions based on the three cross-organizational flows in the
supply chain (materials, capital, and information) along with their relevant
environmental details”
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What are the Prerequisites to Success with SCV?
Capture
Data
Integrate
Data
Create
Intelligence
Interrupt
Decisions
Supply Chain Visibility
Prerequisites
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Two Vectors for Business Impacts
Information Quality Decision Mechanics
Visibility improves business decisions by either improving the
information quality feeding the decision maker (timeliness,
accuracy, completeness, etc.), or by changing the mechanics of
the decision making process (automating it, involving more
parties, documenting how it was decided, etc.)
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Example: A supply of components must arrive at an OEM by Nov 22nd (capture data); the shipment it is on
is re-estimated to arrive on Nov 20th (capture data).These two data points are connected by matching
unique references (integrate data). A dynamic reforecast for this shipment also projects 48 hours from
shipment arrival to final delivery (integrate data).This indicates the shipment will be later than the
booking target delivery date (integrate data). If this is beyond the tolerance level of the OEM, an email
alert is created (create intelligence) and production planners can look for expedited delivery options or
agree to change the target production plan (interrupt decisions).
An Example…
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Supply Chain Visibility for Physical Flows
We must re-plan in order
to run a bottleneck
machine 15 days straight
prior to changeover
Where are the
inputs for that
machine? Could
Something be
delayed?
WIP Status,
Inventory,
Inbound
Shipments, Past
yield rates, etc.
Intelligent and
flexible data
modelling
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Supply Chain Visibility for Financial Flows
How Much Working
Capital to Borrow?
What are
receivables and
forecasted
payments?
Orders,
Shipments,
Inventory,
Chargebacks,
Payments, Legal
Framework
Intelligent and
flexible data
modelling
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Visibility Effectiveness is Measurable: Example Scoring Criteria
Score Description
0 The system has no explicit input to this
business decision. It is only “optional” in
the decision process
1 The system is a required information
source for the decision maker. A user
must look for and find the event, and
then can take actions as they want.
2 The system is a required information
source for the decision maker. The system
asks the user to look at the event, but
does not attempt to help with further
actions
3 The system offers a set of action
alternatives based on the event, or
4 narrows the selection down to a few, or
5 suggests one action, and
6 executes that suggestion if the human
approves, or
7 allows the human a restricted time to
veto before automatic execution, or
8 executes automatically, then necessarily
informs humans, or
9 informs the human only if asked, or
10 The system decides everything and acts
autonomously, with no notice given to
the users
Interrupt Decisions
Score Description
0 Data remains in the capturing systems
with no attempt to integrate the data for
later use
1 Data remains in the capturing systems,
but processes allow them to be manually
integrated (i.e. agreed global IDs, etc)
2 Capturing systems or their middleware
render all the decision-relevant data as
interconnectable. There are no solitary
data objects.
3 Data is centralized but not directly
available to the decision maker using the
search or browse methods they want
4 All relevant decision-support data is
centralized and accessible by any relevant
path the decision maker could use.
5 The system’s approach to integrating data
is easily updatable
6 The system’s approach to integrating data
is self-updating
Integrate Data
Score Description
0 No data is captured to support the
target business decision
1 Some relevant data is captured, but is
incomplete compared to what is
needed for the business decision
2 All data is captured but the accuracy
of the data is unknown or known to
be low
3 Data is complete and consistently
biased (i.e. low quality but
predictable)
4 All data needed to support the
decision is captured, complete,
consistent, and measurably high in
accuracy
Capture Data
Scor
e
Description
0 There is no automated recognition
from the system that a business
decision is needed
1 There is recognition from the system
that a business decision is needed
sometimes, but not for all decision-
inducing circumstances
2 There is system always knows that
the business decision is needed
3 The system’s approach to
recognizing the need for a business
event is easily adaptable by users
4 The system’s approach to
recognizing the need for a business
event is self-updating
5 The system’s approach to
recognizing the need for a business
event, integrating data to support
the event, and to action-taking for
the event, are self-updating
Create Intelligence
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Specific Example: Scoring Decision Interruption
Score Description
0 The system has no explicit input to this business decision. It is only “optional” in the
decision process
1 The system is a required information source for the decision maker. A user must look for
and find the event, and then can take actions as they want.
