Supply Chain Leader: Reaping the Rewards of Innovation (issue 4)

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<ul><li> 1. October 2007Ideas &amp; Innovations from i2 Technologies Cycle-Time Optimization Demand Sensing Risk Management Lean Manufacturing Plus Interview with GMs Adriana KaraboutisJames Champy on Change-Initiative Pitfalls Burts Bees on Sustainable Supply Chains Managing in High-Growth Environments The Supply Chain Results Company TM </li></ul><p> 2. October 2007 Vol. 2, No. 2 i2 Senior Director, Contributing Writers Editorial Advisory Board Chuck Kramer Marketing Lauren Bossers Sanjiv Sidhu Senior Vice President, Retail Beth ElkinFounder and Chairman and Consumer Industries Sector Michael Cohen of the Board EditorAditya Srivastava Cynthia FuscoSenior Vice President and Victoria CooperPallab Chatterjee Elizabeth Greer Interim Chief Executive OfficerChief Technology Officer Art Director Jon Kemp Hiten Varia Kelly Thomas Peter Klabunde Deborah Navas Executive Vice President,Senior Vice President, Circulation Manager Global Customer Operations Manufacturing Sector Sangeeta BajajTom Smithyman and Chief Customer OfficerRazat Gaurav John Cummings Vice President, Senior Vice President andGlobal Logistics Chief Marketing Officer Copyright 2007, i2 Technologies, Inc. This magazine is available online at www.i2.com.Reproduction of this magazine in whole or in part in any medium is prohibited without written consent of the editor. Contact: supply_chain_leader@i2.com. 3. In This IssueCover story Short Product Life Cycles Demand Innovation Throughout the Businessby Pallab ChatterjeePage 4To compete today, consumer goods manufacturers must focus not only on innovationsin product development but also on meaningful changes in four key areas of thebusinesstechnology, process, partnerships and market strategy.FeaturesPage 17 Theres Power in POS DataNot Just for Retailers, but for Suppliers Too by Mohan Balachandran and Jim Morganstern Retailers new emphasis on inventory at the shelf level adds a new level of customer service. Essentially, its vendor-managed inventorythough not at the distribution center. Page 24Page 42 Managing Supply Chains inThe Lean Challenge in High-Growth Environments Demand-Driven Value Chains by Gaurang Pandya andby Aamer Rehman and Venky NayarKelly Thomas Five key areas must be specifically In the extended enterprise, the addressed for high-growth markets:material-control techniques using organization, supply chain design,the traditional manual/visual planning, demand shaping andmethods are no longer sufficient to managing transitions. synchronize material flow. Case studies Page 22 Cooper Tire Rolls Out New Systems for Better Demand Fulfillment, by Lauren Bossers Page 30 Customer-Centric Approach Drives Global Growth for Tata Steel, by Elizabeth GreerColumns Page 10 Cycle-Time Optimization: From Concept to Cash Register Fasterand More Profitably, by Gurdip Singh and Chuck Kramer Page 20 Order Fulfillment: Using Order Management to Get Closer to Your Customers, by Rajat Bhargav Page 39 Risk Management: New Technologies Help Identify and Mitigate Risks, by Darren Ward and Anand IyerDepartments Page 3Perspective: Innovation Through People, Process and Technology, by Sanjiv Sidhu Page 12 Interview: Inside Supply Chain Globalization at GM. An interview with Adriana Karaboutis, by Victoria Cooper Page 32 Opinion: What are the top priorities in supply chain management for your business? Interviews with Burts Bees, AMR Research, ADTRAN and i2, by Michael Cohen Page 36 Focus: Protecting Revenue Through Supply Chain Risk Management, by Ravi Vancheeswaran of ON Semiconductor Page 45 Viewpoint: Changing the Way You Work and Think About Your Business. An interview with James Champy, by Victoria Cooper Page 48 Inside i2: Winners of the 2007 Global Ken Sharma Award for Excellence, by Tom SmithymanSupply Chain Leader / October 2007 1 4. Perspective by Sanjiv SidhuInnovation Through People, Process and Technology Companies have been grappling for the past twoWhat should you do about the disconnect? Should you decades with what will drive the evolution of supply chainproduce more to meet the demand or, through a combi- management. At General Motors (see Interview, page 12), nation of promotion and production, achieve a demand/ Adriana Karaboutis suggests that its people (for domainsupply balance of 90-90? Which approach will be more expertise), and business reengineering expert James Champyprofitable for your business? maintains that its process (see Viewpoint, page 45).Problems like this arise every day in supply chain You would think that we at i2 would cite technology.management, and innovative processes and technologies But we dont. When I cofounded i2 with Ken Sharma can support the iterative process needed to solve them. almost 20 years ago, we were focused on process innovation. We used a unique combination of process and technology In fact, we embedded many processes in our software. Butinnovation to create an agile demand/supply management