Changing the Game with Your Customers
– A Supply Chain Strategy in Action
ECR Asia Pacific Conference 2008, Thailand
Jeffrey Russell, Accenture /
Metta Siramongkholkarn, L’Oreal
Copyright © 2008 Accenture All Rights Reserved.
In order to drive Consumer Products
companies performance to the next
level, many are adopting a ‘Game
Changing Supply Chain’ strategy
- Game Changing Supply Chain -
Value
Supply chain differentiation based on customer
/ consumer behaviour and value to drive topline growth
- Performance Optimization Focus on service levels by raising the performance bar,
fine-tuning the overall model and collaboration with the
extended supply chain.
- Every Day Great Execution Getting the basics right in terms of people process, systems, organisation
and data. Cost optimisation through rationalisation of the cost base
Supply Chain Performance Journey
Copyright © 2008 Accenture All Rights Reserved.
2
Effective supply chain strategies form
the basis of competitive advantage and
increase shareholder value
 Developing differentiated channel value propositions
 Improving the ability to meet customer needs and buying behaviour
 Reducing total cost to serve as the level of service provided is varied
between channel segments
 Aligning operations and sales and marketing in the way they treat
customers
 Enabling the organisation to structure resources around segments,
e.g. options to outsource customer service activities for selected
segments vs retain in-house
Copyright © 2008 Accenture All Rights Reserved.
3
Typical benefits achieved in FMCG
companies through customer aligned
supply chains
Copyright © 2008 Accenture All Rights Reserved.
4
Historically, FMCG companies have
developed a ‘one size fits all’ supply
chain that is designed to achieve cost
efficiency
-- Accenture’s SC Customer Alignment Framework --
Supply Chain Strategy
Supply Chain 1.0
Strategy
Demand
Generation
Market
Segmentation
Product
Segmentation
& Portfolio
Management
Supply
Alignment
Supply
Replenishment
Strategies
Supply
Sourcing
Options
Foundation
Customer Demand Profiling
Segmentation & Forecasting
Network
Optimisation
Capabilities
Sales &
Leadership - Process
Cost to
Performance
Operations
Behaviours - Organisation
serve
Metrics
Planning
Culture
- Talent
- Technology
Copyright © 2008 Accenture All Rights Reserved.
Fulfilment
Operations
PLM
Risk
Management
5
Accenture’s Customer Alignment
Framework provides the structure and
rigor to design ‘fit for purpose’ supply
chains for differentiated
customer/product segments
Business Strategy
Strategy
Supply Chain 2.0
Supply Chain 1.0
Supply Chain Strategy
Supply Chain 3
Supply Chain 2
Product
Supply Chain 1 Segmentation
Demand
Market
Customer
Demand
Generation
Supply
Alignment
Foundation
Copyright © 2008 Accenture All Rights Reserved.
Profiling
Product
+ Portfolio
Segmentation
Demand Segmentation & Forecasting
Segmentation
Market Management
Customer
Profiling
Product
+ Portfolio Demand
Segmentation Segmentation
& Forecasting
Market
Segmentation
Customer
Management Profiling
Segmentation
& Portfolio
Segmentation
& Forecasting
Supply
Supply
Management
Network
Fulfilment
Replenishment
Sourcing
Optimisation
Operations
Supply
Supply
Strategies
Options
Network
Fulfilment
Replenishment
Sourcing
Optimisation
Operations
Supply
Supply
Strategies Fulfilment
Options
Network
Replenishment
Sourcing
Optimisation
Operations
Strategies
Options
Cost to
serve
Sales &
Operations
Planning
Performance
Metrics
Leadership
Behaviours
Culture
Capabilities
- Process
- Organisation
- Talent
- Technology
PLM
Risk
Management
6
Example Supply Chain Re-design “fit
for purpose”
6 – 12 Months
SC
Manager
Customer
Care
Sourcing /
Procurement
Physical
distribution
SC
Manager
SC
Manager
SC
Manager
Segment 1
Segment 2
Segment 3
Segment 1
Segment 1
Segment 1
Customer
Care
Customer
Care
Customer
Care
Segment 2
Segment 2
Segment 2
Sourcing /
Procurement
Sourcing /
Procurement
Sourcing /
Procurement
Segment 3
Segment 3
Segment 3
Physical
distribution
Physical
distribution
Physical
distribution
Challenges :
- multi-skills Supply Chain Managers
- Limit increase of headcounts
Copyright © 2008 Accenture All Rights Reserved.
