ignite 2015 na - paul lord - "insights on supply chain for the chemical industry"
TRANSCRIPT
1 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved.
• Supply Chain Risks and Constraints • Supply Chain Optimization versus Alignment • Undertaking Complex Change
Thoughts of the Day
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…….And Real-World Risks and Constraints
Product
Demand Supply
Sense Shape Profitable Response
Orchestration
Leverage Scale for Competitive Cost
Maintain Efficiency and Service
Mitigate Impact From Disruption
Bridge Timing and Location Gaps
Increase Capital Utilization
Supply Chain Involves Complex Interdependencies
3 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved.
Understand and Manage Your Constraints They are Different from Risks & Threats
Economic: • Contract
commitments (delivery terms and service levels)
• Asset economics and margin drivers
• Duties and taxes • Product transition
costs (cleaning, capacity and yield losses)
• Complex pricing formulas and boundaries (modal freight differences)
Physical: • Storage and
thru-put capacity • Material properties • Physical
performance erosion • Physical distances,
speed limits, lead times
• Shared assets (ports, canals, rails, roads, loading racks)
Virtual: • Government policies
and regulations • Company safety,
environmental and ethics policies
• Inventory and cost reduction goals
• IT technology strategies
• Organizational structures
• Financial performance metrics
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Constrained Supply Requires Demand Management
Levers of Supply Agility:
• Platform design for supply
• Postponement
• Flexible manufacturing capability
• Dynamic, integrated scheduling
• Logistics agility
• Inventory strategies • Collaboration with suppliers (SMI)
Demand-Shaping Levers: Marketing programs
• New product introductions
• Promotions and trade deals
• Package design
• Sales incentives
• Price management
• Order management rules
• Customer collaboration (VMI)
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Analyze and Manage Supply Lead Time
Sourcing Lead Time
Production Lead Time
Delivery Lead Time
Order Lead Time
Supply Lead Time (L)
Testing and Packaging Lead Time
1. Evaluate the cost of shorter physical lead times (source, make, packaging, delivery)
2. Invest in processes and technology to shrink decision times and waiting
Order Mgmt.
Lead Time
Scheduling Lead Time
Dispatch Lead Time
Receiving & Staging
MTS Push-Pull
Boundary
MTO Push-Pull Boundary
CTO Push-Pull
Boundary
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Maximize Business Value from Alignment
Demand Supply
Product
What is your source of competitive advantage and joint value creation?
“Supply chain optimization” is most directly applicable to businesses with a focus on maximizing value from a
supply network advantage
KPI: Margin & ROCE
“Product and Solutions innovation” strategies emphasize profitable growth by maximizing return on
investments in R&D and successful launch, commercialization and portfolio management.
KPI: Revenue growth
“Customer intimacy”, “Brand loyalty” and “Market focus” strategies emphasize growth of revenue, share and profitability at target customer or market segments with tailored
offerings and a superior experience
KPI: Market share and customer satisfaction
7 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved.
Supply Chain Optimization: What, When, Why & How?
"Optimization is the ability to minimize cost or maximize profit (“an objective function”) subject to existing constraints such as …"
— J.Paul Dittmann, Supply Chain Transformation: Building and Executing an Integrated Supply Chain Strategy
• Conscious design tradeoffs:
• Networks • Processes • Incentives
Alignment
• Network decisions establish constraints
• Constraints reduce options and contribute to decision complexity
Constraints
• Flexibility adds to decision complexity
• Modeling supports faster and more intelligent decisions
Decisions
Gartner Research: “Supply Chain Optimization in Process Manufacturing Requires More Than Analytics”
Supply chain optimization is optional and is reserved for complex, high value decisions
8 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved.
Align Supply Networks, Decision Processes & Incentives
Sell Deliver Make Source Strategic/Long-term Planning (2 Years to 5 Years)
Strategic Planning and Forecasting Network Optimization, Strategic Risk Evaluation
Tactical/Mid-term Planning (3 Months to 24 Months)
Sales and Operations Planning
Demand Planning & Shaping
Supply Planning Inventory Configuration
Supplier Mgmt. Contract Mgmt.
Operational/ Short-term Planning (1 Week to 12 Weeks)
Demand sensing Customer Collaboration
Distribution Req. Planning ( DRP) Safety Stock Policy Transportation Mgmt.
Production Planning & Factory Scheduling
Material Req. Planning (MRP) Supplier Collaboration
Execution (Order Duration to Shipment)
Order to Cash (transactional) Commit to Deliver (physical)
Manufacturing Operations & Execution Systems (MES)
Procure to Pay
Note: Planning Horizons Differ by Industry Depending on Product Life Cycle and Asset Investments
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Executive Sponsorship
Transformational Change is Complex and Constrained
Burning Platform
Vision
Business Case
Change Readiness
Roadmap(s)
Current Capabilities
Reference: Supply Chain Transformation Guide (Jan 2014)
Cost-based Proposals
Strategic Bias
Value vs Risk Pragmatism
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Success = Development and Alignment of Capabilities
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Performance Enablement
Supply Operations
Customer Fulfillment
Demand Management
Product Lifecycle
Management
Strategic Governance
Supply Network Design
React Anticipate Integrate Collaborate Orchestrate
• Revenue focus • Silo’ed execution
• Standard, scalable functional processes
• Competing goals & metrics
• Cross-functional tradeoffs and singular value chain goals
• Extended networks • Outside-in mindset • Tailored outcomes
• Multi-enterprise ecosystem • Custom solutions, shared joint
value
Gartner’s Demand-Driven Model for Supply Chain Maturity (G00278802)
Cost
Inventory
Service OE (S, Q, C)
Market Share & Asset
Utilization
Margin &
Growth
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Summary / Recommendations
• Analyze and mitigate your supply chain risks and constraints • Quantify and communicate supply network performance capability • Align supply decisions and incentives with demand patterns and
product supply strategy • Create a strategically aligned case for investment in supply chain
capabilities for profitable balance of supply & demand
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[email protected] @paultlord
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