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What I s Supply Chain Excellence?

Lora Cecere Founder and CEO Supply Chain Insights. What I s Supply Chain Excellence?. Defining Supply Chain Excellence Conquering the Effective Frontier The Supply Chain Index Imagine. Agenda. Current State. Agility. Need for Strategy. Process Evolution. Align: Market Driven.

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What I s Supply Chain Excellence?

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  1. Lora Cecere Founder and CEOSupply Chain Insights What Is Supply Chain Excellence?

  2. Defining Supply Chain Excellence Conquering the Effective Frontier The Supply Chain Index Imagine Agenda

  3. Current State

  4. Agility

  5. Need for Strategy

  6. Process Evolution Align: Market Driven Build Horizontal Process Connectors Continuously Test, Learn & Improve in Market Orchestrate Demand and Supply Adapt: DemandDriven Resilient Reliable Efficient Absorb Demand Volatility Right Product Cost Sense Demand and Supply Source: Supply Chain Insights LLC Right Place Absorb Supply Volatility Right Time Procure to pay/ order to cash Shape Demand and Supply Based on Market Right Cost

  7. What Is Supply Chain Excellence? • Perform better than peer group • Improve year-over-year results • Align internally on metrics • Deliver against the business strategy • Demonstrate consistency in results • Use innovation in supply chain processes • Balance. Be leaders in managing trade-offs

  8. Defining Supply Chain Excellence Conquering the Effective Frontier The Supply Chain Index Imagine Agenda

  9. Definitions • Supply Chain Excellence: The behavior of companies working to maximize value through the setting of targets for supply chain financial ratios and aligning metrics that matter (tied to value chain strategy). • Supply Chain Effective Frontier: The balance of growth, profitability, cycle and complexity metrics to deliver the supply chain strategy. It may or may not maximize the company’s market valuation. • Supply Chain Index: A formulaic representation of supply chain financial ratios correlated to stock market capitalization valuation.

  10. The Supply Chain Effective Frontier

  11. Mining 20 Years of Financial Data

  12. Most Interesting Patterns • Cash to Cash versus Inventory Turns • Revenue per Employee versus Inventory Turns • Operating Margin versus Inventory Turns

  13. What Have We Learned? • Each industry has a different pattern of trade-offs of balancing growth, profitability, cycles and complexity. • Companies that are supply chain leaders have very small movement with a balanced portfolio of metrics. • It is about MUCH more than Return on Assets (ROA), growth and inventory.

  14. Productivity in Manufacturing

  15. Productivity in Retail

  16. Progress in Inventory Turns and Operating Margin (2000-2012)

  17. Impact of A Recession

  18. Visualizing the Patterns Best Scenario Here, we plot inventory turns (y-axis) vs. revenue per employee (x-axis). Ideally, companies are increasing inventory turns and revenue per employee, moving towards the upper right corner of the graph over time. DOW 999, 6.7 Trace the line from 2002 point to 2012 point to follow the performance over time. The diamond shows the company’s average over the period. Ex: The Dow Chemical Company (DOW) has an average of 461 K$ for revenue per employee and 4.0 for inventory turns. Average (Revenue per Employee, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source

  19. Beverage

  20. Cereal

  21. Household Products

  22. A Closer Look

  23. Another View

  24. Comparison Chart (2000-2006, 2007-2009, 2010-2012)

  25. Defining Supply Chain Excellence Conquering the Effective Frontier The Supply Chain Index Imagine Agenda

  26. A formulaic representation of how companies are trading off growth, profitability, cycle and complexity performance on selected supply chain financial metrics against market valuation.

  27. Household & Personal Products Equation Y =2.93 – 0.01(DOI) + 0.02(DPO) + 0.01(DSO) + 3.07(FCF) – 0.93(ROIC) + 0.28(SGAC) – 4.10(WC) Household & Personal Products Equation Correlation Strength NOTE: Full equation is Y = 2.931928671 - 0.006302786 (Days of Inventory) + 0.019638717 (Days of Payables Outstanding) + 0.008347971 (Days of Sales Outstanding) + 3.06558272 (Free Cash Flow Ratio) - 0.929537849 (Return on Invested Capital) + 0.282841974 (SG&A to COGS Ratio) - 4.097122543 (Working Capital Ratio). We utilized adjusted which accounts for the occurrence of large p values. Outlier values were defined and excluded as those 5 times larger than IQR.

  28. CPG Ranking 2012

  29. Mean Absolute Percent Error & Value

  30. Defining Supply Chain Excellence Conquering the Effective Frontier The Supply Chain Index Imagine Agenda

  31. 3D Printing Big Data CSR as a Brand Advantage Digital Manufacturing Collaborative Economy Internet of Things Business Networks Digital Path to Purchase New Forms of Analytics Inter-Enterprise Systems of Record

  32. imagine

  33. Imagine

  34. Conventional Manufacturing

  35. Use of 3-D Printing

  36. Re-aligning Process & People T-Shaped Managers Listening Functional Silos Functional Silos Yelling BREADTH DEPTH

  37. Most Companies Are Stuck • New Practices Are Emerging • We Must Design with the End in Mind

  38. Thanks to Our Sponsors!

  39. Continue the Discussion Visit the Supply Chain Insights Global Summit website for all conference content: www.supplychaininsightsglobalsummit.com

  40. Save the Date! Supply Chain Insights Global Summit 2014September 10-11, 2014The Phoenician – Scottsdale, AZ USA

  41. Enjoy the Conference!

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