Redefining the Supply
Chain Opportunity
Disclaimer: I am a Skeptic
Supply Chain Insights LLC Copyright © 2016, p. 2
A Social Scientist
Supply Chain Insights LLC Copyright © 2016, p. 3
A Fortune-teller of Sorts….
Supply Chain Insights LLC Copyright © 2016, p. 4
I Write for the Supply Chain Leader
Supply Chain Insights LLC Copyright © 2016, p. 5
Delivering Open Content To The Market
Supply Chain Insights LLC Copyright © 2016, p. 6
Pressure Is On!
Increasing Pressure on Operations
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
Supply Chain Insights LLC Copyright © 2016, p. 8
Descriptors Used by Leaders
Supply Chain Insights LLC Copyright © 2016, p. 9
Who Has a Supply Chain That Is Working Well?
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A Closer Look at Value Networks
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Annualized Growth Rates of Total Factor Productivity
2
1.89
1.8
Second
Industrial
Revolution
1.6
1.2
1
0.8
0.6
Percent Per Year
1.4
1.03
Third
Industrial
Revolution
0.57
0.46
0.4
0.4
0.2
0
1890-1920
Years
20
1920-1970
50
1970-1994
1994-2004
24
20
2004-2014
10
Supply Chain Insights LLC Copyright © 2016, p. 12
Technology
SRM
CRM
ERP
APS
PLM
Operational Investments
Analytics
Workforce Productivity
Supply Chain Insights LLC Copyright © 2016, p. 13
Understanding the
Organization
Right Stuff?
Supply Chain Insights LLC Copyright © 2016, p. 15
Supply Chain as a Function
Middle Management Has Greatest
Shortage of Supply Chain Talent
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Growing Talent Gap
Supply Chain Insights LLC Copyright © 2016, p. 18
Challenges
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Fallacies
Fallacy#1: Functional Excellence Drives the Fastest
Results
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Focus on Total Supply Chain Costs
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Manage the Costs Like a Decathlete
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Fallacy #2: A Project-based Focus
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Fallacy #3: The Efficient Supply Chain is the Most
Effective
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Bullwhip Effect
Supply Chain Insights LLC Copyright © 2016, p. 26
Fallacy #4: Integration is the Answer Beyond the
Firewall
Supply Chain Insights LLC Copyright © 2016, p. 27
Gaps in Supply Chain Visibility
Supply Chain Insights LLC Copyright © 2016, p. 28
Confidence in ERP to Build Business Networks
Supply Chain Insights LLC Copyright © 2016, p. 29
Metrics That Matter
What We Expected
Supply Chain Insights LLC Copyright © 2016, p. 31
What We Learned….
A Supply Chain
is a Complex System
with Complex
Processes
with Increasing
Complexity
Supply Chain Insights LLC Copyright © 2016, p. 32
The Supply Chain Effective Frontier
Supply Chain Insights LLC Copyright © 2016, p. 33
Correlations to Market Capitalization
Supply Chain Insights LLC Copyright © 2016, p. 34
Orbit Chart: Wal-Mart
(Inventory Turns and Operating Margin)
Supply Chain Insights LLC Copyright © 2016, p. 35
Orbit Chart: Apple
(Inventory Turns and Operating Margin)
Supply Chain Insights LLC Copyright © 2016, p. 36
Measuring Supply Chain Improvement
Overall Ranking per Company
•
•
•
Balance: 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 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙 =
𝟏
𝟏
𝟏
𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓 + 𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓 + 𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓
𝟑
𝟑
𝟑
Supply Chain Insights LLC Copyright © 2016, p. 37
Supply Chains to Admire Methodology
+
Performance
Improvement
Beats the industry
average for operating
margin, inventory turns
and ROIC for 20062014 and 2009-2014
Ranks above peer
group average on
The Supply Chain
Index for 20062014 or 2009-2014
Supply Chain Insights LLC Copyright © 2016, p. 38
Chemical
Supply Chain Insights LLC Copyright © 2016, p. 39
Orbit Charts: Dow Chemical Company
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Relative Performance
Supply Chain Insights LLC Copyright © 2016, p. 41
Operating Margin vs. Inventory Turns
(2006 – 2014)
9
Best Scenario
Inventory Turns
2014
Here, we plot
inventory turns
(y-axis) vs.
operating margin
(x-axis).
