Copyright © DRK Research 2014

The Future of a Networked Supply Chain

Dr. Kevin McCormack

March 2014

Advanced Analytics for Business Solutions

Copyright © DRK Research 2014

Managing the Extended Enterprise: The Future of the Networked Supply Chain

The supply chain world is more connected than ever before. Social media and collaborative-networked applications are commonplace.  Mobile apps make the office “everywhere”. How do you use this connectivity to improve supply chain performance? What are the best practices currently being used and under consideration?  This presentation presents recent research suggesting the future and what is needed to be successful.

 

DRK

Percipio

Profit Point

17th Floor

iCognitive

PhD.Program

ShanghaiConsulting

NorthwoodUniversity

SAS

Other

Vlerick Leuven Gent Management School

Belgium

IndependentsAssociates

ISM

UniversityOf Maryland

U of ESBrazil

Supply Chain Council

ISMChina

Neurametrics

Singapore

Shanghai

Europe

Portland, OR

Phil. PA

TX

TBD

BPM Network

University of LjubljanaSlovenia

UMFG Brazil

Data Top

OrionNJNIPE

Advanced Analytics for Business Solutions

On DemandAnalysis

University ofZagreb,Croatia

JK DataAnalytics

SkemaFrance

Business Process Knowledge

GlobalBPM Research

Network

Dr. Kevin McCormack

is President of DRK Research and a professor at Skema Business School (France) and Northwood University. Dr. McCormack has over 30 years of business leadership, teaching, research and consulting experience. His experience covers many national and international industry segments and a broad range of business processes. He has been a member of or has successfully conducted engagements with several government agencies and major companies in the food, forest products, pharmaceutical, chemical, consumer products, high tech and the plastics industry. Some of his clients have been Kraft, Philip Morris, CPC International, Cargill, Texas Instruments, USMC, Phillips Petroleum, Chevron-Phillips, Columbia Forest Products, Dow Chemical, Warner-Lambert, Standard Charter Bank, Microsoft, Intel, Tektronix, several state governments, Borden Chemical, California Public Employees Retirement System (CalPERS), Wal-Mart, Campbell’s, General Mills, Fairchild Industries and PepsiCo. He has written six books and over 100 articles on business process, Supply Chain Management and business strategy.

Time

Supply Base Performance/Capability

Higher

TOTAL QUALITY

MANAGEMENT

SUPPLY BASE ASSESSMENT

SUPPLY BASEREDUCTION

REACTIVE SUPPLIER

DEVELOPMENT

STRATEGIC SUPPLIER

DEVELOPMENT

Lower

Evolutionary Strategies

Evolution of Supplier Development Supply Network

Management

Connectivity, Capability and Friction (Interaction Costs)

Cap

abili

ty

FrictionHigh

High

Low

LowPeople

to People

Post

Radio

InternetWireless

InternetPhone

Telephone

Telegraph

InternetBroadband

Con

nect

ivity

High

Low

Interaction costs:The money and time expended whenever people and companies exchange goods, services or ideas.

Interaction costs

MobileWireless

Copyright © DRK Research 2007

P2P View - Constraining

Sourcing Decision

Contract / PO Generation

SupplierNeedFulfillment

Receive Material,Services &Documents

Forecast,Plan &Coordinate

Settle &Pay

NeedClarification &Specification

Start End

Copyright © DRK Research 2014

P2P “Networked” View

Sourcing Decision

Contract / PO Generation

SupplierNeedFulfillment

Receive Material,Services &Documents

Forecast,Plan &Coordinate

Settle &Pay

NeedClarification &Specification

Start End

DRK ConfidentialDo not Distribute without Permission

9

SC NetworkUnits of Analysis

s

s

s

s

s

s

s

SC NetworkOrganizer

Commodity Category

Interactions and Relationship

Supplier Attributes

Supplier Environment

s

s

s

s

s

s

s

SC Network

Organizer

Interactions and Relationship

Supplier Attributes

Supplier Environment

SC NetworkComponents

Copyright© 2007 DRK Research, LLC

PerformancePerformance

Human ResourcesHuman Resources

Supply Chain Disruption

Supply Chain Disruption

Financial HealthFinancial Health

RelationshipRelationship

EnvironmentalEnvironmental

The customer’s reputationwith suppliers is also a critical factor. Customer of choice

Geographic, market, transportation, etc.

Interactions and Relationships

Copyright © DRK Research 2014

The basics - Orders / goods / money – do this in a self service, efficient way.

Communications (two way) – not just orders!

Face to Face meetings – still important.

Proximity is Important (Geographic, Organizational, Institutional, Cognitive, Social)

The Goal: to be the customer of choice of your suppliers andbuild and benefit from a relationship.

DRK ConfidentialDo not Distribute without Permission

12

SC Network“Amazon” Like Hub

s

s

s

s

s

s

s

SC NetworkOrganizer

Commodity Category

Interactions and Relationship

Supplier Attributes

Supplier Environment

Other Netw

orks

Hub

Hub

From $250/PO to <$5

Customer of Choice

Copyright © DRK Research 2014

“A customer of choice consistently receives competitive preference for scarce resources across a critical mass of suppliers in its database,”

A Procurement Strategy Council report found that suppliers rated only 5% of customers as “customers of choice.”

A customer of choice also receives a performance preference of 5-10% (price, delivery, quality, etc.)

The network organizer has control of this!

NetworkPerformance

Relationship

Industry Focus

Customer Leverage

Reputation

Critical InfoSharing

30% improvement in relationship factors leads to an 8-10% improvement in network performance

Relationships to Performance

NetworkPerformance

Freq. of Critical Info Sharing

Cost Structure

Process / MaterialChange

Production Schedule

Inventory Status

Accreditations

EPA Violations

Other Gov.Validations

Information Sharing is critical to network performance

NetworkPerformance

Financial Indicators

Perf. v.Competition

Perf. ofBusiness Unit

Cust. Sat. ofBusiness Unit

Profitability ofBusiness Unit

AR v. PayableCycle Time

Financial Performance of each member is critical to network performance

Building Network

Copyright © DRK Research 2014

The Web (Internet enablement) – over 20 years old! An Amazon type hub.

Social Networks (Facebook, LinkedIn, etc.) – building linkages with a purpose.

Mobile Apps – (iPad, Phone, etc.) - easy connections from anywhere.

BYOD – bring your own device. What are the issues?

No longer are you tied to a desk and device!

Building Network

Copyright © DRK Research 2014

Issues:

Who pays for the Amazon hub?

Competitiveness – suppliers connect to many networks with many different formats

Confidentiality – who controls? Who sets the rules?

Big data – analytics!

Trust – is this getting better or worse?

Opportunistic Behaviors (cheating) – better or worse?

Actions

Copyright © DRK Research 2014

Build key relationships with your suppliers. Become customer of choice.

Build YOUR network (Amazon, LinkedIn, etc.)

Big data – Self service analytics! Make things visible, actionable.

Trust – make it better

Opportunistic Behaviors (cheating) – enforce the rules

BYOD and Mobile – it is here, deal with it or leverage it

Copyright © DRK Research 2014

Questions?

Dr. Kevin McCormack

March 2014

Advanced Analytics for Business Solutions