software alone cannot drive change. The companies thatprocess for Panasonic, for example. As Mike Aguilar, receive the full range of benefits from their softwarePanasonics senior vice president of supply chain strategic implementations also implement business process changes.initiatives, explained, When Panasonic took on the project What is our approach to supply chain innovation of shifting our emphasis from supply to demand and today? I like to think of it as the analysis of extremes. Weshifting our forecasting to a point-of-sale system, we had encourage i2 employees to envision our customers at a two choices. We could go through the traditional process theoretical level of best performance, or what we would of buying software and installing it inside our company call extreme performance. or we could have i2, which has extensive software develop- Lets take inventory as an example. We might ask, ment and consulting services, perform the data capture and How can a customer reduce its inventory by half?analysis for us. We decided to rent both the software and i2s Instead of contemplating moving from $100 million inexpertise in forecasting analysis. We were able to get this inventory to $50 million, we suggest finding ways toproject going in just a few months rather than a few years. achieve near-zero inventorywhich would be considered (Supply Chain Leader Interview, Spring 2006, pages 67.) extreme performance. Thinking about that near-zeroThrough this approach, Panasonic achieved increased state helps us to understand with greater clarity the first revenue and inventory performance in a short time. While principles and process changes required to support ourwe know that profound change is not a short-term propo- goalin this case, inventory reduction. sition, we also appreciate that early successes are important When thinking about the processes required to effectin overcoming the resistance to change inside companies. such a step-level change in performance, we ask our peoplei2 Operations Services is helping more and more companies to think about what technologies might not only support like Panasonic move from a less desirable to a more desir- new processes but also be the catalyst for them. At i2, weable end-state of best practices and process excellence in believe that technology should focus on supportingthe timeframe demanded by increasing globalization and advanced processesthose that make a company more customization. agile. When this is the case, process innovation is symbiotic Besides driving greater and faster process and technology with what technology is capable of doing. The result is innovation, the approach we take with i2 Operations Services greater agility, or managing in the face of variability. In creates a greater synergy among people, process and tech- other words, todays advanced processes help companiesnology. Its my belief that it isnt just the functional walls manage risks, exceptions, demand and other variablesthat need to come down inside companies. Its also the resulting from market and competitive forces. walls separating these three interlinked engines of high performance. Enhancing iterative capability Innovations in supply chain management have come, Sanjiv Sidhu is the cofounder of i2 and in large measure, from the ability to iterate multiple the chairman of the board. scenarios at high speed, enabling businesses to make better- informed decisions faster, as problems arise. As an example,Contact: supply_chain_leader@i2.com. say your demand level is at 100, but your supply is at 80. Supply Chain Leader / October 20073 5. Short Product Life Cycles Innovation Throughout 4 Supply Chain Leader / October 2007 6. To compete today, consumergoods manufacturers mustfocus not only on innovationsin product development butalso on meaningful changesin four key areas of thebusinesstechnology,process, partnerships andmarket strategy.The consumer goods marketplace has always been fastpaced and unpredictable. After all, selling retail productsis based on understanding the current needs of end users,then rapidly developing new offerings that address thoseneeds before they inevitably change. Add the challengesof maintaining high product quality and generating strong Demand profits, while managing increasingly complex supply chainsfrom end to end, and its easy to see why so many consumergoods manufacturers struggle to achieve lasting success.Recent trends have made the consumer goods market-place even more difficult to navigate. Product life cycles the Business have been slashed dramatically. The Internets increasingimportance as a retail sales channel has increased com-petition, often from smaller companies whose Web sitesmight look very similar. In addition to leveling the playingfield, the Internet has also contributed to an increase inprice transparency, enabling consumers to make quickpurchasing decisions based solely on price. The result?Today, prices are dropping faster than ever followingan initial market launch, even on the most exciting,innovative