collaborative execution: closing the loop on supply chain
TRANSCRIPT
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October, 2011
Collaborative Execution: Closing the Loop
on Supply Chain Planning and Execution
Aberdeen Group's Chief Supply Chain Officer (CSCO) Survey (January
2011) collected data from 191 companies. That study revealed that over the
past 12 months, the supply chain is both more global (85% of companies
operate internationally) and more complex. It is also much more strained as
there have been several unpredictable major disruptions to the extended
supply chain, including natural disasters and geo-political unrest. The added
complexity and all of these potentially disruptive events have served to
heighten the importance of minimizing the gap between supply chain
planning and collaborative execution across partners and beyond the
enterprise.
In September 2011 we completed a follow-on survey with 97 enterprises.
That survey reinforces the premise that the increase in the number of global
disruptions combined with the increase in suppliers, customers, carriers,
and countries are changing the importance of collaborative execution
between all parties in the multi-tiered global supply chain. Aberdeen’s
research indicates that as a result of this growing complexity, there is a
growing shift in focus towards closed loop integration of planning and
execution both within the enterprise and its extended supply-demand
network. Indeed, a majority of all companies claim to have processes to
integrate planning and execution (61 companies).
This report will focus on the key process and technology differentiators
displayed by the 61 companies with tight closed-loop integration and
synchronization between supply chain planning and supply chain execution
across partners and beyond the enterprise. It will also show that such
companies are enjoying a significant advantage in both cost and service
results compared to companies without that level of integration.
Business Pressures
Given the growing globalization, complexity of the supply chain, and rising
cost of fuel and raw materials; collaborative synchronization between supply
chain planning and supply chain execution is of paramount importance. The
data shows that the rising cost of supply chain management (48%) and the
growing complexity of the supply chain (38%) are the top two business
pressures cited by supply chain executives. Surely, supply chain management
has grown more complex and more expensive; consumer demand has also
become increasingly more volatile serving to complicate matters further. In
fact, demand volatility was the third largest business pressure at 34% among
survey respondents. Together, all of these pressures serve to highlight the
importance of synchronization between supply chain planning and supply
chain execution inbound-to-outbound across both supply and demand.
Demographics
In September 2011, Aberdeen
surveyed 97 qualified industry
respondents:
Job title: C-Level executive
(CEO, CFO, CTO, CIO)
(6%); VP/General Manager
(18%); Director (19%);
Manager (36%); other titles
(21%).
Functional Responsibility:
Logistics/Supply Chain (37%);
operations / procurement
(24%); information
technology (9%);
manufacturing/production
(8%); other areas (22%).
Company size: Under $50
million (17%); $50 million to
$1 billion (42%); $1 billion
and up (41%)
Geography: North America -
Includes USA, Canada,
Mexico (60%); South/Central
America and Caribbean (2%);
Asia/Pacific (7%); Europe
(27%); Middle East, Africa
(4%)
Research Brief
Aberdeen’s Research Briefs
provide a detailed exploration
of a key finding from a primary
research study, including key
performance indicators, Best-
in-Class insight, and vendor
insight.
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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© 2011 Aberdeen Group. Telephone: 617 854 5200
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Figure 1: Supply Chain Cost and Complexity are Paramount
23%
23%
34%
38%
48%
0% 25% 50% 75% 100%
Escalating demand for service from customers
Lack of visibility with external trading partners
Increased demand volatility
Growing complexity of globaloperations logistics channels
Rising supply chain management costs
Percent of Respondents n=97
All Respondents
Source: Aberdeen Group, September 2011
The sections that follow serve to further illustrate the benefits and the
challenges inherent to synchronized planning and execution in today's multi-
tiered, multi-enterprise supply chain particularly as it pertains to
collaborative execution (defined in the sidebar).
Strategic Actions
When looking at key strategies for the survey respondent companies, we
found that knitting a tighter and more interoperable supply and demand
process competency was a top priority. For example, the top strategy
employed by survey respondents was to increase supplier-side
collaboration/visibility (55%).
