Presentation for ism webinar april 12

Supply Chain Insights
Delivering Actionable Advice to the Supply Chain
Leadership Team

Supply Chain Insights, LLC © 2012

BRICKS Book
Publishes

Matter
in August
2012

The Role of Supply Chains
in Building Market-Driven
Differentiation

LORA M. CECERE
CHARLES W. CHASE JR.

3

Current State


Supply Chain Pain Points:
All vs. Largest
Any Pain Largest Pain

Dirty data 67%
18%

Product proliferation 62%
13%

62%
Top Supply
Rising commodity prices 25% Chain Pain
Talent shortage 51% Points
16%

Changing market preferences 33%
2%

Cost of IT 33%
2%

Compliance and legislation 28%
3%

Competition 26%
5%

Other 28%
16%

Base: Total Sample (61)
Q18. What is your single largest pain point in the supply chain, at this point in time?
Q19. What other pain points, if any, are you currently experiencing with your supply chain?

The Long Tail: Growing Complexity

Volume

Level of Predictability
Predictability based on forecast accuracy vs Actual Order Profiles


Commodity Price Pressure

400.00

350.00

300.00

250.00 Corn (metric Ton)
Wheat (metric Ton)
200.00
$/LB Coffee, Robusta (Pound)
150.00 Sugar (Pound)
100.00 Beef (Pound)
Crude Oil (Barrel)
50.00

0.00

Source: Index Mundi

6

Days of Working Capital
95

85

75

65

55

45

35
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Household Products Chemical Pharma Average

Data Source: CFO Magazine

Days of Inventory
65

60

55

50

45

40

35

30
2002 2003 2004 2005 2006 2007 2008 2009 2010
Household Products Chemical Pharma Average
Data Source: CFO Magazine


Supply Chain Focal Points for Next 2 Years
Supply Chain Focal Points for Next 2 Years
Total Primary

Improving demand planning 74%
23%
Saving costs 70% Top Supply
21%
66%
Chain Focal
Shortening cycles 21% Points
Network design 62%
8%
New product launch effectiveness 48%
10%
Channel sensing 30%
3%
Revenue management 26%
7%
Other 18%
7%

Q23. What do you expect to be your primary focus on your supply chain over the next 2 years?
Please select the one that is most important. Supply Chain Insights, LLC © 2012

10

Typical Organization

CEO

Chief
Customer COO
Officer

Chief
VP of Supply VP of
Marketing Sales CFO
Chain Manufacturing
Officer

Account Customer
Logistics CIO Procurement Quality
Teams Service

Growth Volume Cost


Supply Chain Organization
Functions Reporting
Through Supply Chain

Supply Chain Planning (Supply) 95%

Inventory 90%

Supply Chain Planning (Demand) 89%

Deliver (Distribution) 77%

Transportation 77%

Customer Service 66%

Source (Procurement) 61%

Make (Manufacturing) 39%
functions reporting through
6 the supply chain on average

Q6. How many people overall currently report to you or your staff?
Q7. Please tell us how you define your company’s supply chain organization by selecting

12

Pitfalls and Potholes


A forecast is not a forecast is not a forecast.


A Forecast is not a Forecast is not a Forecast
Increasing need for value
network strategy alignment

Business Planning

Forecasting

Constrained Forecast

Increasing levels of
granularity

14

One Number Forecasting.


Demand-side Views Supply-side Views

Hole in Enterprise
Architectures

Account-Level
VMI C
A Supplier Supplier Supplier Supplier

Downstream Data Distribution Distribution Distribution
Network Network Network

17

The Role of Forecasting


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


Looking at Supply Chain as a Complex System
Growth

Corporate Revenue Cost of Goods
Trade-offs
Working Capital

Corporate Social Responsibility
Investment
Trade-offs R&D Strategy and Investment Asset Strategy and Investment

Forecast Accuracy Customer Service Inventory
Supply
Chain Product and Service
Channel Strategy Supplier Strategy
Portfolio
Trade-offs
Sales Distribution Manufacturing Logistics Procuremen
Policies Policies Policies Policies t Policies
Supply
Chain Backorders First Pass Material
Returns Empty Miles
Waste Obsolescence Yield Yield

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.

