12 days of bricks matter

Plan4Demand presents

12 Days of

Bricks Matter

http://www.plan4demand.com/

Supply Chain Insights LLC Copyright © 2012, p. 2

Panelists

Charlie Chase Lora Cecere

Jim Heatherington

BRICKS Matter The Role of Supply Chains

in Building Market-Driven

Differentiation

LORA M. CECERE

CHARLES W. CHASE JR.

Book

Publishes

December

2012

Bricks Matter ISBN: 978-1-1182-1831-0

By the Numbers.

290

1

98,000

75

36

18


Supply chain management processes have gradually shifted from a supply-driven focus to a demand-driven one in order to better synchronize demand and supply signals. Bricks Matter shows you how you can identify market risks and opportunities and translate these into winning tactics. Business case studies from 36 companies highlight how business leaders are winning through market-driven approaches. The no-nonsense approach in Bricks Matter, helps you understand how to apply the emerging world of predictive analytics for the better management of value networks.

As companies transition from a demand-driven to a market-driven approach, the focus in organizational shift needs to happen. It is a move from outside-in to inside one. It is a transition from vertical excellence to building strong market-to-market horizontal processes. This includes improving revenue by increasing market share, delivering high and reliable profit margins, meeting corporate social responsibility goals and maintaining high levels of customer service with the indispensable guidance found in Bricks Matter.

About Bricks Matter


Why did I Write this Book?

• Third decade of Supply Chain Management.

Passing of the baton by Supply Chain Pioneers.

Talent shortage and the need to train the next

generation.

• Excellence in Supply Chain is Driven by

Leadership. 36 case studies that tell the story.

• Void in the Market. Supply chain matters. Need

for clarity on the impact of two decades of

spending to true business results.

• Shift in technology capabilities that too few

understand. The power of analytics allows

companies to tackle new opportunities, but only if

they learn, to unlearn, to relearn.


Why Should you Care?

• Supply chain is a powerful road forward for your

career. By better understanding the past, you

can be a better leader for the future.

• Supply chain can save the world. Materials are

tight, and social responsibility pressures are

high. You can be a leader to make a change in

making the world a better place.

• Value is driven by those that make things. Supply

Chain leaders help to orchestrate value in

economies, in companies and in communities.

The shift from digital marketing to digital

business redefines value.

• Clicks and digital marketing are sexy; but in the

end, Bricks Matter.


This is the new bible for all supply chain executives. It provides an insider’s perspective that will prove incredibly valuable to even the most grizzled supply chain veteran. This is the next must-have business book.

--Bruce Richardson, Chief Enterprise Strategist, Salesforce.com

The journey to build the outside-in end-to-end value network happens in stages and can only be led from the top based on value-based outcomes. This is a guidebook for leaders driving the transformation.

--Roddy Martin, Senior Vice President, CCI Best Practice Research and Consulting

This book is like no other that has been written about supply chain management. It is a must read for the supply chain leadership team.

--Marty Kisliuk, Global Operations Director, Agricultural Products Group, FMC Corporation

Lora Cecere has been a key driver of supply chain strategies that force companies to think differently about how they work with their customers, partners, and cross-functionally within their own organizations. Here she teaches us to take a bold step to change our thinking and turn the supply chain around to focus on the consumer.

--Ann Dozier, Vice-President, Fresh Dairy Direct IT, Dean Foods Company

Today, the worlds of social business and supply chain management have many degrees of separation. I enjoyed working with Lora to understand what the future transformation of digital marketing to digital business could look like.

--Jeremiah Owyang, Research Director, Altimeter •

•

What Other’s are Saying


• Chapter 1: Meet the Pioneers

• Chapter 2: Creating Value Networks

• Chapter 3: The World of Demand

• Chapter 4: Redesigning Supply

• Chapter 5: Building Horizontal Connectors

• Chapter 6: Race for Supply Chain 2020

Bricks Matter

Right Use

of Assets

Expansion into

BRIC Countries

(Brazil, Russia,

India and China)

Supply Chain

Process

Knowledge


• Technologies were over-hyped and largely under-delivered.

• We stumbled forward. The greatest advancements came through failure.

• The supply chain organization is both an accelerator and an inhibitor.

• No real change in the supply chain happens in less than three years. It takes hard work, and leadership to guide operations to navigate the trade-offs and make a conscious choice.

