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Supply Chain Insights, LLC © 2012

Supply Chain InsightsDelivering Insights to Line of Business Leaders

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BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation

LORA M. CECERE CHARLES W. CHASE JR.

BookPublishes in August

2012

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Supply Chain Insights, LLC © 2012

Who does it Best?

3

Dell

Toyota

Procter & Gamble

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P&G Apple Dell Wal-Mart Toyota

38%

21%17%

4% 4%

SC Excellence

Who does it Best?

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52%36%

20% 16% 8%

Tipping PointsWhat were the Tipping Points?

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Supply Chain Insights, LLC © 2012

What is Supply Chain Excellence?

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Supply Chain Insights, LLC © 2012

Supply Chain

A supply chain is a complex system with complex processes with increasing complexity.

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Supply Chain Insights, LLC © 2012

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

Alignment to Strategy

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 Process

How do I do the right things right?

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Supply Chain Insights, LLC © 2012

CostVolumeGrowth

Typical Organization9

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

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Supply Chain Insights, LLC © 2012

A Look Back

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Supply Chain Insights, LLC © 2012

Inside-Out Inside-Out

Supply Chain Tipping Points1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

S&OP

Evolution of the PC

JIT

Theory ofConstraints

Supply Chain Organization

Re-Engineering the Organization

(Michael Hammer)

Internet/Email

eProcurement

Total QualityManagement

RFID

Vertical SiloExcellence

Efficient Order toCash Processes

+ Islands ofExcellence

ManufacturingExcellence

+

Supply Chain Excellence = Supply Chain Excellence =

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Supply Chain Insights, LLC © 2012

Inside-Out Outside-In

Value-Based OutcomesDelivered by Horizontal Processes

+

Supply Chain Excellence = Supply Chain Excellence =

Supply Chain Tipping Points2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Y2K

Lean Six Sigma

.com

Demand Driven Concepts

Vertical SiloExcellence

Outsourcing Effectiveness

Social Responsibility

CSCO

Market-Driven Value Networks

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The Long Tail: Growing Complexity

Volume

Level of PredictabilityPredictability based on forecast accuracy vs Actual Order Profiles

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Commodity Price Pressure

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Jan-

97

Jan-

98

Jan-

99

Jan-

00

Jan-

01

Jan-

02

Jan-

03

Jan-

04

Jan-

05

Jan-

06

Jan-

07

Jan-

08

Jan-

09

Jan-

10

Jan-

110.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

Corn (metric Ton)

Wheat (metric Ton)

Coffee, Robusta (Pound)

Sugar (Pound)

Beef (Pound)

Crude Oil (Barrel)

Source: Index Mundi

$/LB

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Supply Chain Insights, LLC © 2012

2002 2003 2004 2005 2006 2007 2008 2009 201030

35

40

45

50

55

60

65

Days of Inventory

Household Products ChemicalPharma Average

Data Source: CFO Magazine

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 201035

45

55

65

75

85

95

Days of Working Capital

Household Products ChemicalPharma Average

Data Source: CFO Magazine

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Supply Chain Insights, LLC © 2012

Evolution of Supply Chain Excellence

Align

ResilientReliable

Adapt

Efficient

Building Horizontal Connector

ContinuousTesting

LearningImproving

Orchestrate

Sense Demand

and Supply

Shape Demand andSupply based

on Market

DemandVolatility

Supply Volatility

Right Product

Right Place

Right Time

Right Cost

Cost

Procure to pay/order to

cash

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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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Great Recession:Leaders sensed Market Changes 5x Faster

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Industry Today Tomorrow

Airspace and Defense

Selling aircraft Performance-based logistics

Automotive Efficiency: sale and life of a car

Safe transportation

Consumer Products

Right product, right time, right place

Effectiveness at the moments of truth

Healthcare Efficient sickness Long life and wellness

What is a Value-based Outcome?

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Sales and Operations Planning

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In 2011…Supply chains are grappling withskyrocketing costs and supply volatility.

Struggling with the integration of businessplanning and supply chain planningtechnologies.

Supply chains experienced a disruption.

Companies have multiple S&OP processes.

Industry progress on working capital has stalled.

90%

87%

85%

62%

!

Source: Supply Chain Resilience 2011 © 2011 The Business Continuity Institute. All Rights Reserved.

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S&OP Evolution

Manufacturing-Driven

Deliver a Feasible Plan for Operations

Sales Driven

Match Demandwith Supply

Business-planning Driven

Coordination of Plans

Demand Driven

Sense andShape Demand

Market Driven

Orchestrate Demand

Market to Market

Greater Benefit• Growth• Resilience• Efficiency

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Aligning for Balance24

S: Go-to-Market

Strategies

OP: Demand Orchestration

Commodity Strategies

Network Strategies: Make/Source & Deliver

Inventory: Form & Function

Competition

Market Drivers

&

Goal

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Supply Chain Insights, LLC © 2012© 2011 Altimeter Group

Image by felixj used with Attribution as directed by Creative Commons http://www.flickr.com/photos/felixj/462022653

Where we are Headed

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Historically, we have:

• Tried to get precise on inaccurate data

• Believed that the most efficient supply chain is the most effective supply chain

• Built efficient chains, but not effective or adaptive networks

• Wrongly defined the “R”s

• Focused inside-out, not outside-in.

• Rewarded the urgent, not the important

• Responded without sensing.

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Supply Chains Don’t Play by the Rules

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But, what if they

could?

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Big Data Supply Chains are Evolving

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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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Connecting the Extended Supply Chain

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Trading Partner 1

Trading Partner 2

Trading Partner 3

Transactional Applications

Transactional Applications

Transactional Applications

Store

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Evolving Supply Chain Architectures

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Collaborative Layer

Collaborative Layer

Collaborative Layer

Enterprise Data Warehouse

Enterprise Data Warehouse

Supplier Signal Repository

Demand Signal Repository

Predictive Analytics

Key:

Transactional Adapters and Intelligent Rule Sets

Trading Partner 1

Trading Partner 2

Trading Partner 3

Transactional Applications

Transactional Applications

Transactional Applications

Enterprise Data Warehouse

Store

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Move the puck. Supply chain excellence is about more than supply and cost. Make it about value and growth.

Invest in new technologies to harness growth: make it count.

For manufacturers and retailers, supply chain is business.

Wrap-up

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Lora Cecere

[email protected]

Blog: www.supplychainshaman.com

Twitter: lcecere

Linkedin:

linkedin.com/pub/loracecere/0/196/573

Thank you!