8
The diamond shows the company’s
average over the period.
SBGSY
0.13, 7.37
2012
2007
2013
2008
2006
2011
7
2010
2009
Trace the line from 2006 point
to 2014 point to follow the
performance over time.
6
0.10
0.11
0.12
0.13
0.14
Ideally,
companies
are
increasing
inventory
turns and
operating
margin,
moving
towards the
upper right
corner of
the graph
over time.
0.15
Operating Margin
Schneider Electric SE
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts
Supply Chain Insights LLC Copyright © 2015, p. 42
Operating Margin vs. Inventory Turns
(2006 – 2014)
13
Best Scenario
2014
EMR
0.16, 10.95
12
Inventory Turns
11
10
2006
9
SBGSY
0.13, 7.37
2014
8
2006
7
6
0.09
0.10
0.11
0.12
0.13
0.14
0.15
0.16
0.17
0.18
0.19
Operating Margin
The Emerson Electric Company
Schneider Electric SE
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014 from YCharts
Supply Chain Insights LLC Copyright © 2015, p. 43
Supply Chains to Admire
Supply Chain Insights LLC Copyright © 2016, p. 44
Insights
• 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
Supply Chain Insights LLC Copyright © 2016, p. 45
Realignment
Supply Chain Insights LLC Copyright © 2016, p. 46
What Drives Top Performance?
•
•
•
•
•
•
Continuity of leadership
Supply chain talent development
Focus on a multi-year supply chain strategy
Clear governance to guide cross-functional decision-making
Strength in horizontal processes
Excellence in supply chain planning, network design and inventory
management
Supply Chain Insights LLC Copyright © 2016, p. 47
Building the End-to-End
Supply Chain
Outsourcing
Supply Chain Insights LLC Copyright © 2016, p. 49
Maturity of End-to-End Thinking
Supply Chain Insights LLC Copyright © 2016, p. 50
Key Questions
• How do you define Global?
– Business
– Region
– Corporate
• Where do you make the Right Pivots?
– Maximize asset utilization
– Drive value
• How do you define the Journey?
– Definition
– How do you best make decisions
– Communication
Supply Chain Insights LLC Copyright © 2016, p. 51
What is Your Governance Model?
Supply Chain Insights LLC Copyright © 2016, p. 52
Role of the Center of Excellence
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Business Continuity
Supply Chain Insights LLC Copyright © 2016, p. 54
Top Disruptions
Supply Chain Insights LLC Copyright © 2016, p. 55
Shifts in Ocean Cargo
Supply Chain Insights LLC Copyright © 2016, p. 56
Improving Planning
What Drives Success?
Supply Chain Insights LLC Copyright © 2016, p. 58
Gaps
Supply Chain Insights LLC Copyright © 2016, p. 59
Network Design Maturity Model
Supply Chain Insights LLC Copyright © 2016, p. 60
Technology Trends
Confluence of Technologies
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Evolution of Analytics
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Data Strategy for….
Clouds?
Streams?
Lakes?
Supply Chain Insights LLC Copyright © 2016, p. 64
Big Data Supply Chains are Evolving
Challenges:
Structured
Data
• Transactional
• Time phased data
Volume
Unstructured
Data
•
•
•
•
Social
Channel
Customer Service
Warranty
Velocity
Sensor
Data
•
•
•
•
Temperature
RFID
QR codes
GPS
Variability
New
Data
Types
•
•
•
•
Mapping and GPS
Video
Voice
Digital Images
65
Supply Chain Insights LLC Copyright © 2016, p. 65
Analytics Maturity
Supply Chain Insights LLC Copyright © 2016, p. 66
Data Types
Supply Chain Insights LLC Copyright © 2016, p. 67
Supply Chains Don’t Play by the Rules
But,
what if
they
could?
