Are You Ready for the Sea Change in Supply
Chain Strategy?
April 2012
Roddy MartinSVP Supply Chain
Transformation Competitive Capabilities International
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Roddy Martin
SC Transformation Thought Leader Executive South African Breweries (SABMiller)
– Engineering Leadership– Manufacturing Strategy – IT Leadership
AMR Research – Gartner SC leadership
CCI SVP SC
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Starting Thoughts
3
SC and IT Alignment: So, what’s new?• IT Alignment, IM Capabilities & Architecture • Prioritized and Synchronized to Support End to End Digitization of the Demand–driven
Value Network
4 Management Systems: Decoupling Layer The End to End Supply Chain Starts at the “Buyer:” Shopper/Customer
• The Journey : Readiness to Change / Performance Improvement Maturity is a Critical Factor.
• Not Just “One Supply Chain” Demand-driven Segmentation Reduces Complexity!
Supply Chain Strategy is the Business Operating Strategy • Top Down Change Leadership is Fundamental to Sustainable Transformation.• Supply Chain Undergoing Sea Change Transformation – from Functional Outputs to
Business Outcomes
Building End to End Process Capability is More Than a Set of Projects • Building Sustainable Process Capabilities while Managing Day to Day Business
Performance – More Than “Integration”
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Today,Tomorrow, 2020 Capabilities Challenge: Future Proofing
4
2020
Growth ?
Today
Costs
Process capability to be
agile across end to end
Demand-driven Value Network
Journey to build agility
“Real”
Money Requires “More” than Projects
& Integration”…………
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“Linear Supply Chains Lack Scale Process & Visibility” --P&G Chief Supply Chain Officer
Disconnects… Silo’d & Functional Focus vs End to End Demand–Driven Processes
MaterialsMgmt Manufacturing Distribution
Suppliers
New Product or ServiceMerges to the Base Supply Process
CustomersPatients
Consumers
SuppliersPartners
ManufacturersAssemblers
DistributorsWholesalers Customers
ConsumersUsers; Buyers
Risk
Risk
Risk Risk Risk Risk
Risk
Projects and Programs
5 day demand change 90 day response time
Manufacturer
• Agility and responsiveness• Sustainable performance improvement• End to end process capabilities• Managed complexity & risk• Structure for “global operations” • End to end talent & skills, people development• Enabling end to end process "information”
X
“Change”
Risk
“Agility to Change”
gold oil
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Gartner, AMR Research
Fundamental
Competitiveness
Differentiators
Outside In view End to End Supply Chain ProcessTechnology Aligned Cross Functional Goals & Objectives
Risk Management Demand Management Global Network ManagementCost Optimized Supply Chain
Align to customer value Sustainability ServicesProfitable Trade Offs
“North-South” Goal
Alignment
MeasurementAptitude
Change Leadership
Continuous Improvement
Culture
Power Through Process (e.g. S&OP)
ST
ICK
YG
LU
E
“East-West”Process
Performance
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Consumers, Shoppers & Buyers
Make Choices
Point of Purchase
Stock Outs
Product QualityOn The Shelf
Costs to ServeAccount Profitability
Winning in New Markets
ComplexityCosts or Differentiates
Demand Supply
Product
“Supply Chain” Starts with the Buyer Choice; Is Outside-In; End to End & An Interdependent Network
Risk Embedded
Risk Management
“IntegrativeImprovement
Actions & Trade Offs”
…& Impacts Capabilities Here
Starts here …..
Open Innovation
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The Demand-driven Value Network Framework: P&G “CDSN “Thought Leadership
Product & Service Innovation
Segmented Pull
Cu
sto
mers
, B
uyers
, U
sers
,
& C
on
su
mers
Channel Demand
&Demand
Management
Demand Visibility
User/ Consumer/Demand Insights
Su
pp
liers
& P
artn
ers
Segmented Push
Reliable, Profitable
Response from Supply
Network Based on Demand
Supply Visibility
decoupling
Demand Translation
& Trade Offs
Integrated Strategy, Business Sufficiency &
Value Network Planning
Adapted from AMR Research
Customer – Patient back design
8
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No Systemic Continuous
Improvement Plans or structure.
Fire Fighting
The 5 Stages of Performance Improvement Maturity
Imp
act
Expert Led /Based Projects
Implementation of
Improvement Projects led by
Experts
(Ad Hoc - Projects)
Integrated FunctionalExcellence
Structured Integration Within
Core Functions
(Systemic – Limited Integrated of Functions )
End-to-endIntegrative
ImprovementSystem
Codified
Integrative
Improvement
(Situational and Systemic)
LearningNetwork
Culture of Innovation and
Sharing
(Situational, Systemic and
Strategic)Reactive
Fixes
Stage 1
Stage 2
Stage 3
Stage 5
Stage 4
Average
Leaders ”The Promise
Of IT”
9
Stages Of Performance Improvement Maturity
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IISd Scores ( April 2012)
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Polling Question
Where do you think your maturity level is ?1. Stage 1: Reactive2. Stage 2: Expert-Led Projects3. Stage 3: Integrated Functional Excellence4. Stage 4: End-to-End Improvement System5. Stage 5: Learning Network
11
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Transformation - Two Core Thrusts of Work; Today and Tomorrow!