7
Benefits after 1 Year
• Privileged Relation 1 Point of contact between Supply Chain manager
(supplier / retailer)
• Tailor-made Service (especially for Mass Market retailers)
•
100% focus on Service level : Gain 10% in average over 12 months
• Team/talent development : Create succession Plan
Copyright © 2008 Accenture All Rights Reserved.
8
Different supply chain models are
more appropriate depending on the
demand predictability and the nature
of the customer relationship
Lean
Loose
Agile
Segment 2
Transactional
‘Base Model’
Collaborative
Agile
Flexible
Segment 3
Customer Relationship
Segment 4
Joint
Planning
Segment 1
Tight
High
Copyright © 2008 Accenture All Rights Reserved.
Demand Predictability
Low
9
Potential service offerings for
strategic customer group
Potential service offerings to Customer Group:
 Tier 1 strategic importance
 Low relative demand variability
 Demanding behaviour
Trade terms
Cash Management
Efficient Assortment / Ranging
Growth Incentives
Product Discount - case deals
Checkout Display
Promotional Display
Standard (prompt) payment
Accelerated payment
Electronic payment
Order to Cash
Weekend deliveries
Advance shipment notification
Backhaul
Ex factory gate / NDC
Cross docking
Direct store delivery
Drop trailer
Web ordering
Field sales call
Phone / fax
EDI
Weekend ordering
Short lead time
EDI invoice
EFT
e-POD
Operational Integration
CRM
Category Management
Nominated logistics contact
Fulfilment
Copyright © 2008 Accenture All Rights Reserved.
10
Differentiation between the stable
and variable components of demand
is a key step to determine fulfillment
setup – managing volumes differently
balances service levels and cost to
serve
- Demand Types -
- Fulfilment setup -
Identify what parts of the business can be treated
as fundamentally stable:
• Stable, predictable demand
• Commoditised or mass market products
• Collaborative customers
Fulfil through a ‘lean’ supply chain configuration:
Identify what parts of the business are variable
and truly complex:
Fulfil through a more flexible supply chain:
• Local sourcing and / or finishing
• Short lead times
• Variable configurations
•
•
•
•
Variable demand
Promotions
Premium products
Low visibility customers
•
•
•
Thailand indicative
SC alignment
Customer
C1 Indicative
SC alignment
Thailand
- indicative
stable
/ variable
split
Customer
C12006
Indicative
stable
/ variable
split
Stable orders
Cases ordered
400,000
350,000
300,000
250,000
200,000
150,000
100,000
50,000
= 59%
Stable
Stable
Stable
(58%)
(60%)
= 41%
W
ee
k
W 01
ee
k
W 04
ee
k
W 07
ee
k
W 10
ee
k
W 13
ee
k
W 16
ee
k
W 19
ee
k
W 22
ee
k
W 25
ee
k
W 28
ee
k
W 31
ee
k
W 34
ee
k
W 37
ee
k
W 40
ee
k
W 43
ee
k
W 46
ee
k
W 49
ee
k
52
-
Variable
Variable
(42%)
(40%)
Copyright © 2008 Accenture All Rights Reserved.
Demanding
/ Efficient
Collaborative
Customers Customers
500,000
450,000
Maximum capacity
Lowest cost
Long lead time
Variable orders
Collaborative = 53%
Lean = 27%
Agile = 20%
11
So in summary, consumer goods
companies need to change the game
while continuing to deliver everyday
execution
- Game Changing Supply Chain -
Value
Supply chain differentiation based on customer
/ consumer behaviour and value to drive topline growth
- Performance Optimization Focus on service levels by raising the performance bar,
fine-tuning the overall model and collaboration with the
extended supply chain.
- Every Day Great Execution Getting the basics right in terms of people process, systems, organisation
and data. Cost optimisation through rationalisation of the cost base
Supply Chain Performance Journey
Copyright © 2008 Accenture All Rights Reserved.
12