At a High Level


Inside-Out Inside-Out

Supply Chain Tipping Points

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

S&OP

Evolution of

the PC

JIT

Theory of

Constraints

Supply Chain

Organization

Re-Engineering the

Organization

(Michael Hammer)

Internet/Email

eProcurement

Total Quality

Management

RFID

Vertical Silo

Excellence

Efficient Order to

Cash Processes +

Islands of

Excellence

Manufacturing

Excellence +

Supply Chain Excellence = Supply Chain Excellence =


Inside-Out Outside-In

Value-Based Outcomes

Delivered by Horizontal Processes +

Supply Chain Excellence = Supply Chain Excellence =

Supply Chain Tipping Points

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Y2K

Lean Six Sigma

.com

Demand Driven

Concepts

Vertical Silo

Excellence

Outsourcing

Effectiveness

Social

Responsibility

CSCO

Market-Driven

Value Networks


Evolution of Supply Chain Process

Excellence

Align:

Market

Driven

Building Horizontal Process Connectors

Continuous Testing

Learning Improving In Market

Orchestrate Demand and Supply

Resilient Reliable

Adapt:

Demand

Driven Efficient

Sense Demand

and Supply

Shape Demand and Supply based

on Market

Absorb Demand Volatility

Absorb Supply Volatility

Right Product

Right Place

Right Time

Right Cost

Cost

Procure to pay/order to

cash


An adaptive network focused on a value-

based outcome that senses and translates

market changes (buy and sell-side markets)

bi-directionally with near-real time data

latency to align sell, deliver, make and

sourcing operations.

What is a Market-driven Value Network?


Supply Network: When the supply chain is extended to a network of trading partners, it is termed a supply network.

Value Chain: When the emphasis of this extended supply chain shifts from cost to value, it is called a value chain.

Value Network: When it becomes more strategic to the company, focused outside-in to drive value-based outcomes, it is termed a value network.

Definitions


Leaders sensed Market Changes 5x

Faster


A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity


Looking at the Supply Chain

as a Complex System

Profitable Growth

Revenue Cost of Goods

Working Capital

Corporate Social Responsibility

CorporateTrade-offs

R&D Strategy and Investment Asset Strategy and Investment

InvestmentTrade-offs

SalesPolicies

DistributionPolicies

ManufacturingPolicies

LogisticsPolicies

ProcurementPolicies

Returns Backorders First Pass Yield Empty Miles Material Yield

Supply ChainWaste

Forecast Accuracy Customer Service Inventory

Channel Strategy Product andService Portfolio

Supplier Strategy

Supply ChainTrade-offs


Growth Profitability Cycle Complexity

R&D Margin Cash on Hand C2C Cycle Altman Z

R&D to COGS Ratio Free Cash Flow Ratio Days of Finished

Goods Capital Turnover

SGA Margin Gross Margin Days of Inventory Current Ratio

SGA/COGS Net Profit Days of Payables

Outstanding Quick Ratio

COGS as Percent of

Net Sales Operating Margin

Days of Raw

Materials Return on Assets

Pretax Margin (EBIT) Days of Sales

Outstanding Return on Equity

YoY Sales Growth Days of Work in

Progress Return on Invested

Capital

Operating Margin DPO/DSO Return on Net Assets

Inventory Turns Revenue/Employee

Receivables Turns Cost of Sales

Useful Ratios

P&G Apple Dell Wal-Mart Toyota

38%

21%17%

4% 4%

SC Excellence

Who does it Best?

0

100

200

300

400

500

600

700

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Re

ve

nu

e/T

ho

us

an

ds

of

Em

plo

ye

e

Revenue/Employee for the Period of 2000-2011

P&G Colgate Unilever Kimberly-Clark Nestle Kraft








Bricks Matter


The Supply Chain of the Future

World

Population

Source: “The World at Six Billion” United Nations, 2004; The World UN Population Assessment 2006; “Unsustainable World,” 04/15/08, BBC

North America

2007 2020

339M 342M

Europe

2007 2020

731M 722M

Asia

2007 2020

4.0B 4.6B

L America

2007 2020

572M 660M Africa

2007 2020

965M 1.3B

Oceania

2007 2020

34M 40M

MARCO TRENDS


Supply Chain Management: Top 3 Elements of Pain for Respondent


Ease of Getting Total Supply Chain Costs: Manufacturers, Retailers & Distributors

___________________________________________________________

Source: Supply Chain Insights LLC, Transportation (Aug-Oct 2012)

Base: Transportation Users (Manufacturers, Retailers and Distributors) (n=34)

Q18. How easy is it for your company to get total supply chain costs for your operations?