Figure 2: Top Strategic Execution Actions
21%
31%
34%
36%
55%
0% 20% 40% 60%
Enable multi-tier external process
collaboration and integration
Customer enablement - Increase B2B
collaboration / visibility into customer-side
processes with customers, trading
Improve external cross-network process
collaboration and design
Improve perfect order rate by improving
pick accuracy and on-time shipment
Supplier enablement - Increase B2B
collaboration / visibility into supplier-side
processes with suppliers, trading partners
Percentage of Respondents, n = 123
21%
31%
34%
36%
55%
0% 20% 40% 60%
Enable multi-tier external process
collaboration and integration
Customer enablement - Increase B2B
collaboration / visibility into customer-side
processes with customers, trading
Improve external cross-network process
collaboration and design
Improve perfect order rate by improving
pick accuracy and on-time shipment
Supplier enablement - Increase B2B
collaboration / visibility into supplier-side
processes with suppliers, trading partners
Percentage of Respondents, n = 123 Source: Aberdeen Group, September 2011
This collaboration involves the effort from survey respondents to improve
supplier-side process/data integration to assist supply chain planning and
execution on the inbound side.
The theme continues with the second rated strategy (36%, Figure 2),
optimizing or the perfect order rate or customer service levels on the
Collaborative Execution
Defined:
Collaborative execution
provides continuous or real-
time visibility into multi-
enterprise orders/shipments,
inventory levels, and partner
activities. Collaborative
execution relies on
technology for collaborative
problem solving. It involves
the bi-directional exchange
of supply chain planning and
execution data to "close the
loop" on multi-level process
events across-enterprises. A
robust collaborative
execution solution includes:
The ability to propagate new
plans and monitor
exceptions on a single, global
platform
Real time multi-tier demand
and supply data
Role-based participation of
all partners. This is not just
an external requirement, but
requires internal integration
across functional
departments, operating
divisions, and global
geographies
Rapid resolutions in order to
“make the plan,” so it can
respond intelligently to
supply/ demand shifts or
disruptions
Enables dynamic resolution
of the majority of exceptions
quickly and cost-effectively,
while reducing cost, noise,
and latency
Collaborative Execution: Closing the Loop on Supply Chain Planning and
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© 2011 Aberdeen Group. Telephone: 617 854 5200
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outbound or demand side. In addition 31% also indicated they are focusing
on customer enablement - increase B2B collaboration into processes. When
asked about efforts to minimize the gap between planning and execution,
also on the outbound customer-demand side, 42% are focusing on creating a
tighter feedback loop from actual market activity during execution (e.g.,
point of sale data) to demand assumptions or planning. It is apparent that no
plan is adequate if it does not meet market/operational needs. It follows that
one needs feedback during execution to feed the planning process and
adjust to operational inputs in an ongoing cycle of demand-to-supply
process steps. For agile execution, it is important to facilitate frequent
bidirectional information flows in the execution window. Particularly when
it comes to unplanned events, such as the recent Japan tsunami, it is clear
that companies perform better, and demonstrate more execution agility
when they operate on a collaborative technology platform that allows for
bidirectional data flows on a near real-time basis. In later sections we will
examine the correlation between improving the integration/automation of
these process steps and closing the loop between execution and planning
across both the supply and demand side of the extended supply chain.
Process and Organizational Capabilities
In an effort to understand the real value of integration between supply chain
planning and supply chain execution, we divided the survey pool into
companies claiming "closed-loop integration across planning and execution"
(61 respondents) and those that did not (36 respondents). For those with
closed-loop integration the data reveals a significant advantage in core process
and organizational capabilities.
