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Even mighty elephants can slip and fall

Even mighty elephants can slip and fall. Navi Radjou Principal Analyst Forrester Research. Only The Adaptive Survive. Theme. To cope with volatility firms need to migrate their static supply chains to adaptive supply networks. Agenda.

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Even mighty elephants can slip and fall

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  1. Even mighty elephants can slip and fall

  2. Navi Radjou Principal Analyst Forrester Research Only The Adaptive Survive

  3. Theme To cope with volatility firms need to migrate their static supply chains to adaptive supply networks

  4. Agenda • Existing supply chain practices and tools fail to help firms deal with volatility • Static supply chains are dead. Long live adaptive supply networks! • How can firms build adaptive supply networks?

  5. What’s wrong with today’s supply chains?

  6. These business drivers are exposing manufacturers to: Supply/demand mismatches!! Supply chains risk collapsing under the disruptive influence of new business drivers • Accelerated global outsourcing • Ever-shrinking product lifecycles • Fickle demand

  7. Plans are insulated from execution reality Supply Chain Planning Supply Chain Execution

  8. Glitches -- however minor -- get amplified throughout the supply chain

  9. Opportunity costs associated with supply/demand mismatches Company Supply chain exception Opportunity costs General Motors In 1996, an 18-day labor strike at a Quarterly earnings reduced brake supplier factory idled by $900 million workers at 26 assembly plants Boeing In 1997, two key suppliers failed Deals lost worth $2.6 billion to deliver critical parts on time Sony Shortage of PlayStation 2 Sony console shipment in US Graphic chips in 2000 was 50% less than planned Ericsson A fire in Philips Electronics ’ plant Lost three market-share points in New Mexico disrupted supplies againts Nokia in 2000, and was of chips for key new handset forced to exit handset market

  10. But current supply chain apps can’t help due to their centralized architecture OEM’s Planning Department Customer Supplier Contractor 3PL • Only fit “Command & Control” organizations • “Smart” Hub -- “Dumb” Spokes

  11. Optimization tools don’t make the cut “How do people in your company manage supply chain exceptions today?” Base: 25 European companies implementing supply chain optimization

  12. 93 million Internet computers 407 million Internet users 000,000s Shop-floor equipment Millions Trucks and cargo ships Billions Containers and Pallets Existing supply chain apps ignore the “physical world”

  13. Firms must migrate to adaptive supply networks

  14. Supplier OEM Distributor In the 50s: Serial flow across Customer stovepiped organizations Cust Cust Eng Eng 1990s: Ship Svc Svc Customer Internal processes begin Final Mfg Mfg Dist Dist to move outward A ‘ bly Eng Mfg Today: Cust Svc A supply network of dynamic Mfg trading relationships Dist Customer Final A ‘ bly Dist Eng To begin with, it’s no longer a “chain” -- It’s a network!

  15. Competitive Advantage Flexibility gains Efficiency gains 1990 1995 2000 2005 2010 2015 Firms must go beyond efficiency

  16. Business networks of supply chain partners that use technology to sense and respond in a coordinated fashion to changes in their environment Firms must migrate to adaptive supply networks

  17. Event-driven Real-world aware Adaptive supply network Self-regulating The unique characteristics of an adaptive supply network

  18. Efficiency and agility Historical data Leading indicators Centralized Decentralized Manual Software-agent-assisted Point-of-sale data Crystal ball RFID-tagged items Risk management Supply chains Vs. Adaptive supply networks Efficiency Cost-cutting

  19. Use feedback loops to reiterate process transformation and reshuffle coping strategies portfolio Continuous Adaptation Collect and analyze data on key leading indicators to assess emerging risks and opportunities Determine and implement appropriate steps to mitigate risk or seize opportunities To gain flexibility, firms need a closed-loop process adaptation strategy

  20. How can firms build adaptive supply networks?

  21. You need sense-and-respond software • Connect with physical assets • RFID tags • Remote device tracking apps • Manage unplanned exceptions • Event management tools • Automate decisions -- and learn • Software agents

  22. You need people and process changes to: • Interpret data accurately -- by analyzingit collectively • Respond intelligently to changes -- by involving partners • Learn continuously -- by automating mundane decisions

  23. Caveat emptor In particular… Beware of vendors who tell you that ERP apps are only good for “book-keeping”!!

  24. 4. ADAPTABILITY 3. FLEXIBILITY 2. TRANSPARENCY 1. SURVIVAL!! Self- actualization Esteem Belonging Safety and Security Basic Physiological Needs Maslow’s Hierarchy Of Needs Let’s get real: Survival comes first!

  25. Decentralized decision-making Centralized decision-making Low-exposure High-exposure To variability To variability Firms’ roadmap to building an adaptive supply network Step 3 Adaptive supply network Deploy new technologies like agents and RFID to automate sense-and-respond capabilities Step 2 Flexible supply network Use Web services to Step 1 establish “two-way” Transparent supply network conversation with your trading partners -- to enable collaborative problem-solving and decision-making Establish visibility into factory-floor activities and strengthen connectivity with “weakest” links in the supply network Traditional Supply chain operations

  26. Summary • Uncertainty is here to stay • Aggressive firms will beat the competition by making their supply networks adaptive • Firms must crawl and walk before they can run in adaptive supply networks

  27. Thank you Navi Radjou +1 617/613-6119 nradjou@forrester.com www.forrester.com

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