Creating Market-driven Value Networks
Lora Cecere of Supply Chain Insights
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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
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18 Reports in 2012
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Over 30 Reports Planned for 2013
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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
BRICKSRight Use of Assets
Expansion into BRIC Countries (Brazil, Russia, India and China)
Supply Chain Process Knowledge
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Publishing Two eBooks in 2013 on Supply Chain Metrics That Matter
– Consumer Value Networks– Industrial Value Networks
2013 Publications
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Where are we on Delivering on Supply
Chain Excellence?
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A Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity
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The Supply Chain Effective Frontier
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Mining 20 Years of Financial Data
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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
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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
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Most Interesting Patterns
• Revenue per Employee versus Inventory Turns
• Operating Margin versus Inventory Turns
• Cash-to-Cash Cycle versus Inventory Turns
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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.
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A Look at the Last Decade
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Progress in Manufacturing Productivity
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Productivity in Retail
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Progress in Inventory Turns and Operating Margin
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Impact of A Recession
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0 250 500 750 1,000 1,2500
3
6
9
12
15
2002 2012
The Dow Chemical Company
Revenue per Employee (K$)
Inv
en
tory
Tu
rns
Visualizing the Patterns
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source
Best Scenario
DOW999, 6.7
Trace the line from 2002 point to 2012 point to follow the performance over time.
The diamond shows the company’s average over the period. Ex: The Dow Chemical Company (DOW) has an average of 999 K$ 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)
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Corporate Summary
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Inventory Turns vs. Revenue per Employee (2002-2012)
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Corporate Summary
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Cereal
Who Does Supply Chain Best?
October 2013
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Corporate Summary
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Cash-to-Cash Cycle (2000-2012)
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CPG Ranking 2012
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Inventory Turns vs. Revenue per Employee (2002-2012)
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Inventory Turns vs. Operating Margin (2000-2012)
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Cash-to-Cash Cycle vs. Inventory Turns (2000-2012)
Who Does Supply Chain Best?
October 2013
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Corporate Summary
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Cash-to-Cash Cycle (2000-2012)
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Inventory Turns vs. Revenue per Employee(2002-2012)
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Inventory Turns vs. Operating Margin(2000-2012)
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Cash-to-Cash Cycle vs. Inventory Turns(2000-2012)
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Case Study
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Inventory Turns vs.
Operating Margin (2000-2012)
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What Matters
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Mean Absolute Percent Error & Value
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Industry Progress
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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.
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• 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
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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
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Process Evolution
Align:Market Driven
Building Horizontal Process Connectors
ContinuousTesting
LearningImprovingIn Market
OrchestrateDemand and Supply
ResilientReliable
Adapt: Demand Driven
EfficientSense
Demandand Supply
Shape Demand andSupply based
on Market
Absorb DemandVolatility
Absorb Supply Volatility
Right Product
Right Place
Right Time
Right Cost
Cost
Procure to pay/order to
cash
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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?
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Rising Price of a Barrel of West Texas Intermediate (WTI)
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Commodity Price Increases and Volatility
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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?
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Current State
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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
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Market-Driven Value Networks Characteristics
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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
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Value Network Strategy
Supply chain strategy
Business StrategyWhat are the right things to do to increase company value?
Value-network Supply Chain 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
Align demandrelationships
Effective Supply Networks
Execution of buy-side strategies
Continuous Improvement
Capabilities RequiredSupply Chain
Network Design
Design Networks
Innovation Methodologies
Demand Networks
Joint Value Creation Strategies
Business ProcessHow do I do the right things right?
Source: Supply Chain Insights, LLC
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Building an Effective Center of Excellence
Race for Supply Chain 2020
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Outside-In
Value-Based OutcomesDelivered 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
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Our Journey
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Current State
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Gap by Position
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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
SensorData
NewDataTypes
Volume
Velocity
Variability
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Focus
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Connecting the Extended Supply Chain
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Connecting the Extended Supply Chain
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• Outside-in• End-to-End Orchestration• Supply Chain Matters
Path Forward
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Questions?
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Save the Date!
Supply Chain Insights Global Summit 2014September 10-11, 2014
The Phoenician – Scottsdale, AZ USA
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Public Training
www.supplychaininsights.com/training
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November 11-12, 2013Chicago Illinois USA
January 16-17, 2014Atlanta, Georgia USA
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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
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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.
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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.
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Where Do You Find Lora?
Contact Information: [email protected]
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)
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