Figure 3: Core Capabilities Gaps - those with Closed-Loop
Integration and Without
7%
25%
33%
27%
25%
19%
47%
60%
34%
52%
57%
58%
62%
64%
84%
86%
0% 20% 40% 60% 80% 100%
Cloud-based trading partner collaboration - 4.86x
Ability of personnel to view the supply chain
holistically in terms of linked processes - 2.08x
Visibility across multiple tiers of supply base -
1.73x
Ability to automatically collaborate on what-if
scenarios - 2.15x
End-to-end supply chain data and process
visibility - 2.48x
The ability to access real-time supply chain data
needed for decision-making - 3.37x
Ability to perform constrained supply chain
planning and execution - 1.79x
Ability to create demand forecasts that reflect
true customer demand - 1.43x
Percentage of Respondents, n = 123
Close-Loop Integration
No Integration7%
25%
33%
27%
25%
19%
47%
60%
34%
52%
57%
58%
62%
64%
84%
86%
0% 20% 40% 60% 80% 100%
Cloud-based trading partner collaboration - 4.86x
Ability of personnel to view the supply chain
holistically in terms of linked processes - 2.08x
Visibility across multiple tiers of supply base -
1.73x
Ability to automatically collaborate on what-if
scenarios - 2.15x
End-to-end supply chain data and process
visibility - 2.48x
The ability to access real-time supply chain data
needed for decision-making - 3.37x
Ability to perform constrained supply chain
planning and execution - 1.79x
Ability to create demand forecasts that reflect
true customer demand - 1.43x
Percentage of Respondents, n = 123
Close-Loop Integration
No Integration
Source: Aberdeen Group, September 2011
“We are mainly focusing on
getting closer to customers to
better understand forthcoming
demand, and we are also
ensuring optimal stock levels
across product range and
storage locations.”
~ Daniel Muir, Logistics
Manager, Highland Spring Ltd.
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
Page 4
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A deeper look reveals that the 61 companies with closed-loop integration
between supply chain planning and execution have huge advantages in the
following three core competencies:
Cross-network visibility. In regards to visibility (Figure 3),
companies with closed-loop integration were 2.5 times as likely as
companies without integration to have end-to-end supply chain data
and process visibility and 3.37 times as likely to have the ability to
access the real-time supply chain data needed for decision making (64%
closed loop integration claim real-time access to true demand data
versus 19% respectively). Companies with closed-loop integration are
also more automated. Eighty-six percent (86%) of companies with
from customers versus 60% for all others. They were 3 times as
likely to have online (real-time) visibility into supply chain
exceptions during supply or demand execution (only 19% of others
can make this claim). Finally, these companies were 1.73 times as
likely to have visibility across multiple tiers of the supply base (57% versus 33% respectively).
Collaborative execution. Companies with closed-loop
integration were anywhere from 2.2 to 4.9 times as likely as others
to have ability to collaborate during execution. When it comes to
both demand sensing and matching on the customer or demand-
side, or collaborating with suppliers or trading partners on the
supply-side they are able to adjust plans dynamically. For example,
84% claim that they perform constrained supply chain planning and
execution and 64% have access to real-time data for decision-making
(versus only 19% to 47% of other companies). This advantage links
to automation capabilities where companies with closed-loop integration (versus other companies) are:
o 1.4 times as likely to have the ability to create demand forecasts that reflect true customer demand
o 2.2 times as likely to have the ability to automatically collaborate on what-if scenarios
o 4.9 times as likely to have cloud-based trading partner
collaboration as a "collaborative technology platform"
When it comes to today's extended multi-enterprise supply chain it
is important to understand that data and product flows across tiers
are lengthening under globalization. In the past technologies were
not available to allow multi-enterprise collaboration across
networks beyond the immediate upstream or downstream tier of
suppliers or trading partners. Under older technology, network
communications were primarily one-way and passed from one tier
to the next in a "serial" sequenced chain rather than simultaneously.
Globalization has lengthened lead-times and also the number of
transition points in the supply chain. Along with providing for
multitier, multi-enterprise visibility, it is important to move away
from serial B2B communications to simultaneous bidirectional
"We are deploying supply
network collaboration tools to
share forecast, inventory and
confirmed supply information
that will enable us to share
information and react to
changes in demand with our
first and second tier supplier."
~ Director at a Large Sporting
Goods Manufacturer
"Our current supply chain
management initiatives center
on implementing an end-to-end
S&OP process reviewing an
upgrade replacement of our
current TMS solution."
~ Director at a Large
Consumer Electronics
Manufacturer
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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© 2011 Aberdeen Group. Telephone: 617 854 5200
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communications. Today's technologies support this, and those that
are most proficient in collaborative execution are as much as 5 times as likely to have the proper collaborative technology platform.
Collaborative demand sensing and matching. Companies with
closed-loop integration were 1.43 times as likely as companies
without integration to have the ability to create demand forecasts that
reflect true customer demand. This is supported by the degree of
automation, where companies with closed-loop integration were
98% more likely to have the ability to segment the demand forecasts
based on key product-customer characteristics. Finally, these
companies were 58% more likely to have the ability to match
customer demand through automated demand signals. In the past
companies had no choice but to rely on forecasts. But new
collaborative technology platforms allow for simultaneous sharing of
real-time customer sales data that allow for true demand, sensing and collaborative supply-demand matching, feedback, and exchange.
