Cscmp4

Supply Chain Metrics that Matter in the Market-Driven

World

Supply Chain Insights LLC Copyright © 2015, p. 2

Disclaimer: I am a Skeptic


A Curmudgeon of Sorts…


A Fortune-teller….


Process Definition for the Average Joe


My Point of Reference

WileyDecember 2012

Wiley December 2014

Self-publishedSeptember 2014

Self-publishedSeptember 2015

Why is Today’s Supply Chain Stuck?


Today’s Supply Chain is Stuck


Progress: All Industries

Industry Snapshots (2006-2013)

Industry

Year –over-Year

Revenue Growth

Operating Margin

Inventory Turns

Cash-to-Cash Cycle

Revenue per

Employee (K$)

SG&A Ratio

Retail Apparel Industry

18%39%

0.3927%

0505%

6826%

32518%

27%05%

Apparel Manufacturing Industry

14%82%

0.1232%

0568%

15008%

400355%

27%63%

Mass Retail Industry

09%50%

0.0620%

0606%

03148%

35048%

23%6%

Beverage Industry

09%61%

0.1916%

0204%

5346%

512 NC

24% 16%

Pharmaceutical Industry

08%47%

0.2329%

0316%

15547%

57232%

27%08%

Chemical Industry

08%45%

0.1010%

0604%

8723%

55723%

14%27%

Medical Device Industry

06%38%

0.1432%

0213%

20616%

35112%

34%04%

Grocery Retail Industry

06%31%

0.0337%

1701%

1050%

40554%

14%06%

Consumer Packaged Goods

05%25%

0.1473%

08482%

7217%

33314%

26% 09%

Food Industry

05%55%

0.1019%

07 17%

4004%

53455%

20% 18%

Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2013Industry Average comprised of public companies (combined food & beverage industry: NAICS 3112% where % is any number from 0-9, 311320, 311520, 311821, 311941 & 312111), (chemical: NAICS 325188 & 325998), (consumer packaged goods: NAICS 3256% where % is any number from 0-9), (medical device industry: NAICS 339112), (pharmaceutical industry: NAICS 325412) reporting in One Source with 20123annual sales greater than $1billionNC=no change


Drivers


Supply Chain Risk


Why? The Long Tail of the Supply Chain: Growing Complexity

Volume

Level of PredictabilityPredictability based on forecast accuracy vs Actual Order Profiles


Demand Signal

Accurate Weekly Forecasting is ...

Delay from Purchase to

Signal

What is Demand?

* Represents emerging markets


Consumer-driven Supply Networks: Defined by P&G in the 1990s as a shelf-driven, outside-in process defined by successful execution of the two moments of truth.

Demand-driven Supply Networks: As defined by AMR Research in 2004: a supply chain that senses and translates market signals in real time.

Demand-driven Value Networks: As defined by AMR Research in 2007: A network that senses demand with minimal latency to drive a near-real time response to shape and translate demand.

Market-driven Value Networks: As defined by Supply Chain Insights in 2010: an adaptive network focused on a value-based outcomes that senses, translates, and orchestrates market changes (buy and sell-side markets) bi-directionally with near-real time data to align sell, deliver, make and sourcing organizations outside-in.

Evolution of Demand-driven Concepts


Gaps in Supply Chain Visibility


Fallacy #1: Functional Excellence

#sciwebinar


Ability to Get to Total Supply Chain Costs


Fallacy #2: A Project-based Focus

#sciwebinar

Which Metrics Matter?


What We Expected


A Supply Chain is a Complex System

with Complex Processes

with Increasing Complexity

What we Learned….

#sciwebinar


The Supply Chain Effective Frontier

#sciwebinar


Correlations to Market Capitalization

#sciwebinar


Orbit Chart: Wal-Mart(Inventory Turns and Operating Margin)

#sciwebinar


Orbit Chart: Apple (Inventory Turns and Operating Margin)

#sciwebinar


Orbit Charts: Dow Chemical Company

#sciwebinar


Eli Lilly and Novo Nordisk


Measuring Supply Chain Improvement

Overall Ranking per Company• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)• Strength: Inventory Turns & Operating Margin Vector Trajectory (30% of score)• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)

𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙=𝟏𝟑𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓+

𝟏𝟑𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓


Supply Chains to Admire Methodology

PerformanceBeats the industry

average for operating margin, inventory turns

and ROIC for 2006-2014 and 2009-2014

ImprovementRanks above peer group average on The Supply Chain

Index for 2006-2014 or 2009-2014

+


An Example: Beauty


Annual Study: Supply Chains To Admire

Supply Chains to Admire 2015 to be Announced at the Supply Chain Insights Global Summit on September 9th and 10th


• Which metrics matter?– Growth, operating margin, inventory turns, ROIC

• How do we get unstuck?– Focus cross-functionally on a balanced portfolio. Bonus against

these.– Augment with functional metrics focused on improving RELIABILITY.

• What are the functional reliability metrics?– Examples include: First pass yield, OEE, on-time delivery, orders

shipped complete, hands-free orders, schedule attainment, safety metrics, employee turnover

My Insights


Overall Network: Inventory Turns versus Operating Margin 2006-2012

#sciwebinar


Journey to Build the End-to-End Value Chain


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

Driving Results


• Leadership• Building of talent• Alignment• Analytics• Outside-in processes• Horizontal process focus• Active and intentional design• Supply chain planning

What Makes a Difference


Right Stuff?


Organizational Alignment


Growing Talent Gap


Losing Ground


Get Prepared


It is not an evolution

We are defining new practices

It is time to learn from the past, to unlearn, to beginning to relearn

Get Prepared


Questions?

Voice of the Supply Chain Leader StudyWhat are supply chain leaders’ attitudes and plans regarding IT systems

and spending? What are today’s exciting trends and top challenges?

For Manufacturers, Retailers, and Distributors.

Take the Survey www.tinyurl.com/sci-vsc4-evt

Continuous Improvement StudyWhat are companies’ current Continuous Improvement processes and

how are they designed? Have they impacted performance?

For Manufacturers, Retailers and Distributors who have and are familiar with their Continuous Improvement processes.

Take the Survey www.tinyurl.com/sci-cim-evt

Risk Management StudyWhat is the current state of supply chain risk management

and the impact of supply chain disruptions?

For Manufacturers, Retailers and Distributors and Third Party Logistics Providers.

Take the Survey www.tinyurl.com/sci-rsk2-evt

Take a Supply Chain Insights SurveyOur philosophy is “you give to us and we give to you.” We promise to share the

results with you at no charge and can also review the results with you either via a virtual roundtable or a dedicated call. We want you to benefit from our research!


Founder: Lora Cecere

• Founder of Supply Chain Insights

• “LinkedIn Influencer”

• Guest blog for Forbes

• Author of 3 books: Bricks Matter (2012), Shaman’s Journal (2014) and Supply Chain Metrics That Matter (December 2014)

• 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.

Contact Information: • Email: [email protected]• Blog: www.supplychainshaman.com (6000 pageviews/month)• Forbes: http://www.forbes.com/search/?q=lora+cecere• Twitter: lcecere (6000 followers)• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (46,000 followers)

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