Supply Chain

Contents

© Competitive Capabilities International

Contents


End to End Supply Chain Performance Improvement & Transformation Best Practices Roddy Martin SVP Supply Chain Transformation CCI & Industry SC Leaders Panel

Roddy Martin Roddy Martin Contents • End to End SC Transformation Thought Leader • Executive South African Breweries ( SABMiller) – – – –

Engineering Leadership Manufacturing Strategy IT Leadership Change Management Leadership

• AMR Research SC leadership – Distinguished Analyst

• CCI SVP SC – Integrative Improvement Thought Leader


Today’s Presentation

Contents

SC Transformation

5 © Competitive Capabilities International

“Linear” Supply Chains Lack Scale Process & Visibility ……….P&G Chief Supply Chain Officer Suppliers Partners

Distributors Wholesalers

Manufacturers Assemblers

Manufacturer Projects and Programs Suppliers Risk

Risk

Risk

“Change”

Customers Patients Consumers

Materials Mgmt Manufacturing Distribution

Risk

Consumers Users; Buyers

Contents

New Product or Service Merges to the Base Supply Process

Risk

Customers

Risk Risk

Risk 5 day demand change 90 day response time

.Disconnects… Silo’d & Functional Focus Vs End to End Demand –driven Processes

X

•Agility and responsiveness •Sustainable performance improvement •End to end process capabilities •Managed complexity & risk •Structure for “global operations” •End to end talent & skills, people development •Enabling end to end process "information”


“Agility to Change”

The Challenge ……Bringing It All Together!

End to End Process Contents Capabilities Codified Ways of Working

Demand

People

Process

Supply

IIS Technology Performance Culture

5 Stage Maturity Journey

Organizational Effectiveness

Product © Competitive Capabilities International

Adapted from Gartner- AMR Research

The Challenge ……The Devil Is In The Details !

Contents Supply

Moments of Truth

Actual Market Demand

Demand

“How”

? Product

Adapted from AMR Research © Competitive Capabilities International

“Supply Chain” Starts with the Buyer Choice ;Is Outside-In; End to End & An Interdependent Network

Starts here …..

Consumers, Shoppers & Buyers Make Choices

Point of Purchase Stock Outs

Contents

Demand

…& Impacts Capabilities Here

“Integrative Improvement Actions & Trade Offs”

Product Quality On The Shelf

Supply

Product

Costs to Serve Account Profitability

Winning in New Markets

Open Innovation Complexity Costs or Differentiates

Risk

Embedded Risk Management


The Demand-driven Value Network Framework Adapted from AMR Research

Product & Service Innovation

Customer Consumer back design

User/ Consumer/ Demand Insights

Contents

Supply Visibility

Integrated Strategy, Business Sufficiency & Value Network Planning

Channel Demand & Demand Management

Demand Translation & Trade Offs

Reliable, Profitable Response from Supply Network Based on Demand

Suppliers & Partners

Customers , Buyers, Users, & Consumers

Demand Visibility

decoupling Segmented Pull

Segmented Push


Industry Leader Example – LATAM Strategic Statement Build a Competitive advantage through a reliable and sustainable customer/consumer driven supply chain

Contents

FOCUS ON THE FUNDAMENTALS Reliability Program

BUILD STABLE SUPPLY CHAIN

CREATE END TO END SUPPLY CHAIN

PRODUCT NETWORK

PRODUCT AVAILABILITY FOOD SAFETY PEOPLE SAFETY

HOLISTIC GROSS MARGIN

REGULATORY

OPERATING SYSTEM

PRODUCT QUALITY

ELEVATE CS/L ROLE

2009-2011

2012-2013 Supply Chain Excellence


END TO END SUPPLY CHAIN MANUFACTURING EXCELLENCE CS/L AS A COMPETITIVE ADVANTAGE

2014-2016+ 12 Demand Driven Excellence


Contents

Redefine “Supply Chain”





Contents


Play

Lead User/ Consumer/ Demand Insights

Supply Visibility

Win






Demand Visibility


Segmented Push


Executing the Business Operating Strategy

Contents

Vision

Talent & Skills

Reliable Supply

Supply Network

Suppliers

Supply Chain

Executing the “Integrative Challenge” Innovation

Strategic Focus Areas

Customers

Strategic Intent

Prioritized Work

Leading and Managing The Change Transformation COE


The 5 Stages Performance-Improvement Maturity Leaders

Impact

”The Promise Of IT”

