auto logistics leaders admi 2009

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Importance of Supply Chain Benchmarking

autoMOTIVE Logistics Leaders Congress 2009

Marc A. Brazeau

PrincipalADMi Supply Chain Consulting

June 3 2009




Presentation Overview

Benchmarking and the Supply Chain

Types of Benchmarking

Integrating Benchmarking Activities

Applying the Results

Visibility, Cooperation, and Collaboration

Promotion of Industry Standards




Benchmarking is the process of comparing the cost, cycle time, productivity, or quality of a specific

process or method to another that is widely considered to be an industry standard or best practice

What is Benchmarking?





Be globally competitive in quality, technology, systems cost and

supply

Have expert knowledge of opportunities and competition, as they

leverage even more of the international supply base

Adhere to principles of innovation and collaboration as the basis

for sustained business relationships

Global supply chain performance is challenged by a variety of important factors

OEMs require the automotive supply chain to:




T raditional domestic supply chain:


SupplierLocations

Plants

Static supplier base

Established logistics

networks

Limited border crossings

Coordinated customs

processes

Established carrier base

Existing infrastructure

Effective regulatory agencies

Regional plant locations

Integrated logistics centers

and cross-docks

National distribution

capacity

Specialized equipment

Stable

distances





SupplierLocations

Plants

Dynamic supplier base

Increased number of

supplier options

Multiple source

countries

Multiple International border

crossings

Complicated customs

regulations

Various data requirements

Multiple mode requirements

Broad and diverse carrier base

Multiple language requirements

Regional customs

High level of coordination

Multiple plant locations

Flexible manufacturing

Parts commonization

Increased mileage

International

dealership network

Extended Global supply chain:





NAFTA commercial border

crossings have increased 192%

since 1996

Increase in imports from Asia toU.S. grew from $45 Billion in

1995 to $243 Billion in 2005

Security compliance programs:

FAST

CTPAT

NBEST

Port and border congestion, and the increased security measures, require better shipment planning and

coordination

Sources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact BookSources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact Book

Increased border security and customs requirements




Impact of natural disasters and pandemics


Regional disruptions in key

component supplies

Reduced productivity

Capacity re-directed to emergency

causes

Reduced manpower availability

Need for robust contingency plans

Supply chain transparency and collaboration is more and more important





Global oil demand and the

impact on fuel prices

Raw materials costs

OEM and supplier economichealth

Global automotive demand

fluctuations

Transportation industry

manpower shortagesAbility to re-invest in

transportation equipment

Seismic volume fluctuations and market uncertainty stress the supply chains ability to re-invest

Economic Volatility




Need for infrastructure investment


North American highways, ports and

bridge infrastructure requires an

incremental $32 billion/year through

2020

Rail network requires $10 billion/ year of

incremental investment

East Asia will have to spend $165

billion/year over the next 5 years to be

in line with current needs

Increased port volume since 1994:

251% West Coast

284% East Coast

Investment decisions will be more difficult to make requiring potential innovation trade-offs

Sources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact BookSources: Journal of Commerce, Port Import/Export Reporting Service, Bureau of Labor Statistics, Association of American Railroads, AASHTO, CIA Fact Book





Dynamic ever-growing supplier

base

Multiple countries, languages, and

customs

Diverse transportation modes and

infrastructure

Complex data coordination

requirements

In-transit inventory float

Expanding mileage factors

Incorporating benchmarking activities into the strategic planning process will enable effective best practice

development and adoption

Summary challenges and tactical requirements:

Improve volume forecasting and

data transparency

Develop coordinated supply chain

contingency plans

Promote collaborative supply chain

networks (OEMs and suppliers)

Support industry best-practice

commonization and productivity

improvement initiatives





Financial analysis comparison with other targets

to assess overall competitiveness and

productivity

Process of designing new products or upgrades

to current ones, including reverse engineering of

competitive products

Comparison of peer or target companies market

performance in considering corporate investment

alternatives





Process of observing common or uncommon

groups competitive advantages or disadvantages

Identifies and observes specific business

processes with a goal of identifying best practices

Focuses on a single function in order to improve

the operation of that particular function.





Helps companies assess their competitive

position by comparing specific performance

dimensions

Used to develop yardstick comparisons, allowing

outsiders to evaluate the performance of

operators in an industry

Supply chain benchmarking generally revolves around Strategic, Process, Function, and Performance

benchmarkingthus promoting more effective performance metrics





Benchmarking relies on the collection of both qualitative and quantitative data, depending on the

chosen process




External affairs

Systems

Cost management

Network design and

operation

Organization

Strategy

Logistics scorecard

Strategic involvement in key

issues

Limited involvement in key

issues

Lack of awareness of key

issues

LeadingLagging

Internally managed and

strategic integration

Internally managed, but

primarily tactical

Externally developed and

managed

Full control of cost drivers;

significant competitive

advantage

Internal / external costs

managed moderately well

Lack of control of cost drivers;

Significant cost disadvantage

Flexible, optimal networkFlexibleRigid network; defined by

third party

Centralized and integratedSpecific functions / groups

are centralized

Fully decentralized

Retain critical strategy logistics

resources and capabilities

Some internal logistics

capabilities

Outsource all logistics

functions

1

2

5

3

4

6


Supply chain benchmarking contains 6 performance and structural elements.





Benchmarking may be a one-off event, but is often treated as a continuous process in which organizations

continually seek to challenge their practices





Transit performance has a direct impact on inventory carrying costs, equipment utilization and overall

strategy





Data details should be analyzed at a variety of levels and granularities





Cost level analysis identifies performance gaps when compared to competitive sets





All identified gaps should be categorized and dollarized in order to develop strategic plans to address





The overall benchmarking should form the basis for annual planning and future performance tracking





Customer (Client) Surveys are the most used (77%) of 20

improvement tools, followed by SWOT (72%), and Informal

Benchmarking (68%). Performance Benchmarking was used by

(49%) and Best Practice Benchmarking by (39%)

60% of organizations indicated that the tools that are likely to

increase in popularity the most over the next three years are

Performance Benchmarking, Informal Benchmarking, SWOT, and

Best Practice Benchmarking

When Best Practice Benchmarking is done well significant benefits are obtained with 20% of projects

resulting in benefits worth US$250,000

Source: Global Benchmarking NetworkSource: Global Benchmarking Network

In a 2008 survey on benchmarking, results showed that:




Supply chain visibility is the cornerstone for effective benchmarking and rapid collaboration

Visibility, Cooperation, and Collaboration




Promotion of industry standards

Professional developmentTransportation associations

Shipper conferences

OEM sponsored

All supply chain partners should engage and participate in the promotion and development of

operating and reporting standards




Promotion of industry standards

The AIAG provides a forum for the OEMs and tiered supply base to effectively collaborate




Last Slide

Questions & Answers

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