Performance Metrics
In the previous sections we have demonstrated how companies with closed-
loop integration between supply chain planning and execution deliver
significant process and automation capabilities over their counterparts in
both supply-side and demand-side process steps. However, do those
advantages translate to real cost savings or deliver improvements against
cost and service metrics? Even while transportation and warehousing costs
and hence overall supply chain costs (48%, Figure 1) are increasing under
globalization, those companies with tight integration between supply chain
planning and execution have been able to minimize the rising supply chain
related cost relative to companies lacking such integration. In Table 1 the
final two columns display the performance gaps between these two groups.
Table 1: Performance Metrics (year-over-year percent change) Compared
Company
Top Integrated
Companies
n = 17
With Closed-
loop integration
n = 61
Without Closed-
loop integration
n = 36
Change in Total landed costs per unit handled 0.57% 3.14% 3.63%
Change in Domestic transportation costs per
unit shipped -0.19% 3.00% 3.66%
Change in International transportation costs
per unit shipped 1.67% 2.53% 2.98%
Change in Actual warehouse operating cost -1.23% 3.31% 3.87%
Source: Aberdeen Group, September 2011
At a high level, the full group of 61 companies "with closed-loop integration"
reported an 18% smaller increase in domestic transportation costs. Also,
those same companies were able to reduce the impact of lengthened supply
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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chains and rising fuel costs - holding the rise in international transportation
costs to 2.53% (column 2). Hence companies with closed-loop integration
overall delivered a 15% performance advantage versus those lacking closed-
loop integration. Across these four metrics we can see that closed-loop
integration of planning and execution in today's complex extended supply
chain can translate into sizable performance advantages.
But a fairly large number of companies (63%) are claiming a tight level of
closed-loop integration between planning and execution. Within such a large
group it is therefore not surprising that are there are even larger gaps in
performance that can be delivered for those companies most successful in
managing their operations. Indeed, those most successful in the cost/service
(the top 20%) have also exhibit higher levels of closed-loop integration of
process and technology in and certain key processes, and we will explore
those next.
A deeper analysis revealed that the top 20% of the companies (top
companies are defined in the sidebar) with closed-loop integration and
synchronization between supply chain planning and execution were
performing dramatically better than even other companies with closed-loop
integration. The 17 top companies managed to minimize the rise in supply
chain logistics costs when compared to other integrated companies. In fact,
the top companies have even managed, in some cases, to lower their costs.
Table 1 shows that top integrated companies were able to lower their
domestic transportation costs by 0.19% and they were able to lower their
warehousing costs by better than 1.2%. These savings, especially for large
multi-tiered supply chains, are very significant. We will examine how such
companies are implementing new capabilities in the sections to follow.
The priority shifts to "closed loop" collaborative and
responsive implementations
While the case for closed-loop integration between supply chain planning
and execution is overwhelming, it is important to discuss a priority
hierarchy for an integration initiative. What are the top methods for
improving supply chain execution and planning integration and
synchronization? Based on the data, the overall survey respondent pool
listed improving or increasing two core elements:
1. Supply chain visibility is the most important integration improvement
strategy scoring a 3.99 on a 5-piont scale (5 being highest priority)
2. Increasing the integration of supply chain collaborative technology with
internal legacy and ERP systems (3.94) and improving current continuous S&OP processes (3.89)
For the best performers (17 top performers) these two priorities hold
constant - but the priority of collaborative planning is the top selected item.
For this group a deeper look into the data reveals these high performers
(i.e., lower landed costs, lower warehouse operation costs (see sidebar) are
improving their current S&OP process was the top strategy (4.12). In short,
for the best of the best, collaborative planning is a continuous process
“We are currently optimizing
our S&OP process and
beginning development of a
distribution requirements
planning process to better
support our global distribution
capabilities.”