Contents

Average

Integrated Functional Excellence Expert Led /Based Projects Reactive Fixes

End-to-end Integrative Improvement System

Codified Integrative

Implementation of

Improvement No Systemic Projects led by Continuous Experts Improvement Plans or structure. (Ad Hoc - Projects) Fire Fighting

Structured Integration Within Core Functions (Systemic – Limited Integrated of Functions )

Improvement (Situational and Systemic)

Learning Network

Culture of Innovation and Sharing (Situational, Systemic and Strategic)

Stage 5

Stage 4

Stage 3

Stage 2

Stage 1 Stages Of Performance Improvement Maturity 16 © Competitive Capabilities International

Transformation - Two Core Thrusts of Work; Today and Tomorrow! ………..Aligned Through a Transformation “Office” Vision Strategic Intent

Leadership Role

Managing The Change

Contents

Business Management Role

Business Strategy, Intent, & Focus Areas Prioritized Work Future-ize The Business

Build Sustainable Improvement & Compliance Capabilities

Control & Manage the Business & Compliance Learning

Integrative Improvement

Compliant & Controlled Business Performance

Managing The Change

Impact

Vision Strategic Intent

C od ifi ed an d int eg ra te d im pl e m en ta tio n

Functional I m pl e m en ta tio n ap pr oa ch ba se d on th e ca pa bil ity of th e lo ca l ex pe rt

St ru ct ur ed im pl e m en ta tio n ap pr oa ch wi thi n th e fu nc tio ns

Expert based No Cont. Imp. N o C on tin uo us I m pr ov e m en t Pl an s or str uc tu re .

Stage 1

Stage 2

Network

System

Stage 5

Excellence

Culture of Innovation and Sharing of Production Know How

Stage 4

(Situational, Systemic and Strategic)

Stage 3 (S itu ati on al an d Sy st e mi c)

(S ys te mi c)

(A d H oc )

1950

2010

2013

Sustainable & Compliant Performance Improvement Culture

Change Management & Alignment COE © Competitive Capabilities International

Sustained & Compliant Agility Capabilities

The Integrative Performance Improvement System (IIS) Connects the Dots in Supply Chain Transformation from Traditional to Demand -driven

The Execution Challenge ! Contents Transformation COE A Strategic Enterprise Initiative to Lead Alignment & Develop Capabilities Using IIS Platform

S & OP INTEGRATED PROCESSES

Demand Supply Projects

1 Strategy

>

2

Processes

3

Demand-driven Value Network

>

4

5

“Evolving READINESS”

Metrics

Process –based Performance Analytics Organization

IT

GOAL ALIGNMENT


2.3

New Product Launch and Introduction

1.9


Asset Reliability & performance

Information and Technology

Knowledge management and Standards

Sourcing and Procurement Costs

Demand Forecast Accuracy

Teamwork & Change Management

Perfect Order performance

Manufacturing Gate Quality

S & OP

Inventory Level Optimization

+ + + + + + + + + + + 5%

10%

20%

“When you get this right , it rains money” 19

Stock Out Performance

3.1

-

Practice based Performance Development

Integrative Improvement…Business Goal ; Eliminate Stock Outs

“Difficult” in Project –driven Silo Mentality Contents

Supply Chain Pain Points:

Lora Cecere Supply Chain Insights

All vs. Largest Supply Chain Pain Points Any Pain

Largest Pain

Dirty data

Product proliferation

2%

Cost of IT

2%

KLA Leading and Managing Supply Chain Alignment through TRACC

Top Supply Chain Pain Points

51%

16%

Changing market preferences

Other

62%

25%

Talent shortage

Competition

62%

13%

Rising commodity prices

Compliance and legislation

67%

18%

33% 33% 28%

3%

26%

5% 16%

28%

“Other” Pain Points

p. 20 Supply Chain Insights, LLC © 2012

Supply Chain Excellence Definition Lora Cecere Supply Chain Insights

How Define Supply Chain “Excellence” Right product, right place, right time at the right cost.

70%

A responsive supply chain that can adapt as markets change.

57%

A resilient supply chain that can withstand the shocks of demand and supply volatility.