22

Evolution of Supply Chain Excellence
Continuous
Align Building Horizontal
Connector
Testing
Learning Orchestrate
Improving

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

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


At a High Level: Becoming Market Driven

Sell Deliver Make Source
Tactical Category Sales and Operations Category
Planning Management Planning Management
New Product Launch
Trading Contract Corporate Social Contract
Partner Policy Management Responsibility Management
Revenue Management
Transactional Order Order-to-Cash Purchase Order
Processing Management Procure-to-Pay Management


Definitions
• Demand Sensing: Shortening the time to sense “true” market data to
understand “true” market shifts in the demand response. This is in contrast
to the use of order to shipment data that can have 1-3 weeks latency in
translating “true” market demand.
• Demand Shaping: The use of techniques to stimulate demand. This
includes new product launch, price and revenue management, assortment,
merchandising, placement, sales incentives and marketing programs.
• Demand Translation: The translation of demand outside-in from the market
to each role within the organization. Recognizing that the requirements for
distribution, manufacturing and procurement are different.
• Demand Orchestration: The process of making trade-offs market-to-
market based on the right balance of demand risk and opportunity.
• Demand Shifting: The shifting of demand from one period to another
through advanced shipments, and moving more products into the channel
without stimulating base demand.


S&OP Evolution
Greater Benefit
Business- • Growth
Sales Driven • Resilience
planning Driven
Match Demand • Efficiency
Coordination
with Supply
of Plans

Manufacturing- Demand Market Driven
Driven Driven Orchestrate
Deliver a Feasible Sense and Demand
Plan for Operations Shape Demand Market to Market


Technology
Goal
A feasible plan • Model the network
• Recognize and respect
constraints
• Gain plan visibility
Match demand with supply • What-if analysis
• Multi-tier inventory analysis
• Network design
Deliver the most profitable • Demand translation
• Supply orchestration
Plan • Optimize financial drivers

Demand-driven • Sense channel demand
• Shape demand
• Drive the most profitable
response
Market-driven • Sense buy and sell-side market
conditions
• Bi-directionally orchestrate
demand
Key:
Demand Planning Supply Planning Inventory Planning Financial Planning Demand Translation Market Sensing
27
Platform

Historically, we have:
• Tried to get precise on inaccurate data.
• 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.

28

29

Where are we headed?


Supply Chains Don’t Play by the Rules

But, wh
at if they
could?

30

Big Data Supply Chains are Evolving
Challenges:
Structured • Transactional
Data • Time phased data

Volume
• Social
Unstructured • Channel
Data • Customer Service
• Warranty

Velocity
• Temperature
Sensor • RFID
Data • QR codes
• GPS

Variability
New • Mapping and GPS
• Video
Data • Voice
Types • Digital Images

31

Connecting the Extended Supply Chain

Transactional Transactional Transactional
Applications Applications Applications

Trading Partner Trading Partner Trading Partner
1 2 3

32

Evolving Supply Chain Architectures

Collaborative Collaborative Collaborative
Layer Layer Layer
Transactional Transactional Transactional
Applications Applications Applications

Enterprise Data Enterprise Data Enterprise Data
Warehouse Warehouse Warehouse
Trading Partner 1 Trading Partner 2 Trading Partner 3

Key:
Demand Signal
Predictive Analytics
Repository
Supply Signal Transactional Adapters
Repository and Intelligent Rule Sets

33

Wrap-up
 Demand planning is the largest gap in supply
chain planning
 To fix it, we have to redesign the process to focus
end-to-end and outside-in
 This requires a re-implementation of most
architectures


Who is Lora?
•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 (3500
pageviews/month)
Twitter: lcecere 2900 followers. Rated as the
top rated supply chain social network user.
Linkedin: linkedin.com/pub/lora-
cecere/0/196/573 (2300 in the network)


Presentation for ism webinar april 12

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