Apics IBF Presentation on Customer Collaboration

Supply Chain Insights

Customer CollaborationAPICS & IBF Best of the Best Conference

Supply Chain Insights, LLC © 2012, p. 2

“When it comes to driving volume, a dollar spent in working with a customer in developing customer programs is worth three spent in trade promotion.”

North American Supply Chain Leader

BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation

LORA M. CECERE CHARLES W. CHASE JR.

BookPublishes in August

2012


Agenda

Current State

Pitfalls and Potholes

Devil is in the Detail

New Ways to Work Together

Wrap-up


CostVolumeGrowth

Typical Organization5

CEO

Chief Customer

Officer

Chief Marketing

OfficerSales

Account Teams

COO

VP of Supply Chain

Customer Service Procurement Logistics

CFO

CIO

VP of Manufacturin

g

Quality


A Supply Chain is a Complex System

with Complex Processes with Increasing Complexity

Looking at Supply Chain as a Complex System

Supply chain strategy

Business strategyWhat are the right things to do to increase company value?

Value-network strategyWhat are the right ways to support the business strategy?

What are the right trade-offs between value drivers for each value network?Right productplatforms

Design the supply response

Build organizational systems and manage talent

Align supply relationships

Developing the Supply Chain Strategy

Align demandrelationships

Effective Supply NetworksExecution of buy-side strategies

Continuous ImprovementCapabilities Required

Supply Chain Network Design

Design NetworksInnovation Methodologies

Demand NetworksJoint Value Creation Strategies

Business ProcessHow do I do the right things right?


Yes 87%

No 10%

Not sure 3%

Have a Sales & Operations Planning Process

S&OP ProcessExistence & Processes

Base: Total Sample (117) Q17. Does your company have a Sales and Operations Planning (S&OP) process? A S&OP process is a tactical planning process to forecast sales and plan operations.Base: Have a S&OP process (102)Q18. Which one of the following best defines the goal of your current S&OP process? Q19. How many distinct S&OP processes does your company currently have? Your best estimate is fine. OPEN-ENDED

1 2 3 4 5 More than 5

27%14% 20%

12% 9%19%

# Distinct S&OP Processes5 S&OP processes on average

59% have 3+ processes


Multiple S&OP Processes

Executive S&OP

Regional S&OP

Processes

Supply Chain Planning Processes with Key Suppliers

S&OP Processes With Key

Customers


Importance of S&OP Process for Agility

Base: Have a S&OP process (102)Q22. How important do you think your S&OP process is to improving the agility of your supply chain?

28%

42%

20%

7%3%

Importance of S&OP Process to Agility

Not important (1-3)

(4)

(5)

(6)

Extremely important (7)

90% Important


Agenda

Current State




Wrap-up

Organizational Alignment to Improve Value Chain Relationships

P&G Efficient Consumer Response adoption as a change program…

based on J. P. KOTTER

+ ++ = CONFUSIONINCENTIVESKILLS PLANRESOURCES

+ + = ANXIETYRESOURCESINCENTIVE PLAN+ LEADERSHIP+

++ + =INCENTIVESKILLS RESOURCES FALSE STARTSSHAREDVISION LEADERSHIP+

LEADERSHIP+ ++ =SKILLS INCENTIVE PLAN FRUSTRATIONSHARED

VISION +

++ + = GRADUAL CHANGESKILLS RESOURCES PLANSHAREDVISION LEADERSHIP+

SHAREDVISION

+ ++ = CHANGESKILLS INCENTIVE PLAN ++ RESOURCES LEADERSHIPSHAREDVISION


Health Care Providers

Goal: Working Capital Turns

Pharma BioTech

Goal: Growth Goal: Innovation

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

Goal Alignment


Goal Alignment

Retail

Goal: Working Capital Turns

CPG 3rd Party Supplier

Goal: Growth Goal: Costs

Sale

s

Time

Manufacturing

Sale

s

Retail Warehouse

Retail StoreConsumer

Sale

s

Time

Suppliers

Time

Sale

s

Time

Inventory and Costs

Inventory data source: CFO Magazine September 2010-2004

Demand

Retailers Food Manufacturers Containers and Packaging1015202530354045505560

200920082007200620052004

Days of Working Capital

Food Value Chain Working Capital

Demand Signal

Accurate Weekly

Forecasting is ...

Delay from Purchase to

Signal

The Bullwhip Effect.

Red Represents Emerging Economies with Distributor Trade

Retailer DC

Easy

3-10 Days7-20 Days

Manufacturer DC

Difficult

10-20 Days20-45 Days

Suppliers

Almost Impossible

20-50 Days45-80 Days

Store

Trivial

InstantVariable

Store

Traditional Supply Chains do not Respond Fast Enough with Market Data

Production

POS store

Shipments to DCPOS demand

Production

Shipments

Kraft Foods Presentation MIT Supply Chain Forum, November 2011


24%

24%

26%

22%

25%

21%

31%

24%

33%

24%

22%

25%

28%

33%

30%

36%

27%

34%

28%

47%

30%

24%

28%

23%

36%

27%

29%

33%

20%

24%

27%

21%

17%

23%

8%

16%

12%

6%

9%

26%

In-store advertisements

Every day low price

Pricediscounts/changes

Joint marketing w/retailers

Buy one get one free

Market basket or cross-category promos

Coupons

Custom products

Floor displays or endcaps

Special packaging

Less than 50% 50-70% 70-90% Greater than 90%

Trade Promotion Compliance w/ Retailers?

