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The Modern Supply Chain: Global Challenges and Best Practices

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The Modern Supply Chain: Global Challenges and Best Practices

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Fueled by innovation and modernization, Bart Huthwaite will explore how developing and improving your resilience and adaptability can ultimately future-proof your global supply chain and set you up for continuous success.

Fueled by innovation and modernization, Bart Huthwaite will explore how developing and improving your resilience and adaptability can ultimately future-proof your global supply chain and set you up for continuous success.

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The Modern Supply Chain: Global Challenges and Best Practices

  1. 1. with Bart Huthwaite Building Resilience for the Future: How to Secure Your Global Supply Chain Tuesday, November 15th, 2022 11:00am PST, 2:00pm EST, 7:00pm GMT Principal, Management Consulting, Operations and Supply Chain Tara Dwyer Webinar Coordinator, Supply Chain Brief
  2. 2. Avetta provides a cloud-based supply chain risk management and commercial marketplace platform. Our global solution is uniquely designed to connect the world’s leading organizations with qualified suppliers, driving sustainable growth. We build trustworthy bonds through responsive technology and human insight. Our process is collaborative. Our global reach is complemented by our local expertise. Hundreds of global organizations depend on Avetta to align their supply chains to sustainable business practices, worldwide. Discover more at avetta.com.
  3. 3. TO USE YOUR TELEPHONE: You must select "Use Telephone" after joining and call in using the numbers below. United States: +1 (631) 992-3221 Access Code: 554-429-946 Audio PIN: Shown after joining the webinar TO USE YOUR COMPUTER'S AUDIO: When the webinar begins, you will be connected to audio using your computer's microphone and speakers (VoIP). A headset is recommended. Click on the Questions panel to interact with the presenters
  4. 4. Bart Huthwaite Principal, Management Consulting, Operations and Supply Chain
  5. 5. © 2022 RSM US LLP. All Rights Reserved. SECURING YOUR SUPPLY CHAIN FOR FUTURE November 2022
  6. 6. © 2022 RSM US LLP. All Rights Reserved. • Insights from COVID: Understanding the supply chain operating model • Best Practices: Steps taken by the leading organization to adapt to an agile supply chain network • Supplier Resilience: Challenges & Opportunities, including ESG and Tier-N-Visibility Learning Objectives
  7. 7. © 2022 RSM US LLP. All Rights Reserved. © 2022 RSM US LLP. All Rights Reserved. INSIGHTS FROM COVID : UNDERSTANDING THE SUPPLY CHAIN OPERATING MODEL
  8. 8. © 2022 RSM US LLP. All Rights Reserved. Bank of America noted mentions of “supply chain” in Q3’2021 earnings calls by Fortune 500 companies had risen an astonishing 412% from Q3 2020 and 123% from Q2 2021 earnings calls. Of a survey conducted of global supply chain leaders in MAY’2022, it was clear that COVID-19 will transform supply chains. COVID impact on Supply Chain Encountered problems in the supplier footprint that require changes in the future Experienced delays in planning decisions because of remote working 73% 48% Faced issues in the production and distribution footprint that require changes in the future Struggled with insufficient digital supply chain technologies – visibility / agility 75% 48%
  9. 9. © 2022 RSM US LLP. All Rights Reserved. The RSM US Middle Market Business Index Index surges to 138.5 despite elevated inflation 9 PESSIMISM OPTIMISM
  10. 10. © 2022 RSM US LLP. All Rights Reserved. RSM US Supply Chain Index 2001 Dot.com bust 2008-09 Global financial crisis 2020-21 Pandemic era Note: An index value of zero is defined as normal level of supply chain efficiency. Positive values of the index suggest adequate levels; negative levels suggest deficiencies. Source: Various government and private organizations, Bloomberg, and RSM US
  11. 11. © 2022 RSM US LLP. All Rights Reserved. Unexpected changes or disruptions in U.S. supply over the last 12 months 11 Total (n = 199) Significant increases in price or cost for some items 78% Delays in order fulfillment or receipt 76% Unreliable, or inconsistent times for order fulfillment 74% Missed deadlines for order fulfillment 74% Receipt for partial, or incomplete orders (i.e., incomplete quantities) 66% Source: RSM US Middle Market Business Index, Q2 2022
  12. 12. © 2022 RSM US LLP. All Rights Reserved. Supply Chain Disruptions organizations experienced significant negative effects due to unexpected changes or disruptions in supply from upstream suppliers 12
  13. 13. © 2022 RSM US LLP. All Rights Reserved. Unexpected changes or disruptions in supply 13
  14. 14. © 2022 RSM US LLP. All Rights Reserved. Areas where organizations are experiencing increased cost pressures 14
  15. 15. © 2022 RSM US LLP. All Rights Reserved. $- $2,000 $4,000 $6,000 $8,000 $10,000 $12,000 $14,000 $16,000 Nov-21 Dec-21 Jan-22 Feb-22 Mar-22 Apr-22 May-22 Jun-22 Jul-22 Aug-22 Sep-22 Oct-22 Shipping Price per 40ft Container Box Shanghai to LA Shanghai to NY 15 The container index is 68% lower than last year. Shanghai to Los Angeles fell from $9,947 to $2,262 per 40-foot container while Shanghai to New York fell from $12,718 to $5,351 per 40-foot container. Container cost
  16. 16. © 2022 RSM US LLP. All Rights Reserved. 1 1.1 1.2 1.3 1.4 1.5 1.6 Ratio Inventory to Sales Ratio Total Business Retailers Manufacturers Merchant Wholesalers 16 Source: Federal Reserve Bank of St. Louis; RSM US Inventory to sales ratio
  17. 17. © 2022 RSM US LLP. All Rights Reserved. 17 Over the last 12 months, the producer price index increased by 12.0%, 14.6%, and 14.7% for all commodities, truckload, and LTL (less than truckload), respectively Producer price index