68
Supply Chain Insights LLC Copyright © 2016, p. 68
Evolution Based on Cultural Preferences
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Internet of Things
Supply Chain Insights LLC Copyright © 2016, p. 71
Micro Demographic Analysis of Flavor Preference by
Demographics
Supply Chain Insights LLC Copyright © 2016, p. 72
Have You Ever Thought?
Supply Chain Insights LLC Copyright © 2016, p. 73
Opportunity
at the Intersection
of the Social and Interest Graph(s)
Supply Chain Insights LLC Copyright © 2016, p. 74
Listening: Newell Rubbermaid
• Newell Rubbermaid
#Future15SB @bwdumars
Supply Chain Insights LLC Copyright © 2016, p. 75
Newell Rubbermaid
#Future15SB @bwdumars
Supply Chain Insights LLC Copyright © 2016, p. 76
Listening: Lenovo
Supply Chain Insights LLC Copyright © 2016, p. 77
Voice of Customer Comes in Many Forms
Large Enterprise Client experiences 5 keyboard malfunctions in their latest
shipment. Complaints received through account executive
[Critical Situation]
Canada
-Customer A calls about a blue screen on a Yoga
-Customer B posts on Facebook about his X220’s AC/DC adapter issues
China
-Customer L wrote on Weibo about
Yoga screen issues
-Customer M calls about a Tablet 8
battery issues
0
USA
-Customers C & D write X220 product
reviews on amazon.com and mention
issues with AC/DC adapters
-Customer E posts on
forums.lenovo.com that they are
experiencing blue screens on their Yoga
Brazil
-Customer F submits a service from on
esupport.lenovo.com regarding
their W530 hard drive
0
0
0
0
0
0
Morocco
-Customers G & H comment on their
X220’s electrical issues on Twitter.com
-Customer I called about Yoga screen
issues
Australia
-Customer J write a review on
NewEgg.com about AC/DC adapter
issues on X220
-Customer K had an eChat with Lenovo
about Yoga screen issues
Supply Chain Insights LLC Copyright © 2016, p. 78
One Voice – A Single View of Perceptual Quality
Lenovo
- 6 recorded issues about X220’s
AC/DC adapter
- 5 recorded issues about
keyboard issues on X1 Carbon
- 5 recoded issues about Yoga
screen
0
0
0
0
0
0
0
- 1 recorded issue about W530
hard-drive
- 1 recorded issue about Tablet 8
battery
Supply Chain Insights LLC Copyright © 2016, p. 79
Recommendations
• We 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.
Supply Chain Insights LLC Copyright © 2016, p. 80
About Supply Chain Insights
Supply Chain Insights LLC Copyright © 2016, p. 82
About Lora Cecere
• Founder of Supply Chain Insights
• “LinkedIn Influencer”
• Guest blog for Forbes
• Author of 4 books: Bricks Matter (2012), Shaman’s Journal (2014),
Supply Chain Metrics That Matter (2014), Shaman’s Journal (2015)
• Partner at Altimeter Group (leader in open research)
• 7 years of Management Experience leading Analyst Teams at Gartner
and AMR Research
• 8 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: lora.cecere@supplychaininsights.com
Blog: www.supplychainshaman.com (15,000 pageviews/month)
Forbes: www.forbes.com/sites/loracecere
Twitter: twitter.com/lcecere (6,800 followers)
LinkedIn: www.linkedin.com/in/loracecere (66,724 followers)
LinkedIn Influencer: www.linkedin.com/today/author/446631
Supply Chain Insights LLC Copyright © 2016, p. 85
Definition:
Metric Equations
Metric Equations
Cash-to-Cash Cycles = (Avg. Inventory/COGS + Avg. Accounts Receivable/Sales - Avg. Accounts
Payable/Purchases)*91.5
Days of Inventory = (Average Inventory/COGS)*91.5
Days of Payables = (Average Accounts Payables/Purchases)*91.5
Days of Receivables = (Average Accounts Receivable/Sales)*91.5
Inventory 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)
Source: Supply Chain Insights LLC, Corporate Annual Reports (2000-2014)
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