52%

The Efficient Supply Chain. Lowest cost per unit.

Right product, right place, right time.


Most Mature

38%

20%


Examples of Supply Chain Excellence:


Open-Ended Top Examples of Supply Chain Excellence

Other Examples 67%

ANY MENTION

33%

P&G

30%

Apple

26%

Wal-Mart Amazon

13%

Dell

13%

Unilever

11%

Kraft

8%

Pepsi

8%

Bayer Chemicals

L’Oreal

Best Buy

McDonalds

Black and Decker

Nestle

Campbell Soup

Nokia

Cisco

Novartis

Colgate-Palmolive

Samsung

ConAgra

Southwest Airlines

DuPont

Stanley

Fashion Industry (gen)

Starbucks

5 Guys Hamburgers

Target

Ford

Tesco

Coke

5%

HP

Toyota

FedEx

5%

IBM

UPS

General Mills

5%

Intel

Walt Disney

Nike

5%

Johnson and Johnson

Zappos


Kimberly Clark


Today, Tomorrow, 2020 Capabilities Challenge… Future Proofing Historical Trend + 2% per case per year

Requires “More” than ProjectsContents & “Integration”…………

2.4

Flat Goal: 90/91 - 94/95

$1.08

Normalized volume

Normalized cost/case

“Real” Money

$1.10

2.3 2.2

$1.06

2.1

$1.04

2.0

Reliability

1.9

$1.02 1.8 $1.00

1.7 1.6

$0.98 1.5 $0.96

1.4 1.3

$0.94

1.2 $0.92 1.1 $0.90

An Integrative Transformation Journey to Build Agility

1.0 86/87

88/89

Normalized $/Stat

90/91

92/93

94/95

96/97

98/99

00/01

Normalized Volume

Stage 4-5

Growth

Stage 2-3

Process capability to be agile across end to end Demand-driven Value Network

Journey to build agility

Today © Competitive Capabilities International

2020

23

Supply Chain Focal Points Lora Cecere for Next 2 Years Supply Chain Insights Supply Chain Focal Points for Next 2 Years Total Improving demand planning

21%

Shortening cycles

21%

New product launch effectiveness Channel sensing

70% 66%

48%

10% 30%

3% 7%

Other

7%

Top Supply Chain Focal Points

62%

8%

Revenue management


74%

23%

Saving costs

Network design

Primary

26% “Other” Focal Points 18%


The Ultimate Goal… Sustainable, Anchored Capabilities, Integrative Improvement

ContentsSustainable Business Performance Improvement

“silo cost focus ”

Excellence in Results

Unsustainable Performance

•Balance •Capabilities •Processes •Change Leadership

Integrative Improvement Journey

“ lean and efficiency improvements”

Excellence in Work Practices


Necessary but not Sufficient

Bringing The Pieces Together Into A Demand-driven Value Network based Business Operating Strategy Is A Maturity-based Transformation Journey……….

Contents


Demand

Supply

? How !

Transformation COE

Product


The Role of The Transformation COE …………. How ? Leadership Sets vision & Goal for “One Company”

Project Management Office

Reports

-Cumulative -Business ROI

Evaluate Options & Estimate ROI

Process Improvement Governance

CPIO

Finance Director

S & OP

SC TRACC

SC Strategy Program Director

HR / Change Management Manages Portfolio of Approved and Potential Projects

?

Project Lists

Business Goal Scope


Process Owner - Victor

Business Unit

BU Leader

Process Lead

Process Lead

Projects “K Lean”

Mfg TRACC

Designs Common Business Processes

CIO

Processes

Process Owner

Process Owner - Victor

BU Leader

Send CFO Savings Assumptions for Future Budgets

Governance Victor

Global HQ

Evaluate Options & Estimate ROI

Contents

Executive Leadership Team

ERP

Reports -Budget & Schedule -Achievement - Cumulative ROI

Business Unit Process Lead

Process Lead

Process Lead

Process Lead

Information Technology (IT) © 2006 AMR Research, Inc.

The Transformation COE …. Benefits Realization & Capability Building Leadership Sets vision & Goal for “One Company” Executive Leadership Team

Contents C o n t i n u o u s I m p r o v e m e n t P l a n s

Project Management Office

s t r u c t u r e .

