Improving Supply Chain Performance€¦ · Applying a ‘Marginal Gains’ Approach to Improving...

Applying a ‘Marginal Gains’ Approach to

Improving Supply Chain Performance

Mark Morley – Director, Strategic Product Marketing

2OpenText Confidential. ©2016 All Rights Reserved.

Agenda

Supply Chain Trends

Introduction to ‘Marginal Gains’ Theory

How B2B Integration Drives Superior

Supply Chain Performance

Applying the Marginal Gains Approach

to Supply Chain Improvement

How Digital Transformation will Drive

Further Marginal Gains


Today’s Supply Chain

Challenges

• Supporting global trading partners

• Embracing consumer driven requirements

• Restructuring due to increased M&A activity

• Increased competitive pressure

• Improving supply chain resilience

• Increased levels of regulatory compliance



Introduction to Marginal

Gains Theory

• Marginal Gains theory was originally devised by Sir David Brailsford

• Brailsford masterminded the British Cycling team’s participation in the Beijing Olympics

• Brailsford applied the same approach to great effect in recent years with his management of Sky’s Cycling Team

• This approach to performance improvement has been used across many sports including Formula 1, rowing and sailing



How Does Marginal Gains

Actually Work?

• Brailsford said that if you could improve every variable influencing your performance by just 1% then cumulatively you can achieve a significant performance improvement

• In the case of the British Cycle team this was an ‘aggregate of marginal gains’ as every aspect of the team’s operation was improved, e.g

• Cycling equipment and associated technologies

• Rider preparation, fitness, rider mindset & coaching

• Team logistics etc and the list goes on



‘’Kaizen’ Process of

Continuous Improvement

• Marginal Gains is similar in nature to the ‘Kaizen’ process for continuous improvement

• Kaizen was developed by Toyota in the 1950s to transform their production operations

• Eiji Toyoda, a member of Toyota’s founding family, led the introduction of Toyota’s lean processes

• Every step in Toyota’s production process was analyzed, and improved to drive significant operational improvements



Can you Apply a Marginal

Gains Approach to a B2B

Environment?

• Implementing a B2B environment across thousands of trading partners can be a lengthy and complex process

• Taking a step by step approach to deploying or improving a B2B Procurement environment can bring significant benefits

• From on-boarding trading partners to integrating to enterprise systems such as ERP, applying a marginal gains approach to B2B can drive superior supply chain performance



Can B2B Integration Improve Supply

Chain Performance?

The hypothesis for the study was to

see whether B2B integration could help

drive improved supply chain

performance

The study covered 270 companies in

the automotive, high tech and CPG

sectors

Responses were obtained from

companies located across 8 major

manufacturing hubs around the world



Study Measured Key Supply Chain Metrics

• Average Time-to-Market in days,

(i.e. time required developing a

product to the point it can be

sold)

• Share of new Product Launch

Failures out of total new

products launches

• Cash-to-Cash cycle time in days

• DSO (Days of Sales

Outstanding) in days

• Invoice Processing Time

• Average customer Order Delivery

Time in days

• Average Delay (in days) in order to

respond to an internal or external

unforeseen event impacting

customer orders

• Share of Perfect Orders delivered

(i.e. orders delivered in full, on

time, in perfect conditions and

documented accurately)

• Monthly Inventory Turns, (i.e.

number of times inventory is sold

or used in a month)



Example Supply Chain MetricQ. What is your average invoice processing time ?


Four Performance Groups


IDC Supply Chain Study –

CPG Industry Results

Trade electronically with less than 50% of their

trading partners

94.4%

Said their customers are

driving new B2B projects

48.9%

Said reduced logistics costs

was a key benefit of B2B

integration

48.9%

Said competing IT projects such as ERP were a

barrier to starting B2B

projects

42.2%

Processed invoices within

one business day

41.1%



What a Difference B2B Integration Makes!

+156% Faster Invoice Processing Time

+89% More Responsive to Unforseen Events

+48% Improvement in Customer Order Delivery Time

+35% Faster Inventory Turns

+22% Reduction in Cash to Cash Cycle Time

+16% Improvement in Successful Product Launches

+3% Improvement in Perfect Orders



Can B2B Integration Improve Supply

Chain Performance?

