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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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navi radjou principal analyst forrester research
Navi Radjou

Principal Analyst

Forrester Research

Only The Adaptive Survive

slide3

Theme

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

agenda
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?
slide6

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
plans are insulated from execution reality
Plans are insulated from execution reality

Supply Chain Planning

Supply Chain Execution

opportunity costs associated with supply demand mismatches
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

but current supply chain apps can t help due to their centralized architecture
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
slide11

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

existing supply chain apps ignore the physical world

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”
to begin with it s no longer a chain it s a network

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!
slide15

Competitive

Advantage

Flexibility gains

Efficiency gains

1990

1995

2000

2005

2010

2015

Firms must go beyond efficiency

firms must migrate to adaptive supply networks16

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
the unique characteristics of an adaptive supply network

Event-driven

Real-world aware

Adaptive

supply network

Self-regulating

The unique characteristics of an adaptive supply network
slide18

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

to gain flexibility firms need a closed loop process adaptation strategy

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
you need sense and respond software
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
slide22

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
caveat emptor
Caveat emptor

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

let s get real survival comes first

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!
firms roadmap to building an adaptive supply network

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

slide26

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
thank you
Thank you

Navi Radjou

+1 617/613-6119

nradjou@forrester.com

www.forrester.com