strategic target setting in the supply chain triangle
TRANSCRIPT
Strategic Target SettingIn the Supply Chain Triangle
Prof.dr. Bram [email protected]
+32.497.58.28.60
be.linkedin.com/pub/bram-desmet/1/788/823/
@bram_desmet
My name is Bram …• Business
• 1998 - 2003: IT manager, Arcelor-Mittal, Gent (Sidmar)
• 2003 - …: Consultant Strategy – SupplyChain – Operations, MÖBIUS
• 2009 - …: Managing Director, Solventure, S&OP software and software based services
• Sector experience: aftermarket, chemical/pharma, consumer goods, discrete/high-tech, metals, retail, recycling, SME's (+50 companies)
• Academic
• 1998, Master in Mathematics, Gent University
• 2002-2004, Executive MBA, Vlerick Business School
• 2006-2009, PhD in Operations Research, Gent, Multi-Echelon Inventory Optimization
• 2010-…, Adjunct Professor at the Vlerick Business School, Supply Chain and Operations
• Contact info
• [email protected], +32.497.58.28.60
• be.linkedin.com/pub/bram-desmet/1/788/823/
• @bram_desmet
How much inventory do we really need??
Company 2: strong in inventory turns but
out of balance
Company 3: betterbalanced but did not
recover to pre-crisis levels
Company 1: betterbalanced & good
rebound after crisis
STRENGTH
BALANCE
RESILIENCE
e.g. reduce cost bysourcing in far East
e.g. increase market share by extendingproduct portfolio
e.g. reduce inventoryby lowering safetystocks
Focus/incentives in a typical productioncompany …
Resulting pressure in the triangle
… what happens if a business is underpressure …
17
Aligning the triangleis about maximizingROCE
Top-line
EBIT
ROCE
Market leaders are
‘extremely disciplined
and focused’ on 1 of 3
strategic options
Treacy & Wiersema, 1995
Operational Excellence Product Leadership Customer Intimacy
• ‘Best price’ and/or
• ‘Best access’ (‘fast, easy,
painless’)
• ‘Best product’ • ‘Best service’ and/or
• ‘Best connectivity’
(‘relationship
orientation’)
• Efficiency through
process thinking
• Zero-defect service
• Best product through
continuous product
innovation
• Clear innovation strategy:
where to place the bets?
• Understanding the
broader problem
• Having expertise about
the customer’s business
• Customers carefully
selected
• The operations
department drives the
company
• Attention is paid to
process speed and quality
• R&D is key: idea
management
• Marketing is also key:
educate people with a
missionary zeal
• Get engineers, designers,
and marketers
systematically together
• Demonstrate expertise
and experience
• Strengthen the
relationship
• Build loyalty: focus on
customer retention
Product Leadershiphighest cost in R&D, marketing, supply chain
Customer intimacythe extra mile comes at an extra cost
Operational Excellencecost leader in every fibre of the organization
service
inventory cost
Higherturns
Lowercost
Higherservice
Product Leadershiphighest complexity, highest risk
Customer intimacycontrolled complexity
Operational Excellence simplicity drives efficiency
service
inventory cost
Higherturns
Lowercost
Higherservice
Product Leadershipemotion beyond functional service
Customer intimacyan extra mile for a premium
Operational Excellenceexcel in the basics
service
inventory cost
Higherturns
Lowercost
Higherservice
Product Leadershiphighest risk with highest potential payoff
Customer intimacyan extra mile at an extra cost and premium
Operational Excellenceexcel in cost and the service basics
service
inventory cost
Higherturns
Lowercost
Higherservice
Product Leadershiphighest risk with highest potential payoff
Customer intimacyan extra mile at an extra cost and premium
Operational Excellenceexcel in cost and the service basics
service
inventory cost
Higherturns
Lowercost
Higherservice
EBIT
Remember ROCE principle: lower turns require a higher EBIT!
� EBIT of product leader should be the highest!!
Product
Leadership
Customer
IntimacyOperational
Excellence
Key Takeways
• Never benchmark in only 1 dimension
• Make sure to balance Service, Cost and Cash: the Supply Chain Triangle
• Different strategies lead to different targets
• Remember ROCE principle: lower turns should be compensated by a higher EBIT!
Want to know more?
• Cfr. http://www.slideshare.net/bramDesmet/
• Cfr. Solventure Youtube channel for video blogs https://www.youtube.com/channel/UCzyuODMMCk2vXkcQLawJVkg
Thank You!!
Prof.dr. Bram [email protected]
+32.497.58.28.60
be.linkedin.com/pub/bram-desmet/1/788/823/
@bram_desmet