12% 12% 24% 24% 29% Users

USERS: Ease of Getting Total Supply Chain Costs

Extremely/very easy 5 Neutral 3 Extremely/very difficult

24% EASY 53% DIFFICULT


Demand

Signal

Accurate

Weekly

Forecasting

is ...

Delay from

Purchase to

Signal

Data Latency and Distortion

Red Represents Emerging Economies with Distributor Trade

Retailer DC

Easy

3-10 Days

7-20 Days

Manufacturer DC

Difficult

10-20 Days

20-45 Days

Suppliers

Almost

Impossible

20-50 Days

45-80 Days

Store

Trivial

Instant

Variable


SHARED

VISION + SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE

SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION

SHARED

VISION + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY

SHARED

VISION + SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =

FALSE

STARTS

SHARED

VISION + SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION

SHARED

VISION + SKILLS + RESOURCES + PLAN + LEADERSHIP =

GRADUAL

CHANGE

Source: J.P. Kotter

Collaboration: The Right Stuff


Value Network Strategy

Supply chain strategy

Business Strategy What are the right things to do to increase company value?

Value-network Supply Chain Strategy What are the right ways to support the business strategy?

What are the right trade-offs between value drivers for each value network?

Right product

platforms

Design the

supply

response

Build

organizational

systems and

manage talent

Align supply

relationships

Align demand

relationships

Effective Supply

Networks

Execution of buy-

side strategies

Continuous

Improvement

Capabilities Required

Supply Chain

Network Design

Design Networks

Innovation

Methodologies

Demand Networks

Joint Value Creation

Strategies

Business Process How do I do the right things right?

Source: Supply Chain Insights, LLC


• Chapter 1

• Chapter 2

• Chapter 3

• Chapter 4

• Chapter 5

• Chapter 6

Bricks Matter


Opportunity

at the Intersection

of the Social and Interest Graph(s)


More than Just “Like”


• Newell Rubbermaid

Newell Rubbermaid Gets IT!

#Future15SB @bwdumars


#Future15SB @bwdumars

Newell Rubbermaid Gets IT!








Bricks Matter


The Long Tail of the Supply Chain:

Growing Complexity

Volume

Level of Predictability Predictability based on forecast accuracy vs Actual Order Profiles

Commodity Price Index


Commodity Price Increases and Volatility

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

400.00

Corn (metric Ton)

Wheat (metric Ton)

Coffee, Robusta (Pound)

Sugar (Pound)

Beef (Pound)

Crude Oil (Barrel)

Source: Index Mundi

$/LB


Pull Push

Cu

stom

ers

an

d C

on

sum

ers

Channel

Demand

&

Demand

Management

Demand

Translation

Reliable,

Profitable

Response from

Supply Based

on Demand

Su

pp

liers

Demand Visibility Supply Visibility

Organizational Overview: Typical Consumer Products

Global Organization in 2005-2010

Regional

Team

Regional

Team

Regional

Team

Regional

Team

Regional

Team

Regional

Team

Regional

Team

Over 300 teams

One Face

to the

Supplier

C

u

s

t

o

m

e

r

T

e

a

m

S

u

p

p

o

r

t

AMR Research: 2007


Change in Wages in China

http://americancenturyblog.com/wp-content/uploads/2011/07/urbanwages_wh.gif


National

Pre-1945

Products manufactured and sold within companies within regions

Imported materials and products exported in trade routes

Vertical integration

Operations handled at headquarters

Multi-National 1945-2000

Protective trade

rules closed trade

routes of the past

Products

manufactured

and sold in

regions

Operation of

“mini-companies”

within regions

Local/regional

focus

Manufacturing Evolution

Global: 2000-

Present

• Free Trade

• Optimization of

manufacturing beyond

country borders into

Supply Networks

• Horizontal,

globally integrated

• Shift from “what to

make” to “how to make”

• Management of a

network


Source: Supply Chain Insights 2012

Average Days of Inventory by Year

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Consumer Packaged Goods 59.0 57.0 62.0 64.0 67.0 67.0 68.0 70.0 70.0 64.0 64.0 67.0

Chemical 71.5 71.9 78.2 75.1 62.0 70.3 68.1 64.3 64.3 78.6 72.9 72.8

Pharma 122.2 133.7 190.1 171.0 184.3 175.6 167.8 149.8 154.9 198.7 154.3 131.8

High Tech 93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4

Average 86.5 80.0 94.2 89.6 87.3 87.5 86.9 80.2 81.0 95.6 81.5 75.5

0.0

50.0

100.0

150.0

200.0

250.0

Days

of

Inve

nto

ry


Source: Supply Chain Insights 2012

Average Days of Working Capital by Industry

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Consumer Packaged Goods -20.0 -8.0 -12.0 -2.0 -21.0 -23.0 -8.0 -18.0 -11.0 -10.0 -12.0 -13.0