The study demonstrates that there is a

strict correlation between having a

pervasive, more modern and

collaborative B2B platform in place and

being a leader in supply chain

performance

36.4% of respondents were regarded as

leaders in how they deployed

synchronous & collaborative

technologies to improve supply chain

performance



Applying a Marginal Gains Approach to

Improving B2B Integration

Improve

Transaction

Automation

Improve

Trading

Partner

Engagement

Improve

Regional

Compliance

Improve

Enterprise

Integration

Improve

Customer

Service

Improve

360 Degree

Visibility

Marginal

Gains



Improve Transaction

Automation

Most organizations understand the need for

an effective B2B Integration infrastructure

However Stanford University’s Global Supply

Chain Forum showed that over 50% of

information exchanged between trading

partners still travels by fax, email or phone(1)

Simply automating more transactions will

reduce cost, reduce errors while speeding

the order-to-cash cycle and improving

inventory performance

The 1% Gain

Companies save, at the

very minimum, 50% from

exchanging documents

electronically

If you exchange 1,000,000

documents a year - with

paper costing $14 to

process and electronic $7 –

trading just 1% more

electronically saves you

$70,500 per year


1. B2B Integration Study - Stanford Business Global Supply Chain Forum


Improve Trading Partner

Engagement

Effective collaboration within a trading partner

community requires real-time access to up-to-

the-minute information on your trading

partners

If you can’t be 100% confident in that

information, your supply chain is at risk and

business initiatives such as new product

launches and new market entry can stall and

fail

In addition, rapid partner and customer

identification and on-boarding are essential to

build agility within your supply chain

The 1% Gain

According to Gartner,

organizations are paying up

to $1000 per year on

supplier information

management(2)

A large global company has

10,000 suppliers. Saving

just 1% on supplier

information management

equates to $100,000 per

year


2. The Five Best Practices of Supplier Information Management - Supply & Demand Chain Executive.


Improve Customer Service

The most important element for the long-term

health of any company is a happy and loyal

customer base

While many things will go into creating the

ideal customer relationship, one aspect of

customer service will always dominate: the

ability to consistently deliver the ‘perfect order’

Not only will this bring higher customer

satisfaction levels, it reduces inventory,

shortens order-to-cash cycles and leads to

fewer stock outs

The 1% Gain

One large pharma company

estimates each imperfect

order costs $200 (3). The

average perfect order

delivery is 96%(4)

If the company transacts 1

million orders each year

then it will have 40,000

imperfect orders. improving

perfect orders by just 1%

equates to a saving of

$80,000 per year


3. Supply Chain Management Best Practices - David Blanchard

4. How B2B Integration Drives Superior Supply Chain Performance - IDC/OpenText


Improve 360 Degree

Visibility

Increasing supply chain visibility is a critical

strategy for enterprises to reduce costs and

improve operational performance across

supply chains

Research from GS1 found 63% of respondents

saw this as a high priority for improvement (5).

Supply chain visibility goes beyond simple

track-and-trace of logistics shipments

It is the ability to have an end-to-end view of all

transactions across your supply chain from raw

material extraction to final product delivery to

customer

The 1% Gain

According to GS1 research,

sector leaders were far

more likely to have visibility

of Advanced Shipping

Notices from themselves

and their suppliers(6)

If we accept an electronic

ASN costs, on average, $78

less than its paper-based

equivalent, an enterprise

producing 100,000 ASNs

will save $78,000 per year


5. Supply Chain Visibility - GS1/The Aberdeen Group

.6. Supply Chain Visibility - GS1/The Aberdeen Group

.


Improve Regional

Compliance

The regulatory and compliance landscape for

every company grows more and more complex

Many organizations first introduce B2B

Integration to comply with the trading

mandates of large customers

Now extended, global supply chains mean

there is a necessity to be able to accommodate

industry and governmental regulatory

compliance as well as providing the correct

information governance to reduce the risk in

global supply chain operations

The 1% Gain

According to the Ponemon

Institute, the average cost

to a large organization of

non-compliance related

issues is $9.4 million

annually (7)

With the supply chain, this

falls within areas such as

finance-related issues, eco-

compliance and logistics

management. Reducing

non-compliance issues by

1% saves $94,000 per

year


7. The True Cost of Compliance - Ponemon Institute.

.