~ Managing Director at a Small
Health and Beauty Product
Manufacturer
Top Performing Company
Definition n = 17
0.57% increase in total
landed costs per unit handled
(includes warehousing,
transportation costs, and
import / export duties and
tariffs) over prior year
.19% decrease in domestic
transportation costs per unit
shipped over prior year
1.67% increase in
international transportation
costs per unit shipped over
prior year
1.23% decrease in actual
warehouse operating cost
(YTD performance vs.
budget)
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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© 2011 Aberdeen Group. Telephone: 617 854 5200
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requiring constant feedback during execution. In this sense, cross network
planning was the most important factor in improving their closed-loop
integration and synchronization followed closely by visibility into the
extended supply chain.
This is underscored in previous Aberdeen reports, as we have expounded
on the importance of sales and operations planning process to achieving
visibility and transformation throughout the entire organization. It is
important to note for the purposes of this discussion that Sales and
Operation Planning (S&OP) can be "continuous and collaborative" and can be
used a means of increasing reaction time to changing market dynamics and
avoiding inventory excess inventory.
Among the top integrated companies, we conducted several interviews
where supply chain visibility was rated a "high priority" when trying to
increase the integration and synchronization internally and externally. "We
are currently extending the integral supply chain in order to create visibility
and improve responsiveness up and including the second tier suppliers in
order to improve planning and execution integration," explains a Manager at
a large lighting manufacturer. Being able to quickly and accurately view the
current state of your supply chain (i.e., inventory, supplier capacity, inbound
and outbound shipments) allows companies to achieve the following:
Better match of consumer demand through higher levels of collaboration, responsiveness and matching
Avoid transportation bottlenecks in execution
Improve inventory management
Top companies understand that supply chain visibility is more of a
continuous process than a static goal - it is an ever changing and ever
evolving target and is a first step to achieving collaborative execution. In
fact, even among those that reported that they have end-to-end supply
chain visibility, it was still the top area targeted for incremental investment
in 2012. For 67% of all companies, supply chain visibility and its integration
into the closed loop process is the highest investment priority for the next
12 months. The complexity of the multi-tier supply chain adds to the
degradation of information and time (see sidebar on page 13) particularly
when each tier is handled in a serial fashion. A continuous and collaborative
S&OP and visibility solution provides for simultaneous synchronized
exchange of supply chain data bearing procurement, production and delivery
phases across each tier.
Voice of the market - What are your current initiatives
around the integration of planning with execution?
When asked about strategies around enhancing the level of synchronization
and integration of planning with collaborative execution within the extended
multi-enterprise supply chain, the response was overwhelming. In an effort
to go beyond the data and bring the end users voice into the discussion,
Fast Facts:
Collaborative planning is a
continuous process requiring
constant feedback during
execution
The complexity of the multi-
tier supply chain adds to the
degradation of information
and time particularly when
each tier is handled in a serial
fashion
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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here are some of the more interesting comments from the end user
community:
"We are deploying supply network collaboration tools to share forecast,
inventory and confirmed supply information that will enable us to share
information and react to changes in demand with our first and second tier
supplier," reveals the director of manufacturing at a large sporting goods
manufacturer.
"Our supply chain management approach is far more focused on
collaborating with multiple tiers of our supply chain throughout the product
lifecycle to ensure designs are producible and processes are established to
consistently produce acceptable hardware among a supply base that will
remain viable in our turbulent market," explains the Vice President of a mid-
size aerospace and defense manufacturer.
"To get a better understanding of when parts of the new fashion collections
are received, is important to know where the goods are and when we can
ship them to the customers. We need to know in detail the status to
combine those deliveries into a balanced collection for each shop so that
matching tops and bottoms arrive at the shop at the same moment," says
the managing director of a small European apparel company.
"Collaborating with suppliers to gain visibility into their production will
enable our organization to schedule purchases and plan for ebbs and flows
in inventory. This kind of collaboration is essential to building the lasting
relationship necessary for a small industrial supplier to maximize fixed -
price contract performance by making sure that the product needed will
always be available with the lowest possible holding costs. Another
important initiative is a massive forecasting overhaul. Making forecasting
improvements is essential to making intelligent purchasing decisions," reveals
the director of logistics, at a small North American industrial tools
manufacturer.
Though the approaches vary from company to company, it is apparent from
the end users that establishing tight integration and synchronization
between supply chain planning and supply chain execution is top of mind.