Chemical 37.3 44.7 61.7 71.9 64.8 64.1 63.8 57.0 51.7 74.8 85.6 77.0

Pharma 64.1 56.4 48.4 56.2 71.8 94.1 92.6 88.1 87.1 111.0 116.0 113.2

High Tech 231.5 290.3 283.5 243.5 173.5 138.9 109.4 103.0 92.4 131.9 138.9 140.9

Average 78.2 95.9 95.4 92.4 72.3 68.5 64.5 57.5 55.1 76.9 82.1 79.5

0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

-50.0

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

Da

ys

of

Wo

rkin

g C

ap

ita

l


“Kellogg’s cereal primarily in the U.S. due to an

odor from waxy resins found in the package

liner. Total charges were $46 million with a

$.09 impact on earnings per diluted share.”

Kellogg Annual Report

Kellogg 2010








Bricks Matter


• Revenue Management

• Sales and Operations Planning

• Supplier Development

• Corporate Social Responsibility

Horizontal Processes


S&OP Process Existence, Goals & Processes


S&OP Balance


S&OP Evolution

Manufacturing- Driven

Deliver a Feasible Plan for Operations

Match Demand with Supply

Sales Driven

Match Demand with Supply

Business- planning Driven

Maximize Profitability

Demand Driven

Maximize Opportunity Sense and

Shape Demand

Market Driven

Maximize Opportunity and

Mitigate Risk. Orchestrate

Demand Market to Market

Greater Benefit

• Growth

• Resilience

• Efficiency


Benefits Received from S&OP Processes

Source: Supply Chain Insights, 2012

What benefits have you received from your work with S&OP processes?

59%

57%

50%

42%

38%

36%

34%

32%

32%

30%

Increasing revenue

Improving forecast accuracy

Reduction of inventory

Improving asset utilization

Determining outsourced manufacturing

Determining procurement requirements

Improving new product launch

Transportation and warehouse management

Capital planning and asset management

Improvements in the perfect order

▲ 2%

▲ 5-7%

▲ 3-7%

▲ 3-6%

▲ 3-6%

▼ 10-15%

▼ 2-8%


S&OP Process Plan Execution








Bricks Matter


Outside-In

Value-Based Outcomes

Delivered by Value Networks

Supply Chain Excellence =

Supply Chain 2020 Tipping Points

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Talent

Shortage

Compliance on

Safe & Secure

Orchestration

Big Data

Supply Chains

Internet of Things

Learning

Supply Chains

Digital Manufacturing


Mobile & Social Presence Growing


Center of Excellence


Center of Excellence Importance vs. Performance


Supply Chain Talent Today vs. In Five Years


Getting Talent


Middle Management Challenge


Challenge by Position


Current State of Planning


Future State of Planning


Scenario Planning


IT Trends Excited About (Top 3)


Definition

66

Challenges: • Transactional

• Time phased data

Structured

Data

• Social

• Channel

• Customer Service

• Warranty

• Temperature

• RFID

• QR codes

• GPS

• Mapping and GPS

• Video

• Voice

• Digital Images

Unstructured

Data

Sensor

Data

New

Data

Types

Volume

Velocity

Variability


Connecting the Extended Supply Chain

67


Connecting the Extended Supply Chain


• Tried to get precise on inaccurate data.

• Been sales-driven or marketing-driven not market-driven

• Believed that the most efficient supply chain is the most effective supply chain.

• Built efficient chains, but not effective networks.

• Focused inside-out, not outside-in.

• Rewarded the urgent, not the important.

Historically, We Have…

69


Where is Your Opportunity?


Upcoming Book Tour Dates

January 13-15, 2013

NRF 102nd Convention & Expo

Big Idea Session

New York City, NY

January 22, 2013

PROMAT

SupplyChainBrain Booth

Chicago, IL

January 30, 2013

Sam M. Walton College of Business

University of Arkansas

Bentonville Area, AR

February 6, 2013

APICS

Chapter meeting

Danbury, CT

February 12, 2013

Plan4Demand

Pittsburgh, PA

April 7-9, 2013

Informs

San Antonio, TX

June 18-20, 2013

3PL Summit &

CSCO Forum

Chicago, IL


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