2 The system is a required information source for the decision maker. The system asks the
user to look at the event, but does not attempt to help with further actions
3 The system offers a set of action alternatives based on the event, or
4 narrows the selection down to a few, or
5 suggests one action, and
6 executes that suggestion if the human approves, or
7 allows the human a restricted time to veto before automatic execution, or
8 executes automatically, then necessarily informs humans, or
9 informs the human only if asked, or
10 The system decides everything and acts autonomously, with no notice given to the users
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Typical Data Objects Collected for SC Visibility
Visibility
Invoices &
Payments
Forecasted
Demand
Purchase &
Make Orders
Inventory
Shipments
Forecasted
Capacity
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Supply Chain Visibility Impacts on Economic Value Add
Fixed Assets
Working Capital
Revenue
Assets
EVA
Operating
Expenses
Selling, General
& Administrative
Depreciation &
Amortization
Cost of Goods
Price
Sales Volume
Returns
EVA = (Net Profit - Adjusted Taxes) - (weighted average cost of capital * Capital Employed)
Tax
Adjustment
Available to Promise from Virtual Inventory Pools
Improve Service Levels
Launch new products faster
Negotiate lower 1st costs via payment visibility
Negotiate lower 1st costs via supplier scorecarding
Chargeback Automation
Improve manufacturing throughput via
coordination of material flows
SKU-Level total-cost-to-serve visibility enables
product-to-service rationalization
SKU-Level total-cost-to-serve visibility enables
product-to-service rationalization
More effective supply chain analyst staffing, by
removing data collection, cleaning, & rote analytics
Enable advanced distribution tactics
Enable trading company for tax arbitrage
Reduce FG and raw materials, in-transit and safety
stock levels
Reduce carrying costs for inventory
Improve machine utilization via material flow
coordination
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Typical Reported Supply Chain Visibility Benefits
1. Several days of inventory reduction from in-transit and
also from safety stock
2. Reduced logistics spend
3. Reduced cost of goods sold
4. Improved staff effectiveness in planning, network
design, supply chain negotiations, and so forth.
5. Multiplied effectiveness of the ERP systems landscape
60% of 1st Full Year Impact
25% of 1st Full Year Impact
10% of 1st Full Year Impact
2.5% of 1st Full Year Impact
2.5% of 1st Full Year Impact
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Detailed Example: Reducing Inventory Levels via Visibility
Example: the SAP-APO is set to hold a minimum of
ten days of safety stock in inventory for a given raw
material, and to expect inbound lead times of 12
days transit from the manufacturer…
Are the assumptions about
inbound or outbound lead-time
valid? Often they are outdated or
averages with buffers added.
…Right-Size the APO Settings
Are there ways to split fast from
cost-effective supply chain
activities? Update SOPs
accordingly and shorten the lead
time in SAP-APO.
…Improve Segmentation
Is lead-time variability well
understood and controlled? A 95%
on-time short-transit is of no use if
the planning system uses the longest
variability in its planning .
…Minimize Operational Variability
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Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
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Five Characteristics of the Semiconductor Supply Chain
1. Diversity of business models, leading to
diversity of supply chain operations
2. Capital intensiveness: R&D, Fixed-Assets,
and Process Engineering
3. Cyclical and volatile demand
4. Short product lifecycles
5. Extreme market competitiveness, leading
to cost and service/quality ops. focus
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Three Current Business Strategies… and their SC Counterpart
Fab-lite strategies and
diversity of business models
lead to blends of make-buy
for almost all product lines
#1: Make-Buy
Optimization
Capacity &Asset
Optimization
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Varying Business Models & Any Player Could Change Approach
Pack&TestProductionDesign
In-House Mix External
Operating Model
KeyProcess
At Least Five Models:
1. Merchant
Foundries
2. IDMs
3. OSAT
4. Fabless
5. Fab-lite
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Visibility Data That Impacts Make-Buy
Visibility
Cost to Serve
Forecasted
Demand
Inventory
Forecasted
Capacity
Visibility improves the make-buy
decision primarily by improving the
information quality inputs… faster
to collect, more accurate, more
complete, etc.
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Three Current Business Strategies… and their SC Counterpart
Fab-lite strategies and
diversity of business models
lead to blends of make-buy
for almost all product lines
#1: Make-Buy
Optimization
#2: Early
Market Share
Attaining early and definitive
market share allows for
stronger pricing and
realization of sales during
highest profit phase of the
product lifecycle
Capacity &Asset
Optimization
Fast & Effective
Launch
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Market Share vs. ROIC in 2009
iSuppli; McKinsey; Gartner
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IDM Market Share vs. ROIC in 2015
IHS iSuppli Semiconductor rankings for 2013; MarketWatch; Morningstar
0%
2%
4%
6%
8%
10%
12%
14%
16%
7% 9% 11% 13% 15% 17% 19%
Intel Samsung Qualcomm Infineon NVIDIA
MarketShare
ROIC
Returns Below
Weighted Average
Cost of Capital
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Visibility Data That Impacts Product Launch Success
Visibility
Invoices &
Payments
Purchase &
Make Orders
Inventory
Shipments
Visibility improves product launch
success by making novel process,
partners, and distribution channels
transparent. It improves the quality of
information, and automates some
decisions to allow scaling up faster.