Q. What percent of your trade promotion tactics have compliance at the retail level?Sample Size = [varies by # of companies using each promotion type]


Agenda

Current State




Wrap-up


S&OP Plan Execution

Base: Have a S&OP process (102)Q25. After your S&OP plan is generated, how is it executed? Please pick the one that describes it best.

Execution is not connected to S&OP plan

We try to execute the S&OP plan, but hardly do in practice

We execute the S&OP plan most of the time

We execute the S&OP plan nearly all of the time

We monitor market events and adjust to S&OP plan within limits

9%

25%

35%

19%

13%

S&OP Plan Execution

Sense & Respond


Supply Chain Focal Points for Next 2 Years

Base: Total Sample (61)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. Q24. What other supply chain elements, if any, will you be focusing on over the next 2 years? Please select all that apply.

Improving demand planning

Saving costs

Shortening cycles

Network design

New product launch effectiveness

Channel sensing

Revenue management

Other

74%

70%

66%

62%

48%

30%

26%

18%

23%

21%

21%

8%

10%

3%

7%

7%

Supply Chain Focal Points for Next 2 YearsPrimary Total

Top Supply Chain Focal

Points

“Other” Focal Points


Manufacturing View (Units)

Sales View ($) Marketing View

($, Units) Logistics View

(Units, Cases)

Ship-from Locations

Warehouses

Global

Production L

inesPlants

Global

Supply-side Views

Downstream Data

Account-LevelA VMI C

DistributionNetwork

Supplier Supplier Supplier Supplier

DistributionNetwork

DistributionNetwork

Demand-side Views

Hole in Enterprise Architectures


Manufacturing View (Units)

Channel View ($)

Accounts (Ship-to

locations

Countries

Global

Marketing View

($, Units)

Brands

Produc

t Cate

gorie

s

Global

Logistics View

(Units, Cases)

Ship-from Locations

Warehouses

Global

Production L

inesPlants

Global

Supply-side Views

DemandTranslation

Downstream Data

Account-LevelA VMI C

DistributionNetwork

Supplier Supplier Supplier Supplier

DistributionNetwork

DistributionNetwork

Demand-side Views


Connecting the Extended Supply Chain

25

Trading Partner 1 Trading Partner 2 Trading Partner 3

Transactional Applications



Store


Connecting the Extended Supply Chain

Collaborative Layer

Collaborative Layer

Collaborative Layer

Enterprise Data Warehouse


Demand Signal RepositorySupply Signal Repository

Predictive Analytics

Key:

Transactional Adapters and Intelligent Rule Sets

Trading Partner 1 Trading Partner 2 Trading Partner 3





Store


Agenda

Current State




Wrap-up


Smartphone Integration

2/3 of smart phone owners use them in the

grocery store

49% recipe searches

38% shopping lists

Allrecipies.com Today’s Recipe Box Study April, 2010


Campaign Objectives:

Reduce Out of Stocks at targeted retailers by

5%Increase Shopper

satisfaction and brand loyalty

“Where’s My Bud” Viral Campaign

Concept: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

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 pilot, under $75K


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

http://www.budweiser.com/







Stop & Shop and Giant Are Leveraging Mobile In Store

• Twice the basket size

• 16% higher store frequency rate and

• 18% higher coupon redemption rate than that of general grocery shoppers


Supply chain planning

Sales

Senior management

Production/manufaturing operations

Corporate strategy

Procurement

Marketing

Finance

Manufacturing outsourcing

Channel partners in the buy-side of your market

Channel partners in the sell-side of your market

61%

36%

48%

36%

43%

15%

22%

18%

3%

4%

5%

25%

46%

33%

40%

27%

52%

46%

48%

42%

23%

21%

86%

83%

81%

75%

70%

68%

67%

66%

45%

27%

26%

Who’s Responsible for Running the S&OP ProcessPrimary Secondary Any Responsibility

S&OP Responsibility

Base: Do NOT Have S&OP Experience; Total Answered (135)Q5. In your organization, who takes responsibility for running the S&OP process?


Agenda

Current State




Wrap-up


• For 90% of supply chains, customer collaboration in S&OP improves agility.

• We say that we are collaborating, but we are only really sharing data. Collaboration is a sustainable win/win value proposition.

• Today’s supply chains respond. They don’t sense. To be able to sense, the supply chain needs to be redefined..

• S&OP is not just about product. It is about joint planning of new opportunities.

Summary


“When it comes to driving volume, a dollar spent in working with a customer in developing customer programs is worth three spent in trade promotion management spending.”

North American Supply Chain Leader


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: [email protected]: www.supplychainshaman.com (3500 pageviews/month)Twitter: lcecere 2950 followers. Rated as the top rated supply chain social network user.Linkedin: linkedin.com/pub/lora-cecere/0/196/573 (2300 in the network)

Apics IBF Presentation on Customer Collaboration

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