Extent of Integration and Automation
Another major issue underlying this discussion is the extent to which you
need to be integrated to your ERP or legacy systems to receive maximum
benefit. Figure 4 shows that while some integration is likely better than
none; the most value is derived when there is an application user interface
level integration of workflow and data.
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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© 2011 Aberdeen Group. Telephone: 617 854 5200
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Figure 4: Extent of Integration
19%
31%
27%
24%
34%
34%
16%
16%
6%
12%
24%
59%
0% 20% 40% 60% 80%
Our ERP/legacy solution is not integrated with our supply
chain planning solution
Batch based transfer of data but user has to go to different
user interfaces
Real time transfer of data but user has to go to different
user interfaces
Application user interface level integration of workflow
and data
Top 20% of Integration
No Integration
Integration
Percent of Respondents n=97
Source: Aberdeen Group, September 2011
In fact, the top performing close loop integrated companies were 1.4 times
as likely as other integrated companies to have application user interface
level integration. In short, bringing the integration all the way to the line of
business users desktop (in a single user interface) allows for much greater
visibility and collaboration - all of which positively affect supply chain costs.
A related issue to the extent of integration is which features or functions
are the most important to automate. To that end we have put together a
list based on survey data which compares companies without integration to
the very top performing closed-loop integrated companies (top 20%
integrated companies) and companies and highlights those features with the
largest automation gaps.
Table 2: Automated Features/Functions Gaps
Feature/Function
Top 20%
Close-Loop
Integrated
Companies
Without
Closed-loop
integration
Internal supply chain performance
dashboards (e.g., across departments,
regions, divisions, product channels etc.)
70% 42%
External supply chain performance
scorecards (e.g., across carriers
transportation, manufacturing partners,
suppliers, customer / product segments)
65% 43%
Exception alerts - responding to supply -
demand disruptions 82% 47%
"Our current supply chain
management initiatives center
on implementing an end-to-end
S&OP process reviewing an
upgrade replacement of current
TMS solution."
~ Director at a Large
Consumer Electronics
Manufacturer
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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Feature/Function
Top 20%
Close-Loop
Integrated
Companies
Without
Closed-loop integration
Role-based visibility views external
supply chain partners 44% 21%
Supply-demand synchronization with
connectivity, process orchestration, and
exception management
47% 13%
Multi-tier inventory collaboration with
suppliers / others (inbound) 53% 10%
Channel inventory collaboration with
customers, hubs, 3PLs (outbound) 41% 7%
Performs true multi-tier analytics to
assess impact of supply shortages and
reallocations and to reduce, allocate, or
manage inventory held at various stages
in the supply chain
41% 3%
Analytics (e.g., statistical analysis,
trending, route cause analysis, etc.) 53% 30%
Supply chain modeling (e.g., what-if
scenarios, network design, etc.) 41% 20%
Financial settlement or financing triggers 30% 30%
Source: Aberdeen Group, September 2011
The data shows that among the top 20% of integrated companies
(companies with lower total landed costs and lower warehousing costs)
exception alerts are the most popular automated feature (82%). As is typical
of these types of automation gaps they tend to bolster the company's ability
to measure and manage today's more complex global supply chains in both
planning and execution. Looking back at the top business pressures, we saw
that the growing complexity of the supply chain was top of mind for supply
chain professionals. Automating exception alerts allows today's supply chain
professional to navigate their dynamic supply chain with greater ease. Table
2 details specific areas the features and functions that, if automated, tend to
yield the most operational value to cost and service.
Another popular automated feature is an internal supply chain performance
dashboard (e.g., across departments, regions, divisions, product channels
etc.) with 70% of the top integrated companies. This again allows the supply
chain professional to compensate for a key business pressure - rising cost of
supply chain management.
Collaborative Execution: Closing the Loop on Supply Chain Planning and
Execution
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Case in Point: $6.5 Billion Global Electronics Firm
Deploys Closed-Loop Supply Chain Technology for
Double-Digit Gains
Headquartered in Toronto Canada, Celestica is a global leader in the
delivery of end-to-end lifecycle solutions. In 2010, it reported $6.5 billion in
revenue. The company's global operating network comprises 35,000
employees at over 20 locations in 14 countries in the Americas, Europe and
Asia regions. Celestica's expertise is in design and engineering, electronics
manufacturing and supply chain management services. Its suite of solutions
spans the entire product lifecycle - from design, through to delivery and
after-market support.