Improve Enterprise

Integration

Today almost every enterprise operates in

global markets which increases the

requirement for extended, dispersed and

continuously interconnected enterprise

information systems

Enterprise Integration is a strategy to rapidly

respond to the changing global environment by

integrating business functions in order to

efficiently utilize information technology, and

share data quickly and securely with your

trading partner community

B2B Integration provides the interface between

internal and external application infrastructure

The 1% Gain

Research firm Sirius

Decisions noted that it

takes $1 to verify a record

as it’s entered, $10 to

cleanse and de-dupe it and

$100 if nothing is done(8)

Say a large company enters

100,000 records into its

global ERP system each

day of which 2% include

errors. A 1% increase in

error-free records will save

the company over

$720,000 per year


8. Business Operational Intelligence White Paper - OpenText

..

.


$6.5Trillion

in Commerce

16 BillionTransactions

600,000Trading Partners

2 BillionFaxes

80,000Customers

1300Business Network

Experts

23/25Top 25 Supply Chains



The OpenText Cloud

OpenText delivers

people, process &

technology that

optimize supply

chains by

facilitating the

secure, compliant

and efficient

exchange of

information

between trading

partners in the

Cloud

Integration

Hub

Message

Transport

Translation

Protocol

Conversion

ERP

Firewall

Notifications

Message

Storage

Reporting

Analytics

Structured

Information

Exchange

SecureMail

MFT

FAX2MAIL

Notifications

FAX

Unstructured

Information

Exchange


How B2B Integration Drives Marginal

Gains

Community

Management and

Collaboration Tools

Transaction

Compliance and

Quality tools

Order Lifecycle

Visibility and

Supply Chain

Analytics Tools

Electronics Invoice

Compliance and

Conflict Minerals

Reporting

B2B Enablement

Tools – Fax 2 EDI,

Web Forms & MS

Office based tools

ERP / B2B

Integration in the

Cloud

OpenText Confidential. ©2016 All Rights Reserved. 2525

Will Digital Transformation Drive Further

Marginal Gains ?

Several important factors are converging,

driving the need for transformation of

businesses into digital businesses.

Changing

WorkforceSecurity &

Governance

The Digital

Customer

New

TechnologiesRegulatory

Pressure



Digital Disruption Market Predictions

By 2020, almost 50% of IT budgets will be tied into

DX (digital transformation) initiatives

By 2017, over 50% of IT spending will be for new

technologies (mobile, cloud, big data)

Big Data technology and services will grow at a

compound annual growth rate (CAGR) of 23 percent

through 2019, reaching $48.6 Billion

90 Percent of Large Organizations Will Have a Chief

Data Officer by 2019

Source: IDC 2016 Technology Predictions

Source: IDC 2016 Technology Predictions

Source: IDC 2015 Big Data Technologies Forecast

Source: Gartner 2016 Predicts 2016: Information Strategy



Businesses are Embarking on a Journey

of Significant Digital Transformation

D

I

G

I

T

A

L

D I S R U P T I O N

New Sources of Information Will Need Managing & Analyzing Across the Enterprise

4G Networks

Cloud

B

Y

O

C

Internet of Things

W

I

F

I

PaaS

5G Networks

Smart Grids

Mesh Networks

New Networks

SensorsRFID

Smart Phones

Tablet Devices

B

Y

O

D

Connected Devices

3D Printing

Drones

Wearable DevicesMass Storage

M2M

Robots

New Devices+

Big Data

Social Networks

Remote Monitoring

Analytics

Mobile Apps NFC Payments

SAAS

S

E

C

U

R

I

T

Y

T

E

L

E

M

A

T

I

C

S

New Information+



Predictive

Maintenance

Proactive

Replenishment

Pervasive

Visibility



Wi-Fi Network

2. Supplier Replenishment Process

Proactive Replenishment Example – DMI?

1. Product Consumption Trends

Supplier/3PLMobile TGO/Active Docs

Trading Grid™ Online

Customer Coffee Station

Proximity Based Sensors

Connected Devices

Enterprise IOT Platform

RFID Network Integration

Customer Location Supplier Location

OpenText Analytics

Analytics

Improving Supply Chain Performance€¦ · Applying a ‘Marginal Gains’ Approach to Improving...

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