Business Management
Role
Control & Manage the
Business& Compliance
Compliant &
ControlledBusiness
Performance
Leadership Role Business Strategy,
Intent, &Focus Areas
PrioritizedWork
Build Sustainable Improvement & Compliance
Capabilities
Sustained &
Compliant Agility
Capabilities
Future-izeThe Business
Change Management & Alignment
Vision
Strategic Intent
Managing The Change
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The Ultimate Goal… Sustainable, Anchored Capabilities
Exc
elle
nce
in
Res
ult
s
Excellence in Work Practices
Sustainable Business Performance Improvement
Necessary but not Sufficient
“ lean and efficiency improvements”
“si
lo c
ost
focu
s ” • Balance
• Capabilities• Processes • Change Leadership
Unsustainable Performance
Stage B
ased Jo
urney
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4 Layers of “Management Systems”….illustrative process examples only
High Performance Transaction Processing Application Architecture
High Performance Information Technology
Enabled Work Flow
System & Business Process
Management
High Performance
Business Operating
System
Integrative Improvement System Deployment & Capability Development
ERP
CRM
SCM/E
PLM
S & OP
CPFR
1 2 3 4 5
VMI
RFID Traceability
Planning
Stages of Process-based Operating & Performance Improvement Maturity to Demand Driven Value Network Sufficiency
The end to end way the business actually operates
Technology modeled workflows and business processes using business & transactional data
Technology based applications, data processing & data
management
Systems of Record
System of Process
Business Operating System of Venture
andSufficiency S & OP
Balancing Process &
Profitability Analyses
BusinessSufficiency Planning
Demand Forecast Accuracy & Planning
Innovation & Value driven Business Tradeoffs
?
?
Technology Enabled Work Flow Processes
& Data Management
Business Operating Strategy, Execution, & Culture
Improvement Goals & Projects
FunctionalProcess Integration
Demand-driven end- end SC process integration
Value driven Business tradeoffs & network
“MES”
Supply Reliability & Supply Planning
Integrated Quality
& compliance
Performance Maturity – based context of data &
information
Master data & process-based
context of data
Systems of Process and
Control
Real time & Process Control
Data High Performance
Automation Architecture
Machines Controls
Measurements
SRM
Sourcing &
Procurement
Logistics &
Distribution
WHM
14
Process – Model Based Decision Support
1
2
3
4
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Layers of “Management Systems”….illustrative process examples only
High Performance Transaction Processing Application Architecture
High Performance Information Technology
Enabled Work Flow
System & Business Process
Management
High Performance
Business Operating
System
Integrative Improvement System Deployment & Capability Development
ERP
CRM
SCM
PLM
S & OP
CPFR
1 2 3 4 5
VMI
RFID Traceability
Planning
Stages of Process-based Operating & Performance Improvement Maturity to Demand Driven Value Network Sufficiency
The end to end way the business actually operates
Technology modeled workflows and business processes using business & transactional data
Technology based applications, data processing & data
management
Systems of Record
System of Process
Business Operating System of Venture
andSufficiency S & OP
Balancing Process &
Profitability Analyses
BusinessSufficiency Planning
Demand Forecast Accuracy & Planning
Innovation & Value driven Business Tradeoffs
?
?
Technology Enabled Work Flow Processes
& Data Management
Business Operating Strategy, Execution, & Culture
Improvement Goals & Projects
FunctionalProcess Integration
Demand-driven end- end SC process integration
Value driven Business tradeoffs & network
“MES”
Supply Reliability & Supply Planning
Integrated Quality
& compliance
Performance Maturity – based context of data &
information
Master data & process-based
context of data
Systems of Process and
Control
Real time & Process Control
Data High Performance
Automation Architecture
Machines Controls
Measurements
SRM
Sourcing &
Procurement
Logistics &
Distribution
WHM
15
Business Operating SystemIntegrative Improvement System
Application, Data and IT Process Architecture
Flexible Decoupling Information & Analytics Model Layer – Decision Support Models
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Polling Question
• Is the “Decoupling Information Layer” a priority ?– Yes – No – Already in place
Is your IT deployment strategy aligned and synchronized to your Supply Chain performance development strategy ?– Yes – No
16
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The Integrative Performance Improvement System (IIS)Connects the Dots in Supply Chain Transformation from Traditional to Demand-Driven
The Execution Challenge !
