January 2007
Data Explosion: Redefining Metrics
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Page 1© 2008 Boston Strategies International, Inc.6/30/2008
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Global Supply Chain Economists™
IndustryResearch
Cost and Pricing Analysis
StrategyConsultingResearch Analysis Consulting
®
Page 2© 2008 Boston Strategies International, Inc.6/30/2008
Summary
• Data explosion• Explosion of IT platforms and concepts• Volumes more data
D t h d ld• Data changed our world• Information = value• Competitive balance at stake• IT sustaining global economic growth
• Performance improvement opportunities• Revenue value of information• Driving revenue growth• Cost value of information• Many opportunities
• From data to informationFrom data to information• Core competency drives IT architecture• Operations focus: balanced scorecard• Supply chain: forecast variance• Innovation: thought leadership• Planning: charting and mapping techniquesPlanning: charting and mapping techniques
• From information to strategy• 1. Converting data to information• 2. Converting information to strategy• 3. Creating value above market
Page 3© 2008 Boston Strategies International, Inc.6/30/2008
Data ExplosionData Explosion
Page 4© 2008 Boston Strategies International, Inc.6/30/2008
Explosion of IT Platforms and Concepts
Rosetta SRMCRM
ASCIIB2BB2C
Chat Client DNS
Auction XML
BOICADCIOCPCCPP
Domain FTP Gateway Hypertext Internet
WMS ERPData
CPPCTOCTREDIHTM/HTMLISP
Internet MultiMedia OPAC Packet Port
APS GPS
ISPISSKMMIMEMRP
PPP Protocol Router Server Signature
TMSeRFQ
RFID
POPPOSPoint Of SaleROIXBRL
Signature SPAM TCP Telnet Trojan Horse WWW
Page 5© 2008 Boston Strategies International, Inc.6/30/2008
XBRL WWW
Data changing our world
• Innovation from outside• Collaborative sellingCollaborative selling• Supply networks• Standardized subassemblies
“We’re moving towards a world where operations are networkWe re moving towards a world where operations are network-centric. There used to be vertical silos, [but in the future we’ll] have horizontal businesses that can integrate with each other.”
- Stephen Miles MITStephen Miles, MIT
Page 7© 2008 Boston Strategies International, Inc.6/30/2008
Information = value
100%Market Capitalization by Type of Asset
Information A t
75%
Assets
50%
Property, Plant & Equipment
25%
Tangible Assets0%
1987 1991 1995 1999 2003 2007 2011 2015
Page 8© 2008 Boston Strategies International, Inc.6/30/2008
Competitive balance at stake
Share of World ProductionShare of World Consumption
20%
25%
10%
12%
10%
15%6%
8%
0%
5%
10%
0%
2%
4%
0%China U.S.
2005 2006 2007 2008 2009
0%China U.S.
2005 2006 2007 2008 2009
Page 9© 2008 Boston Strategies International, Inc.6/30/2008
Source: Economist Intelligence Unit
IT sustaining global economic growth
6%
7%Growth With and Without Information Technology
5%
6%
3%
4% With ITWithout IT
1%
2%
0%U.S China India Korea ASEAN
Page 10© 2008 Boston Strategies International, Inc.6/30/2008
Source: Economist Intelligence Unit, Boston Logistics Group
Performance Improvement OpportunitiesPerformance Improvement Opportunities
Page 11© 2008 Boston Strategies International, Inc.6/30/2008
Revenue value of information• Delivering Better Service
• Matching Organization of Resources to Demand• Segmenting and Prioritizing Orders• Segmenting and Prioritizing Orders• Customizing product and service delivery
• Launching More New Products Faster• Launching New Products More Frequently• Launching New Products More Frequently• Launching New Products Faster
• Increasing Margins: Rapid, Flexible ResponseR id R• Rapid Response
• Postponement• Dynamic Pricing
Page 12© 2008 Boston Strategies International, Inc.6/30/2008
Driving revenue growth
Page 13© 2008 Boston Strategies International, Inc.6/30/2008
Cost value of information
• Lean manufacturing and lean distribution• Inventory managementInventory management• Supplier partnering• Cross-docking and fleet rationalization• Quality management• E-procurement
Page 14© 2008 Boston Strategies International, Inc.6/30/2008
Many Opportunities
Application Benefit Financial Metric %IT Applications in Supply Chain Management
Manage spend Spend ↓ Expenses ↓ 10%Mg. compliance Spend ↓ Expenses ↓ 10%Track Equipment Utilization ↑ ROA ↑ 20%Track Inventory Turns ↑ Working Capital ↑ 10%D l L b P d ti it P fit 30%Deploy Labor Productivity ↑ Profits ↑ 30%Track Production Cycle time ↓ Revenues ↑ 5%T k D i A il bilit ↑ P f ↑ 20%Track Devices Availability ↑ Performance ↑ 20%Monitor Access Violations ↓ Claims/damages ↓ 3%Speed X Actions Throughput ↑ Revenues ↑ 80%
Page 15© 2008 Boston Strategies International, Inc.6/30/2008
Speed X-Actions Throughput ↑ Revenues ↑ 80%
From Data to InformationFrom Data to Information
Page 16© 2008 Boston Strategies International, Inc.6/30/2008
Core competency drives IT architecture
Competency Customer Operations Supply Marketing /
How Strategy Drives Choice of Metrics
Intimacy Chain InnovationExample Used car
dealershipOutsourced IT services
Oil company IT: Social networking
Time horizon
The moment 3 months 1 year 3-5 years
M t i Hit rate Balanced Forecast Tho ghtMetrics Hit rate Balanced scorecard
Forecast variance
Thought leadership
P/E
Page 17© 2008 Boston Strategies International, Inc.6/30/2008
Operations focus: balanced scorecardScorecard Metrics
Page 18© 2008 Boston Strategies International, Inc.6/30/2008
Supply chain: forecast varianceKey Metrics
Key Indicators VarianceOrder Leadtime ▼ -2 0% ▼ -1 0% -1 0%
ActualForecast Order Leadtime ▼ -2.0% ▼ -1.0% -1.0%Prices ▲ 0.0% ▲ 0.5% -0.5%% SKUs in Catalog ▲ 3.0% ▲ 3.0% 0.0%% to Top 10 Suppliers ▲ 1.5% ▲ 4.0% 2.5%
PricesAlerts
• Prices• Leadtime• Capacity utilization
S l• Supply• Demand• Etc.