Finance Director

HR / Change Management

Project Lists

b a s e d o No Cont. Imp. n t h e c a p a b i l i t y

Stage 1

o f t h e l 1950 o c a l e x p e r t

Expert baseda p p r o a c h

Stage 2 w i t h i n t h e f u n c t i o n s ( S y s t e m i c )

a n d i n t e g r a t e d

Functional i m Excellence p l e m e n t a t i o n

Stage 3

Learning Network

Integrative

Improvement System

Culture of Innovati on and Sharing of Producti on Know How

Stage 5

Transformation COE

Stage 4

(Situatio nal, Systemic and Strategic )

( S i t u a t i o n a l

Process Improvement & Governance

a n d S y s t e m i c )

2010

2013

( A d

C TxO Reports

SC Strategy Program Director

a p p r o a c h

i m p l e m e n t a t i o n

C o d i f i e d

H o c )

CPIO

SC TRACC

S & OP

-Cumulative Business ROI

Governance Committee Sets & Aligns Priorities

Process Owner

Execution Process Owner Owner Designs Common Business Processes

Business Unit

BU Leader

Process Lead

SCA IA’s Projects

SC TRACC

BU Leader

Process Lead

Business Unit Process Lead

SCA IA’s

Mfg TRACC

Global HQ

Manages Portfolio of Approved and Potential Projects

o r

Impact

N o

S t r u c t u r e d

ERP

Transformation Program Management Office

I m p l e m e n t a t i o n

Process Lead

SCA IA’s CIO

Processes

“Lean”

Process Lead

Process Lead

Information Technology (IT)


29

Examples of Supply Chain Excellence:


Open-Ended Top Examples of Supply Chain Excellence

Other Examples 67%

ANY MENTION

33%

P&G

30%

Apple

26%

Wal-Mart Amazon

13%

Dell

13%

Unilever

11%

Kraft

8%

Pepsi

8%

Bayer Chemicals

L’Oreal

Best Buy

McDonalds

Black and Decker

Nestle

Campbell Soup

Nokia

Cisco

Novartis

Colgate-Palmolive

Samsung

ConAgra

Southwest Airlines

DuPont

Stanley

Fashion Industry (gen)

Starbucks

5 Guys Hamburgers

Target

Ford

Tesco

Coke

5%

HP

Toyota

FedEx

5%

IBM

UPS

General Mills

5%

Intel

Walt Disney

Nike

5%

Johnson and Johnson

Zappos


Kimberly Clark


Comparison of Revenue/Employee: 2000-2011 P&G

Colgate

Unilever

Kimberly-Clark

Lora Cecere Supply Chain Insights Nestle

Kraft

Revenue/Thousands of Employees

700

600

500

400

300

200

100

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011




Contents

Transformation Organization

KLA Leading and Managing Supply Chain Alignment through TRACC © Competitive Capabilities International

35

Bringing The Pieces Together Into A Demand-driven Value Network based Business Operating Strategy Is A Maturity-based Transformation Journey……….

Contents


Demand

Supply

? How !

Transformation COE

Product


36


Contents

S& OP Transformation


40




Contents

Supply Visibility


Play

Lead User/ Consumer/ Demand Insights

Win






Demand Visibility


Segmented Push


41

Example …….. S&OP must Confront Conflicting Goals & Adapt with Increasing Business & Process Maturity Goal: Make the financial budget. Tops-down Focus. Desires control and wants predictability of operations. Forecast definition: The budget

Contents Finance

Forecast definition: Sales plan

Sales and Marketing

Demand-side

Mold, color, ship-to at the customer level

Supply-side

Supply Chain

Goal: Maximize revenue & market share, wants guaranteed product availability

Mold, color, manufacturing location

Goal: A feasible plan. Bottoms-up focus. Wants to minimize risk and disruption Forecast definition: The demand plan


Operations

Goal: Factory optimization, improve costs and minimize demand uncertainty Forecast definition: Manufacturing Plan

Adapted from AMR Research

43 Supply Chain Insights, LLC © 2012

The Challenge ……Bringing It All Together! End to End Process Capabilities

Contents

Codified Ways of Working

Demand

People

Process

Supply

IIS Technology Performance Culture

5 Stage Maturity Integrative Improvement Journey

Organizational Effectiveness

Product Adapted from Gartner- AMR Research



S&OP Evolution Sales Driven Match Demand with Supply

ManufacturingDriven Deliver a Feasible Plan for Operations Match Demand with Supply