“Evolving READINESS”
1 2 3 4 5
Projects Processes Demand-driven Value Network> >
GOAL ALIGNMENT
Strategy
Metrics
Organizatio
n IT
INTEGRATED PROCESSES
Supply Demand
S & OP
A Strategic Enterprise Initiative to
Lead Alignment & Develop Capabilities
Using IIS Platform
Transformation COE
Process –based Performance Analytics
& Decision Support
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Integrative ImprovementBusiness Goal: Eliminate Stock Outs
18
Pra
cti
ce b
ased
Perf
orm
an
ce
Team
work
&
Ch
an
ge M
an
ag
em
en
t
Info
rmati
on
an
d T
ech
nolo
gy
Dem
an
d F
ore
cast
Accu
racy
Asset
Reli
ab
ilit
y &
p
erf
orm
an
ce
New
Pro
du
ct
Lau
nch
an
d
Intr
od
ucti
on
-
Inven
tory
Level
Op
tim
izati
on
Kn
ow
led
ge m
an
ag
em
en
t an
d
Sta
nd
ard
s
S &
OP
20%
10%
5%
Sto
ck O
ut
Perfo
rman
ce
1.9
2.3
3.1
Man
ufa
ctu
rin
g G
ate
Q
uali
ty
Perf
ect
Ord
er
perf
orm
an
ce
Sou
rcin
g a
nd
Pro
cu
rem
en
t C
osts
+ +++++++ + + +
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S & OP
19
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S&OP must Confront Conflicting Goals
Demand-side Supply-side
Finance
Goal: Make the financial budget. Tops-down Focus. Desires control and wants predictability of operations.
Forecast definition: The budget
Goal: A feasible plan. Bottoms-up focus. Wants to minimize risk and disruptionForecast definition: The demand plan
Supp
ly
Cha
in
Operations
Goal: Factory optimization, improve costs and minimize
demand uncertainty
Forecast definition:
Manufacturing Plan
Sales and Marketing
Goal: Maximize revenue &
market share, wants
guaranteed product
availability
Forecast definition: Sales plan
Mold, color, ship-to at the
customer level
Mold, color, manufacturing
location
Adapted from AMR Research
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Integrated Business Planning
Planning Integration Evolves Through Stages of Maturity
Demand Planning
Supply Planning
S&OP
Supply Chain Alignment
Demand Planning
Supply Planning
S&OP
Supply Chain Alignment
Integrated
Business Planning
Supply Chain
Alignment
SupplyChain
Alignment
Stage 2 Stage 3 Stage 4 Stage 5
Risk, Complexity, Organization Design, Leading and Managing Change, Enabling IT
Projects Integrated Processes & IT End -End SC Improvement Demand-driven Value Network
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Conclusion
22
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Closing Thoughts
The End to End Supply Chain Starts at the “Buyer:” Shopper/Customer• The Journey : Readiness to Change / Performance Improvement Maturity is a Critical
Factor. • Not Just “One Supply Chain” Demand-driven Segmentation Reduces Complexity!
Supply Chain Strategy is the Business Operating Strategy • Top Down Change Leadership is Fundamental to Sustainable Transformation.• Supply Chain Undergoing Sea Change Transformation – from Functional Outputs to
Business Outcomes
Building End to End Process Capability is More Than a Set of Projects • Building Sustainable Process Capabilities while Managing Day to Day Business Performance
– More Than “Integration”
SC and IT Alignment: So, what’s new?• IT Alignment, IM Capabilities & Architecture • Prioritized and Synchronized to Support End to End Digitization of the Demand–driven
Value Network• 4 Management Systems: Decoupling Layer
23
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Transformation - Aligned Through a Transformation “Office”
Business Management
Role
Control & Manage the
Business& Compliance
Compliant &
ControlledBusiness
Performance
Leadership Role Business Strategy,
Intent, &Focus Areas
PrioritizedWork
Build Sustainable Improvement & Compliance
Capabilities
Sustained &
Compliant Agility
Capabilities
Future-izeThe Business
Sustainable & Compliant Performance Improvement Culture
Change Management & Alignment COE
Vision
Strategic Intent
Managing The Change
Vision
Strategic Intent
Managing The Change
Imp
act
1950 2010
Expert based
Functional
Excellence
Integrative
Improvement
System
Learning
Network
No Continuous Improvement Plans or structure.
Implementation approach based on the capability of the local expert
(Ad Hoc)
Structured
implementation approach within the functions
(Systemic)
Codified and integrated implementation
(Situational and Systemic)
Culture of Innovation and Sharing of Production Know How
(Situational, Systemic and Strategic)
No Cont. Imp.
2013
Stage 1 Stage 2
Stage 3 Stage 4
Stage 5