Page 19© 2008 Boston Strategies International, Inc.6/30/2008
Innovation: thought leadership
Success
Strategy
Consideration
Ideas
Page 20© 2008 Boston Strategies International, Inc.6/30/2008
Planning: bubble chartsHigh
Spend Education
AppliancesMillingGaskets 10
11
12Spend by Category
HeatingChillers
Electronics CompressorsVehicles
Spares
HydrogenConveyor
CO2
Machinery8
9
ResinsValves ApparelFilmTitanium Office Supplies
ConduitHardware
PVC
Diodes ServicesConverters Tools 5
6
7
0 1 2 3 4 5 6 7 8 9 10SPEND
JanitorialWiringElectrical
ComputersPlastic LTL
TLElevatorss Textiles
Fuels Tubing3
4
5
Low
Spend
Textiles
Mixer
Plumbing
Lubricants FloorsAbrasiveHardware
ApparelPaintsStructural Metals
1
2
Page 21© 2008 Boston Strategies International, Inc.6/30/2008
Less Complex More Complex0
Note: Spend scaled to actual spend; Supply Market Complexity scaled inversely to number of suppliers; Size of bubble proportional to number of SKUsSUPPLY MARKET COMPLEXITY
Planning – bubble mapsConsumption by Metro Area
Sum of Number of Invoices by Metropolitan Area
4,000 to 6,000
Page 22© 2008 Boston Strategies International, Inc.6/30/2008
2,000 to 3,999
0 to 1,999
Planning: density chartsCongestion Points, 2020, with Selected Remediation Measures
Ports: 4,300
Ports: 3 300
DEMANDTruck +58%Rail +47%Water +14%Air +182%
TEU/Acre/Year throughput (vs. 10,000+)
Ports: 3,300 TEU/Acre/Year(vs. 10,000)+
“CREATE”
Intermodal Driver Shortage
Air 182%
Longshoremen Shortage (2004)PIERPass
Ports: 4,000 TEU/Acre/Year (vs. 10,000+)
Page 23© 2008 Boston Strategies International, Inc.6/30/2008
Source: Cambridge Systematics/AASHTO, Containerisation International
Planning: split box charts
Example of a Market Share Segmentation Matrix
Page 24© 2008 Boston Strategies International, Inc.6/30/2008
Executing: harvey ball chartsSupplier Comparison
Option 5Option 4Option 3Option 2Option 1Criteria Option 5Option 4Option 3Option 2Option 1Criteria
Delivery3
Quality2
Price1
Delivery3
Quality2
Price1
Service5
Flexibility4
Delivery3
Service5
Flexibility4
Delivery3
Innovation 7
Speed6
Innovation 7
Speed6
= Good/More Attractive = Bad/Less Attractive
Track record8 Track record8
Page 25© 2008 Boston Strategies International, Inc.6/30/2008
From Information to StrategyFrom Information to Strategy
Page 26© 2008 Boston Strategies International, Inc.6/30/2008
1. Convert data to information
Supply and Demand Imbalance
$2,500
$3,000
$2,000
Millions of US Dollars
$1,5002006 2007 2008 2009 2010 2011 2012
Year
Capacity ($M) Demand ($M)
Page 27© 2008 Boston Strategies International, Inc.6/30/2008
2. Convert information to strategy
• Rationalization• Centralization of procurement
Families of Sourcing Strategies
45
Scale
• Centralization of procurement• Group purchasing
• RFx• Global sourcing• Auctions
0123
CompetitionIntegration
• Auctions• Payment terms
• E-Procurement• Long-term agreements
Value• Value engineering• Standardization
g g• Supply chain integration• Purchasing cards• Portals
Page 28© 2008 Boston Strategies International, Inc.6/30/2008
• Spec simplification
3. Create value above the market
• Value: Lower lifecycle costs• Integration: Reduced transactions costsIntegration: Reduced transactions costs• Scale: Economies of scale• Competition: go direct to manufacturers
99100
Creating Price Leverage through Sourcing Strategy
9596979899
Price
• Value• Competition• Integration
929394
1 2 3 4 5Time Period
g• Scale
Page 29© 2008 Boston Strategies International, Inc.6/30/2008
Time Period
Market Term-Adjusted
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Page 30© 2008 Boston Strategies International, Inc.6/30/2008
David Jacoby: [email protected]