Elemica Presentation in Frankfurt - October 9, 2013

Creating Market-driven Value
Networks
Lora Cecere of Supply Chain Insights

Supply Chain Insights is focused on delivering
independent, actionable and objective
advice for supply chain leaders. A company
dedicated to research, turn to us when you
want the latest insights on supply chain trends,
technologies to know and metrics that matter.
About Us

18 Reports in 2012

Over 30 Reports Planned for 2013
#sciwebinar

This is the new bible for all supply chain
executives. It provides an insider’s
perspective that will prove incredibly
valuable to even the most grizzled
supply chain veteran. This is the next
must-have business book.
--Bruce Richardson, Chief Enterprise
Strategist, Salesforce.com
Today, the worlds of social business and
supply chain management have many
degrees of separation. I enjoyed working
with Lora to understand what the future
transformation of digital marketing to
digital business could look like.
--Jeremiah Owyang, Research Director,
Altimeter
Second Printing of Bricks Matter:
15 Five-Star Reviews on Amazon
Book can be ordered from Amazon.com in Hardcopy or Digital Format

Right Use
of Assets
Expansion into
BRIC Countries
(Brazil, Russia,
India and China)
Supply Chain
Process
Knowledge

Publishing Two eBooks in
2013 on Supply Chain
Metrics That Matter
– Consumer Value Networks
– Industrial Value Networks
2013 Publications
#sciwebinar

Where are we on
Delivering on Supply
Chain Excellence?

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

The Supply Chain Effective Frontier

Mining 20 Years of Financial Data

 Perform better than peer group
 Improve year-over-year results
 Deliver against the business strategy
 Demonstrate consistency in results
 Use innovation in supply chain processes
 Balance. Be leaders in managing trade-offs
Our Point of View:
Definition of Supply Chain Excellence

In a way that is:
 Resilient and predictable
 Balanced across the set of metrics to
maximize value
 Showing year-over-year improvement
against peer group
To Drive Corporate Performance

Most Interesting Patterns
• Revenue per Employee versus Inventory Turns
• Operating Margin versus Inventory Turns
• Cash-to-Cash Cycle versus Inventory Turns

What Have We Learned?
• Each industry has a different pattern of
trade-offs of balancing growth, profitability,
cycles and complexity.
• Companies that are supply chain leaders
have very small movement with a balanced
portfolio of metrics.
• It is about MUCH more than Return on
Assets (ROA), growth and inventory.

A Look at the Last Decade

Progress in Manufacturing Productivity

Productivity in Retail

Progress in Inventory Turns and
Operating Margin

Impact of A Recession

2002 2012
0
3
6
9
12
15
0 250 500 750 1,000 1,250
InventoryTurns
Revenue per Employee (K$)
The Dow Chemical Company
Visualizing the Patterns
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source
Best Scenario
DOW
999, 6.7
Trace the line from
2002 point to 2012
point to follow the
performance over
time.
The diamond shows the company’s average over the period.
Ex: The Dow Chemical Company (DOW) has an average of 999
K$ for revenue per employee and 6.7 for inventory turns.
Ideally, companies are increasing
inventory turns and revenue per
employee, moving towards the upper
right corner of the graph over time.
Here, we plot inventory turns (y-axis)
vs. revenue per employee (x-axis).
Average (Revenue per Employee, Inventory Turns)

Corporate Summary

Inventory Turns vs. Revenue per
Employee (2002-2012)

Corporate Summary

Cereal

Who Does Supply
Chain Best?
October 2013

Corporate Summary

Cash-to-Cash Cycle (2000-2012)

CPG Ranking 2012

Inventory Turns vs.
Revenue per Employee (2002-2012)

Inventory Turns vs.
Operating Margin (2000-2012)

Cash-to-Cash Cycle vs.
Inventory Turns (2000-2012)

Corporate Summary

Cash-to-Cash Cycle (2000-2012)

Inventory Turns vs. Revenue per Employee
(2002-2012)

Inventory Turns vs. Operating Margin
(2000-2012)

Cash-to-Cash Cycle vs. Inventory Turns
(2000-2012)

Case Study

Inventory Turns vs.
Operating Margin (2000-2012)

What Matters

Mean Absolute Percent Error &
𝐑2 Value

Industry Progress

Introducing the
Supply Chain Index
A formulaic representation of
how companies are trading off
growth, profitability, cycle and
complexity performance on
selected supply chain financial
metrics against market
valuation.
#sciwebinar

• Supply chain is a complex system with
increasing complexity.
• Different industries have different patterns,
but the cash-to-cash metrics have the
highest correlation to market capitalization
with some of the poorest performance.
Wrap-up

1. Finish the work on the Supply Chain Index
2. Place the rankings on balance, strength and
resilience into the Supply Chain Insights
Community for Shaman Circle members to
vote on supply chain excellence
3. Final analysis of companies to be revealed
at the 2014 Supply Chain Insights Global
Summit
Next Steps