products.Causing prices to fall even fasterand even loweris the rapid commodization of products today. Eventhe most groundbreaking technologies or designs arequickly copied or advanced by competitors. The majorityof trendy products become obsolete quickly, as they arereplaced with new and improved concepts that capture By Pallabshoppers attention.This rapid pace has led to an even greater demand for Chatterjee new products by both retailers and consumers. Retailersare continually adding new shopping seasons, as well asdemanding customized products that help differentiatetheir stores in a crowded marketplace. In addition, todaysconsumers expect to see products that are customizedto their exact preferences, or that reflect the latestfashion trend. CYCLES CONTINUED on Next Page . . .Supply Chain Leader / October 2007 5 7. Facing so many demands from the marketplaceandThe new-generation supply chain the pressure to manage a global supply chain at a break- Most consumer goods supply chains were simply not neck pacemanufacturers often struggle merely to keepdesignedand have not been adequately updatedto up. Many companies design and introduce products sosupport the success of products with short life cycles. rapidly that they dont have a genuine understanding ofNew-generation products used to be launched every the real-world risks, payoffs and rewards associated withfew years. But today new innovations seem to come every each new product, let alone of setting and achieving long- few months, especially in trend-conscious categories such as term strategic goals. They make enormous investments inelectronics and apparel. Too many businesses are struggling design, tooling, manufacturing and inventory, often with-to adapt their old, every few years business models to the out a well-defined plan for maximizing profitability overrealities of launching new products much more frequently. the entire product life cycle. Often, the life cycle endsIn addition, supply chains have become increasingly before the manufacturer has a sound sense of the products complex, with raw materials suppliers and manufacturing ultimate contribution to the business. facilities around the world contributing to the ultimateprofitability of every product. Overwhelmed by the sheer Most consumer goods supply chains were volume of supply chain information available, manufac- not designed to support the success of turers often choose to focus their attention on the upfront products with short life cycles. activities associated with product design, instead of gainingstrategic insights across the end-to-end product life cycle. Why do many consumer goods businesseseven those To compete in the current marketplace, theyll have to with qualified executives, state-of-the art facilities, global re-examine their overall approach and take a fresh look resources and successful retail partnersstruggle to achieve at every business process. Theyll need to have in place a profit today? And why do so many new productseven the best possible information, as well as the best processes the truly revolutionary onesfail? The answer is simple. and technologies, to make rapid decisions that are truly While companies are focusing on innovation in theirinformednot just best guesses. product designs, too often they are trying to support theseIn other words, businesses will need to support their fast-moving, revolutionary products with an outdated product differentiation by innovating across the enterprise, supply chain that cant keep up. with business and supply chain processes that match the Competing in a fast-paced, unpredictable retail market-speed and counteract the uncertainty of todays market- place means operating with a global supply chain that is place. When innovation occurs across the business, designed to deliver the seemingly impossible combination completely re-invented business models will emerge. of speed and risk management. But powerful new tech- To create a new-generation supply chain that will nology solutions are available to help manage complex, support a companys short- and long-term success, mean- end-to-end supply chains that stretch around the world.ingful change must take place in four key areastechnology, To fully leverage these technologies, consumer goods process, partnerships and market strategy. (See Viewpoint manufacturers will have to tailor their global supply net- on page 45 for James Champys insights into resistance to work, and their individual business processes, to thechange inside organizations.) unique demands of todays marketplace.Optimize Across Cost, Price Realization and Volume for Entire PLCDesignSourceMfg Decision Distribution End of Life Product Marketing Launch Readiness Time Zone vs. Inbound Disposition Reuse Strategy Supplier QualityGlobal: where Outbound Markdownto produce for Engineering Material Cost which market Conversion Cost ReuseCustomizations Demand Volume for what device Service/Returns Cannibalization Portfoli...</p>

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