redefining the supply chain opportunity

PowerPoint Presentation

Redefining the Supply Chain Opportunity

Supply Chain Insights LLC Copyright 2016, p. #

Disclaimer: I am a Skeptic


A Social Scientist


A Fortune-teller of Sorts.


I Write for the Supply Chain Leader


Delivering Open Content To The Market


Pressure Is On!


Since 2000, 52 percent of the companies in the Fortune 500 have either gone bankrupt, been acquired, ceased to exist, or dropped out of the Fortune 500.

Activist campaigns against companies with a market cap greater than $10 billion has more than doubled since 2010. Activists won, partially won or settled 73% of proxy fights in 2014, up from 55% in 2010 Increasing Pressure on Operations


Descriptors Used by Leaders


Who Has a Supply Chain That Is Working Well?


A Closer Look at Value Networks


Annualized Growth Rates of Total Factor ProductivityYears2050242010

Second Industrial RevolutionThirdIndustrial Revolution


TechnologyOperational Investments

Workforce Productivity

Analytics


Understanding the Organization


Right Stuff?


Supply Chain as a Function


Middle Management Has Greatest Shortage of Supply Chain Talent


Growing Talent Gap


Challenges


Fallacies


Fallacy#1: Functional Excellence Drives the Fastest Results


Focus on Total Supply Chain Costs


Manage the Costs Like a Decathlete


Fallacy #2: A Project-based Focus


Fallacy #3: The Efficient Supply Chain is the Most Effective


Bullwhip Effect


Fallacy #4: Integration is the Answer Beyond the Firewall


Gaps in Supply Chain Visibility


Confidence in ERP to Build Business Networks


Metrics That Matter


What We Expected


A Supply Chain is a Complex System with Complex Processes with Increasing ComplexityWhat We Learned.


The Supply Chain Effective Frontier


Correlations to Market Capitalization


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


Orbit Chart: Apple (Inventory Turns and Operating Margin)


Measuring Supply Chain ImprovementOverall Ranking per CompanyBalance: 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 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+


Chemical


Orbit Charts: Dow Chemical Company


Relative Performance


Operating Margin vs. Inventory Turns(2006 2014)Trace the line from 2006 point to 2014 point to follow the performance over time.


Operating Margin vs. Inventory Turns(2006 2014)


Supply Chains to Admire


Which metrics matter?Growth, operating margin, inventory turns, ROIC, customer service (in the eyes of the customer)

How do we get unstuck?Focus cross-functionally on a balanced portfolio. Bonus employees against the portfolio. Augment with functional metrics focused on improving RELIABILITY.

What are the functional reliability metrics?Examples include: Forecasting, first pass yield, OEE, on-time delivery, orders shipped complete, hands-free orders, schedule attainment, safety metrics, employee turnover Insights


Realignment


Continuity of leadershipSupply chain talent developmentFocus on a multi-year supply chain strategyClear governance to guide cross-functional decision-makingStrength in horizontal processesExcellence in supply chain planning, network design and inventory managementWhat Drives Top Performance?


Building the End-to-End Supply Chain


Outsourcing


Maturity of End-to-End Thinking


How do you define Global?BusinessRegionCorporateWhere do you make the Right Pivots?Maximize asset utilizationDrive valueHow do you define the Journey?DefinitionHow do you best make decisionsCommunicationKey Questions


What is Your Governance Model?


Role of the Center of Excellence


Business Continuity


Top Disruptions


Shifts in Ocean Cargo


Improving Planning


What Drives Success?


Gaps


Network Design Maturity Model


Technology Trends


Confluence of Technologies


Evolution of Analytics


Data Strategy for.

Clouds?Streams?Lakes?


Big Data Supply Chains are Evolving65Challenges:TransactionalTime phased dataStructured Data

SocialChannelCustomer ServiceWarrantyTemperatureRFIDQR codesGPSMapping and GPSVideoVoiceDigital ImagesUnstructured DataSensorDataNewDataTypesVolumeVelocityVariability


Analytics Maturity


Data Types


Supply Chains Dont Play by the Rules68

But, what if they could?



Evolution Based on Cultural Preferences


Internet of Things


Big Hairy Audacious Goals

Business goals/ challenges:Scale the businessIncrease the number of machines in operation from 900 to 3,000 by 2016Expand internationally

Essentially we had to justify Whitbreads 60 million acquisition!