The company has built its reputation on an agile integrated end-to-end
supply chain that provides for complete contract manufacturing and systems
integration, supplier and inventory management, transportation, global
logistics, and fulfillment.
“Celestica is committed to driving an efficient, high-velocity supply chain
that continually synchronizes planning and execution process steps to
respond to our customers’ needs while reducing costs in the end-to-end,
multi-enterprise supply chain. This strategy provides our customers with the
lowest Total Cost Of Ownership (TCOOTM)", said Harvinder Sembhi,
Senior Vice President, Supply Chain Management and Chief Procurement
Officer at Celestica.
To facilitate this TCOOTM vision, a major supply chain transformation
project was launched about six years ago. The company began looking at
B2B and supply-demand integration solutions to move from fax, email and
manual integration with its numerous supplier and trading partners.
They selected a solution provider to provide state-of-the-art collaborative
technologies. “To support the TCOOTM strategy, we built a global network
of best-in-class supplier partners in close proximity to our principal
manufacturing sites, as well as our vendors and Third-party Logistics
Providers (3PLs) to increase the agility and flexibility of our supply chain and
deliver the shortest overall lead times, while reducing costs. We determined
the true cost of producing, delivering and supporting our customers’
products so we can exceed their expectations for time-to-market and
quality, and provide them with the lowest TCOOTM. The advanced
processes and capabilities of the collaboration/integration platform have
become foundational to delivering on our TCOOTM strategy,” summarized
Sembhi.
Today the process is highly automated - the advanced technology platform
is a cloud-based web portal which facilitates connectivity to electronic
means of data sharing with both large and small suppliers. The flexible tools
and web access options streamline the data collection and sharing process
and also instill a high degree of data integrity and validation.
In concert with the technology migration, the company also streamlined its
global supply chain and operations in both planning and execution to
Collaborative Execution: Closing the Loop on Supply Chain Planning and
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become more responsive and agile in its global in-bound and out-bound
logistics. In support of the TCOOTM vision, the multi-year transformation
began reaping benefits almost immediately, including:
Reduced working capital cost of inventory – days sales outstanding by double digit percentage
Redeployed administration -15% increase in employee productivity
Reduced latency by 30% ( latency time is the time required to send
an available to promise request from Celestica to the supplier and back) - the company is now at a standard of 48 hours
Increased percentage yield acceptance by supplier - first accept yield-to-date and quantity has increased to 60% from 18%
Increased agility - time-to-market by reducing dwell time from order to receipt
Increased data accuracy and synchronization in virtually every
planning and execution process
“These benefits are reflective of the level of transformation we embraced in
order to close the loop on planning and execution in our expansive supply-
demand network. Today our integrated global supply chain is adaptive and
responsive to continuous change, tailored to meet each customer's unique
requirements. It is how we help our customers stay ahead in a dynamic
world and adapt to changes quickly,” concluded Sembhi.
Recommendations
The goal of this document is to explore the level of closed loop integration
and collaborative execution that companies possess to orchestrate activities
between planning and execution across their extended end-to-end supply
chains and across partners. The following are three suggested steps for
embracing collaborative execution across the multi-enterprise supply chain:
Embrace collaborative technology. This document
demonstrates that top performers are more tightly integrated and
are better at closing the gap between planning and execution. Both
internal to their organizations, but even more importantly to the
multi-tier extended supply chain, they are up to five times more
likely to have the visibility required to execute collaboratively. They
are 2.4 to 5-times as likely as other companies to embrace
collaborative and or cloud technologies and platforms to manage
simultaneously across multiple tiers in their supply chain. Moving
from serial to collaborative information flows enables visibility - an
investment area for up to 76% of our respondents. Even for
companies with closed-loop integration between supply chain
planning and execution, only about 34% have cloud-based
collaborative technology in place. The investment required is easily
justified for the top performers have significant process advantages
over their counterparts. The top 20% of companies with closed-
Collaborative Execution: Closing the Loop on Supply Chain Planning and
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© 2011 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897
loop integration and collaborative execution between supply chain
planning and execution were dramatically better than even other
companies with closed-loop integration. Top companies managed to
minimize the rise in supply chain logistics costs and exhibit a 3 to 4
percentage point advantage in total landed cost (warehousing and
transportation) when compared to other integrated companies.