Building Market-driven
Value Networks

Process Evolution
Align:
Market
Driven
Building Horizontal
Process Connectors
Continuous
Testing
Learning
Improving
In Market
Orchestrate
Demand and Supply
Resilient
Reliable
Adapt:
Demand
Driven
Efficient
Sense
Demand
and Supply
Shape
Demand and
Supply based
on Market
Absorb
Demand
Volatility
Absorb Supply
Volatility
Right Product
Right Place
Right Time
Right Cost
Cost
Procure to
pay/order to
cash

A network that senses demand with minimal
latency to drive a near-real time response for
demand shaping and demand translation.
What Is a Demand-driven
Value Network?

Rising Price of a Barrel of West Texas
Intermediate (WTI)

Commodity Price Increases and Volatility

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.
What Is a Market-driven Value Network?

Current State

SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE
SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION
SHARED
VISION
+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY
SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =
FALSE
STARTS
SHARED
VISION
+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION
SHARED
VISION
+ SKILLS + RESOURCES + PLAN + LEADERSHIP =
GRADUAL
CHANGE
Source: J.P. Kotter
Collaboration: The Right Stuff

Market-Driven Value Networks
Characteristics

Demand-shaping Levers
New Product Launch
Marketing
Sales Incentives
Trade Promotions
Distributor Incentives
Assortment
Price
Run-out of obsolescence or mark-
down strategies
Orchestration Levers
Market-driven Orchestration Levers
Price to Price Orchestration
Alternate Bill of Materials
Alternate Sourcing
Change in Assortment
Orchestration of Product Mix (Incent
products with less commodity
variability)
Changes in Demand Shaping
Strategies
Commodity Hedging

Value Network Strategy
Supply chain 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?
Right product
platforms
Design the
supply
response
Build
organizational
systems and
manage talent
Align supply
relationships
Align demand
relationships
Effective Supply
Networks
Execution of buy-
side strategies
Continuous
Improvement
Capabilities Required
Supply Chain
Network Design
Design Networks
Innovation
Methodologies
Demand Networks
Joint Value Creation
Strategies
Business Process
How do I do the right things right?
Source: Supply Chain Insights, LLC

Building an Effective Center of
Excellence

Outside-In
Value-Based Outcomes
Delivered by Value Networks
Supply Chain Excellence =
Supply Chain 2020 Tipping Points
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Talent
Shortage
Compliance on
Safe & Secure
Orchestration
Big Data
Supply Chains
Internet of Things
Learning
Supply Chains
Digital Manufacturing

Our Journey

Current State

Gap by Position

Definition
Challenges:• Transactional
• Time phased data
Structured
Data
• Social
• Channel
• Customer Service
• Warranty
• Temperature
• RFID
• QR codes
• GPS
• Mapping and GPS
• Video
• Voice
• Digital Images
Unstructured
Data
Sensor
Data
New
Data
Types
Volume
Velocity
Variability

Focus

Connecting the Extended Supply Chain

• Outside-in
• End-to-End Orchestration
• Supply Chain Matters
Path Forward

Questions?

Save the Date!
Supply Chain Insights Global Summit 2014
September 10-11, 2014
The Phoenician – Scottsdale, AZ USA

Public Training
www.supplychaininsights.com/training
#sciwebinar
November 11-12, 2013
Chicago Illinois USA
January 16-17, 2014
Atlanta, Georgia USA

PAST WEBINARS: ON DEMAND
• From June 13, 2013: Sales and Operations
Planning: State of the Union
• From May 23, 2013: Supply Chain Index, Part II:
How and Why?
• From May 17, 2013: How Do We Heal the
Healthcare Value Chain?
• From August 17, 2013: Supply Chain Talent, the
Missing Link
Free Webinars
www.supplychaininsights.com/upcoming-webinars
UPCOMING WEBINARS
• October 11: Supply Chain Metrics that Matter
• November 14, 2013: Insights on Healthcare
Value Networks
• December 12, 2013: Digital Manufacturing

Podcasts
www.supplychaininsights.com/podcast
Research Anytime, Anywhere!
Straight Talk with Supply Chain Insights is a fresh and engaging
podcast series on supply chain research, blog posts, hot topics, and
current events plus interviews with supply chain professionals.

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:
lora.cecere@supplychaininsights.com
Blog: www.supplychainshaman.com
(5000 pageviews/month)
Twitter: lcecere 4270 followers. Rated as the
top rated supply chain social network user.
LinkedIn: linkedin.com/pub/lora-
cecere/0/196/573 (5450 in the network)

Elemica Presentation in Frankfurt - October 9, 2013

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Elemica Presentation in Frankfurt - October 9, 2013