Businessplanning Driven Maximize Profitability

Demand Driven Maximize Opportunity Sense and Shape Demand KLA Leading and Managing Supply Chain Alignment through TRACC

Greater Benefit • Growth • Resilience • Efficiency

Market Driven Maximize Opportunity and Mitigate Risk. Orchestrate Demand Market to Market 45

S&OP Process Existence, Goals & Processes


S&OP Process Goal

Have a Sales & Operations Planning Process

43%

Match demand with supply

Not sure 3%

No 10%

32%

Maximize opportunity and mitigate risk Develop a feasible plan Determine the most profitable plan

Yes 87%

Other

14% 8% 3%

# Distinct S&OP Processes

5 S&OP

27% 14%

processes on average

1

20%

2

Base: Total Sample (117)

3

12%

9%

4

5

19%

More than 5

Planning Integration Evolves Through Stages of Maturity….. Projects

Integrated Processes & IT

Stage 2

Stage 3

Demand Planning

Demand Planning

S&OP

Supply Planning

Supply Chain Alignment

End -End SC Improvement Demand-driven Value Network

Stage 4

Stage 5

Integrated Business Planning

Integrated Business Planning

Contents

S&OP Supply Planning Supply Chain Alignment



Risk, Complexity, Organization Design, Leading and Managing Change, Enabling IT


Summary


• The most effective supply chains are designed and created. Today, supply chain fundamentals are more important. Talent development essential. • In 2012, we celebrate 30 years of supply chain management. There is still much to be done.



Layers of “Management Systems Stages of Process-based Operating & Performance Improvement Maturity to Demand Driven Value Network Sufficiency

Business Operating System of Venture and Sufficiency

Business Operating System 1 4 5 2 Contents 3 Integrative Improvement System Functional Process Integration

Improvement Goals & Projects

High Performance Business Operating System

Demand Forecast Accuracy & Planning

S & OP Balancing Process & Profitability Analyses

Supply Reliability & Supply Planning

Demand-driven end- end SC process integration

Value driven Business tradeoffs & network

Business Sufficiency Planning

The end to end way the business actually operates

Innovation & Value driven Business Tradeoffs

Flexible Decoupling Information & Analytics Model Layer Integrative Improvement System Deployment & Capability Development

Business Operating Strategy, Execution, & Culture Technology Enabled Work Flow Processes & Data Management

System of Process

High Performance Information Technology Enabled Work Flow System & Business Process Management

Integrated Quality & compliance

RFID Traceability VMI

S & OP

Sourcing & Procurement

Planning CPFR

Performance Maturity – based context of data & information

Logistics & Distribution

?

Technology modeled workflows and business processes using business & transactional data

Master data & processbased context of data

Systems of Record

Systems of Process and Control

Application, Data and IT Process Architecture ?

High Performance Transaction Processing Application Architecture

CRM

ERP

PLM

SRM

SCM

“MES”

Technology based applications, data processing & data management

WHM

Real time & Process Control Data High Performance Automation Architecture

Machines

Controls

Measurements


Conclusions

1. Supply chain must move from functional outputs focus to business outcome driven – cultural transformation is required Contents from leadership and strategy development levels – – –

more haste less speed REFRAME “Supply Chain” A change management journey

2. Basic foundational processes and capabilities for end to end demand driven supply chain operations: – – – – –

To be defined and mapped in stages of maturity ( end state clarity to “pull” vs “push” To be designed with roles and accountabilities appropriate for the stage To be deployed with change management To be synchronized and anchored through transformational COE To be assessed for governance and progress reporting


Recommendations

1. Actively address transforming “project to process” Contents culture 2. Formally structure COE based Transformation Strategy actively and visibly led by ELT and inclusive of BU’s 3. IIS “plus” as basis of deployment strategy and COE priorities 4. Regularly review and reflect on evolving process developments and maturity in sync with business performance improvement 5. Establish business financial assessment capabilities to fund and fuel ongoing transformation from wins 6. IT and SC alignment – institute a decoupling layer ! 7. Start working on “cost to serve” capabilities ! 54 © Competitive Capabilities International

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