They were able to hold these costs constant, and in some cases,
also lower costs in this troubled economy (Table 1). With these
types of performance gains possible the investment cost can be
justified.
Streamline process and enable collaborative execution.
Moving from a serial to a synchronized and robust continuous
S&OP and collaborative execution platform requires significant
process reengineering. Developing a technology roadmap with your
suppliers, carriers and other trading partners for the frequent and
accurate exchange of global data requires planning and due diligence.
Make sure you equip and train your staff and educate your partners
on their role in making sure that communications and protocols are
in place for the new streamlined process. Moving from a serial to a
multi-enterprise collaborative closed loop supply chain execution
process is not simple. No technology platform by itself enables
supply chain transformation - it requires a reengineered process and
in some cases a reconfigured supply chain. For the best
performance results, effort must be devoted to fully leverage the
collaborative technologies within the enterprise and across the
extended supply chain. Top companies demonstrated superior cost
metrics but often times it is the value of time that results in the
most significant positive impact to supply chain execution (see sidebar).
Equip and empower people. The data shows that among the top
integrated companies (i.e., companies with lower total landed costs
and lower warehousing costs) exception alerts are the most popular
automated feature (82%, Table 2). Looking back at the top business
pressures, we saw that the growing complexity of the supply chain
was top of mind for supply chain professionals. Exception
management is the only way to properly address the complexities of
today's supply chain and it requires technology. However, a
technology platform is only as good as the people that operate and
control it. Top companies generally recognize that a member of
senior management needs to be given authority and responsibility
for collaborative execution within the company (over 88% of all
companies and 95% of the 17 top companies make this claim). Top
companies recognize the need to equip their people, train them and
work in a collaborative fashion with their suppliers, carriers and
other trading partners to execute. Fifty-two percent (52%) of the
companies with closed loop integration indicate that their personnel
have the ability to view the supply chain holistically in terms of
length processes and 58% indicate that they have the ability to
Time as a Driving Factor
A driving factor in execution
agility in this is the value of
time. Time is the only resource
that cannot be replaced or
outsourced. Once it has passed,
the impacts are significant and
only the costs remain: Impacts
include:
Lost customer confidence
Lost sales; market valuation
Inventory carrying and aging
Expediting costs , tariffs /
duties, and customs sanctions
Capacity underutilization
Overtime labor
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© 2011 Aberdeen Group. Telephone: 617 854 5200
www.aberdeen.com Fax: 617 723 7897
collaborate on what-if scenarios (Figure 3). It is not surprising that
they are doing a better job financially and are more equipped to
move from serial to collaborative real-time execution requirements.
It is important that companies equip their staffs to manage the
exceptions as they occur with agility and competency. It is also
important to train and equip suppliers, carriers and trading partners
in proper and frequent exchange of data that is critical to supply chain operations.
The dramatic savings in time and improvements in customer satisfaction
demonstrated in this document are the reasons that leading companies have
developed a core competency in collaborative execution. By utilizing the
three steps above, today's company can ensure that its people, process, and
technology are equipped for supply chain transformation. With leadership
and collaborative execution ingrained throughout the supply chain
organization, today's company can embrace the complexities of the multitier
supply chain and begin to deliver superior performance results.
For more information on this or other research topics, please visit
www.aberdeen.com.
Related Research
Sales and Operations Planning 2011:
Key Lever for Enabling Business
Profitability for the Chief Supply Chain
Officer; August 2011
Demand Management: Bridging External
Market Inputs with Internal Statistical
Forecasting; June 2011
Business Intelligence Command and
Control Center for the Chief Supply
Chain Officer; May 2011
2011 Transportation Contract, Tender
and Spend Management; April 2011
Supply Chain Visibility: Fostering Security,
Resiliency, and Efficiency; February 2011
Warehouse Management Excellence:
Maximizing Resources and Efficiency;
November 2010
Authors: Bob Heaney, Senior Research Analyst, Supply Chain Management,
Kevin Permenter, Research Associate, Supply Chain Management
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