While transforming the Supply Chain

Replace legacy spreadsheet system with new IT system:The legacy system could not pull in data from the coffee stations telemetry systems, so all this valuable data was going to wasteOur brand guardians were effectively spending all their time poring over spreadsheets and manually replenishing stock

These processes were not scalable in line with our ambitions

We needed to transform other aspects of our supply chain and grow at the same time!Change logistics / warehousing partnerMove to direct purchasing

Solution

ToolsGroup is at the heart of our successful supply chain transformation:

System access our telemetry data tap into our machine telemetry data and uses it to calculate replenishment orders for partner sites.The data is used to forecast demand and optimise inventory levels

Some of the results (walk through the four figures on the left of the slide):

Also point out the new role of Brand Excellence Advisor

And we far exceeded our business goals!:

Blew away target to have 3,000 machines in place by 2016. We achieved this target in 2013, a full three years ahead of schedule!Moving into new markets Poland, Ireland and DubaiLaunched new CEM-200 "intelligent" coffee station concession

Next steps (only if there is time)71

Micro Demographic Analysis of Flavor Preference by Demographics


Have You Ever Thought?


Opportunity at the Intersection of the Social and Interest Graph(s)


Newell RubbermaidListening: Newell Rubbermaid

#Future15SB @bwdumars


#Future15SB @bwdumars

Newell Rubbermaid


Listening: Lenovo


0000000CanadaCustomer A calls about a blue screen on a YogaCustomer B posts on Facebook about his X220s AC/DC adapter issuesLarge Enterprise Client experiences 5 keyboard malfunctions in their latest shipment. Complaints received through account executive[Critical Situation]BrazilCustomer F submits a service from on esupport.lenovo.com regarding their W530 hard driveMoroccoCustomers G & H comment on their X220s electrical issues on Twitter.comCustomer I called about Yoga screen issues AustraliaCustomer J write a review on NewEgg.com about AC/DC adapter issues on X220Customer K had an eChat with Lenovo about Yoga screen issuesChinaCustomer L wrote on Weibo about Yoga screen issuesCustomer M calls about a Tablet 8 battery issuesVoice of Customer Comes in Many Forms

USACustomers C & D write X220 product reviews on amazon.com and mention issues with AC/DC adaptersCustomer E posts on forums.lenovo.com that they are experiencing blue screens on their Yoga


78

0000000Lenovo

6 recorded issues about X220s AC/DC adapter

5 recorded issues about keyboard issues on X1 Carbon

5 recoded issues about Yoga screen

1 recorded issue about W530 hard-drive

1 recorded issue about Tablet 8 batteryOne Voice A Single View of Perceptual Quality


Synchronize/organize all comments/complains into one voice79

RecommendationsWe must learn from the past to unlearn, and then rethink supply chain processes.The starting point is rewiring our brains. Value network automation has great promise.


Questions?


About Supply Chain Insights




About Lora CecereFounder of Supply Chain InsightsLinkedIn InfluencerGuest blog for ForbesAuthor of 4 books: Bricks Matter (2012), Shamans Journal (2014), Supply Chain Metrics That Matter (2014), Shamans Journal (2015)Partner at Altimeter Group (leader in open research)7 years of Management Experience leading Analyst Teams at Gartner and AMR Research8 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]: www.supplychainshaman.com (15,000 pageviews/month)Forbes: www.forbes.com/sites/loracecereTwitter: twitter.com/lcecere (6,800 followers)LinkedIn: www.linkedin.com/in/loracecere (66,724 followers)LinkedIn Influencer: www.linkedin.com/today/author/446631


Definition: Metric EquationsSource: Supply Chain Insights LLC, Corporate Annual Reports (2000-2014)

Metric EquationsCash-to-Cash Cycles = (Avg. Inventory/COGS + Avg. Accounts Receivable/Sales - Avg. Accounts Payable/Purchases)*91.5Days of Inventory = (Average Inventory/COGS)*91.5Days of Payables = (Average Accounts Payables/Purchases)*91.5Days of Receivables = (Average Accounts Receivable/Sales)*91.5Inventory Turns = (Cost of Sales/Average Inventory)Operating Margin = (Operating Income/Revenue)Return on Invested Capital = (Net Income/Invested Capital)Return on Net Assets = (Trailing 12 Month Net Income/Total Assets from the most recent quarter) Revenue Growth = (Quarterly Revenuei/Quarterly Revenuei-4 -1)Revenue per Employees = (Revenue/Average Annual Employee)