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Three Current Business Strategies… and their SC Counterpart
Fab-lite strategies and
diversity of business models
lead to blends of make-buy
for almost all product lines
#1: Make-Buy
Optimization
#2: Early
Market Share
#3: Market
Selection
Attaining early and definitive
market share allows for
stronger pricing and
realization of sales during
highest profit phase of the
product lifecycle
Semiconductors feed in to a
large variety of markets, with
various growth and profit
potentials. Outperforming
peers requires identifying a
target market and matching
their operations to it.
Capacity &Asset
Optimization
Fast & Effective
Launch
Supply Chain
Segmentation
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Importance of Market Selection
Examples:
o Texas Instruments divested over 15 companies in 15 years, leaving markets like DRAM and defense-controls in
order to focus on wireless and medical device sectors
o Qualcomm focused on licensing of its wireless communication technologies
o Applied Materials shifted away from implants and towards solar
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Market Selection Leads to Segmentation of Supply Chains
1
Phase Business
Strategy
Supply Chain Focus Visibility Tactics
#1- Prototype / Public
Proof of Capability
Claim a defensible niche Network Design to align capacity
and costs to product profile
• Total cost to serve
• Capacity-forecast alignment
#2- Introduction Book all available orders
and gain market share
Agility… rapid changes to products,
channel, & partners
• Advanced distribution
• Supply-demand pooling
• Supplier payment visibility
#3- Peak sales Maintain market share and
profit margins
Reliability… defend market share
and focus on capacity alignment
• WIP & In-TransitVisibility
• Supplier scorecarding
#4- Commoditization Control price erosion and
rebalance capacity to other
lines
Costs… these supply chains have to
be super-lean, but have little risk
from assets
• Virtual inventory pooling
• Total cost to serve
• Supplier payment visibility
#5- End of Life Support selected lines for
spare parts and avoid
inventory exposure
Assets… the product will sunset and
any inventory left is a loss
• Virtual inventory pooling
• Total cost to serve
2 3 4 5
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Summary of Industry Challenges, Strategies, and Link to SCVCorporateDepartmental
Stated Strategy
KPI to Measure
this Strategy
What is
Success?
Related SupplyChain
Strategy
Visibility
Solutions
How to Measure the
SupplyChain
Fab-lite
Make-Buy Ratio
Book-to-Bill Ratio for
Company compared to
Industry
Capacity & Asset
Optimization
• Supply coordination
• Forecast-capacity
visibility
• Supplier scorecarding
• Make cycle time
• Source cycle time
• Cost of Goods Sold
• Throughput &
Capacity Utilization
First to Market
• Sales from products
released within 12 months
• Market Share
Long period without viable
competitors, leading to high
market share and prices
Fast & Effective
Launch
• Supply-demand pooling
• WIP & In-TransitVisibility
• Advanced distribution
tactics
• Make cycle time
• Source cycle time
• Cost of Goods Sold
Market
Selection
• TotalAddressable Market
• Market Share
Shifting resources to the best
market they can be in 1st or 2nd
place
Segmented Supply
per Product Line
• TotalCost to Serve
• Virtual inventory pooling
• Supplier scorecarding
Cost, Reliability,
Agility, andAssets…
depends on the
segment
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Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
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Five Trends Impacting Supply Chain Visibility
1. Internet of Things… immense, complex, and hands-
free data acquisition and consumption
2. Big Data… particularly external & unstructured data
3. Machine Learning… intelligence monitoring and
assessment is changing the human role
4. UX Engineering… changing expectations and
knowledge about human-software interaction
5. Control Towers… emerging standard for combining
tech, process, and people
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Five Trends Impacting Supply Chain Visibility
Capture
Data
Integrate
Data
Create
Intelligence
Interrupt
Decisions
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Presentation Outline
Where to Get More Information4
What is Supply Chain Visibility?1
Link to Industry Challenges2
SCV Trends of Importance3
33. GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 32
For More Information…
1. Blogosphere (www.supply-chain-visibility.com),
(www.supplychainshaman.com/the-journal/)
2. Advisors… McKinsey, Accenture, Deloitte, Cap Gemini
3. Analysts… Gartner, Aberdeen, Supply Chain Insights
4. Professional Associations… APICS, CSCMP
5. Technologists… GT Nexus, E2Open, Elementum, SAP, JDA
To create value, a supply chain visibility solution must impact the corporate balance sheet or income statement. In this image, we decompose the “economic value add”, a corporate level KPI indicating the efficiency at which a company produces returns for its share holders. Like the DuPont model, it measures the absolute post-tax profits of a company given its capitalization. In brief, this looks at the four top-level ways a company can improve corporate performance:
Increase Revenue
Reduce Costs
Reduce Effective Tax
Reduce Assets