  18. 18. © 2022 RSM US LLP. All Rights Reserved. Ways Supply Chain has changed Supply chain is now key focus for the executives and supply chain issues are being identified as the greatest threats to companies' growth. Companies are now focusing on business continuity by building visibility, resiliency and agility. Strategic key supplier relationships are essential for company’s growth. Network optimization for manufacturing and distribution is the need of the hour. Companies are re-evaluating inventory management strategies and Just-In-Time (JIT) is sometimes replaced with Just-In-Case (JIC). Integrated supply and demand planning – IBP / S&OP are increasingly recognized as valuable processes to address supply chain issues.
  19. 19. © 2022 RSM US LLP. All Rights Reserved. © 2022 RSM US LLP. All Rights Reserved. BEST PRACTICES : STEPS TAKEN BY LEADING ORGANIZATION TO ADAPT TO AGILE SUPPLY CHAIN NETWORK
  20. 20. © 2022 RSM US LLP. All Rights Reserved. What are organizations doing? 70% 51% 36% Found other sources of supply in the United States Purchased some supplies from competitors at a premium Found other sources of supply outside the United States 404 executives responded to RSM’s Middle Market Business Index survey conducted in APR’2022. The data sheds light on the specific ways companies are responding to supply chain issues.
  21. 21. © 2022 RSM US LLP. All Rights Reserved. What are other companies doing? 21 THE AMBITIOUS Changing operating models Optimizing distribution networks THE PRUDENT Supply chain failure mode effects analysis Segmenting and optimizing finished goods and raw materials inventory Updating and maintaining system parameters Developing and implementing a plan for every part Revisiting strategic sourcing strategies to improve resiliency Improving demand and supply management IBP / S&OP Improving supplier contracts to address potential disruptions Improving supply chain visibility and resiliency (primarily through technology) THE OBVIOUS Stockpiling inventory Seeking alternative suppliers THE PRUDENT THE OBVIOUS THE AMBITIOUS Novice Expert
  22. 22. © 2022 RSM US LLP. All Rights Reserved. Apple seeking alternative suppliers to reducing dependency on China Apple is trying to reduce its dependence on China, facilities and vendors. • The company has started producing some iPhone 14 models in India. • Foxconn Technology Group, And Apple’s largest supplier, recently agreed to a $300 million expansion of its production facilities in Vietnam. 22 Apples Challenge: • Scores of local component suppliers, modern and efficient transport, communication and electricity supplies -- make it particularly evolved ecosystem, that Apple and other smartphone manufacturers have relied upon. • Bloomberg Intelligence estimates it would take about eight years to move just 10% of Apple’s production capacity out of China, where roughly 98% of the company’s iPhones have been made.
  23. 23. © 2022 RSM US LLP. All Rights Reserved. GM is revisiting strategic sourcing strategies to improve resiliency • Like many automakers, GM has had a rough go of it this year due to the chip shortage. • Its second-half vehicle production for 2021 was down about 200,000 cars compared to the first half of the year. 23 General Motors may have a solution to its semiconductor chip problem. • The automaker is working with seven chip supplier partners on new designs of chips that would be capable of handling more than the current chips and would be made in North America • GM and its chip suppliers are working on three new families of microcontrollers that will lower the number of chips by 95% on future vehicles. • new microcontrollers will consolidate the functions that individual chips handle now and that will cut costs, but still deliver quality. He foresees making as many as 10 million microcontroller units a year.
  24. 24. © 2022 RSM US LLP. All Rights Reserved. Volkswagen is revisiting their global operating model • Volkswagen confirmed a new growth plan would aim to reduce its vulnerability to the effects of global conflicts, such as supply chain disruption and rising prices, by increasing their focus on regional versus global strategies • Volkswagen’s Chief Executive said the board saw boosting its China business, growing software division Cariad and reorganizing its steering model as the most pressing issues facing the carmaker. 24 VW’s comments echo concerns among other carmakers about the ability of their suppliers to keep making parts as energy prices surge. VW’s team is currently trying to mitigate the impact by prioritizing below : • Greater localization in Europe • Relocation of Manufacturing capacity • Technical alternatives for semiconductors • CapEx investment for a new cell factory in Germany • $80 million facility opened to research, develop and test EV batteries
  25. 25. © 2022 RSM US LLP. All Rights Reserved. Toyota prepared for COVID from 2011 In March 2011, after the earthquake most of Toyota’s Japanese plants were closed for nearly two months and north American production was cut to 30% for the subsequent 6 months due to a shortage of 150 different parts. To mitigate risks in case of future hits, Toyota started to build redundant inventory, selected multiple or even redundant suppliers and adopted more standardized components for different vehicles. 25 Toyota action plan and 2016 unplanned testing Toyota’s 5-year plan, that would enable a recovery from a hit within two weeks, comprised four actions. • Toyota adopted some components that are standardized across all Japanese automakers so that they could be manufactured in several locations and shared among automakers if needed. • Toyota also built a database with information about thousands of parts stored at 650,000 supplier sites, which helps bypass bottlenecks when one supplier gets knocked out of commission. • In addition, Toyota decided to regionalize the supply chain. Regionalization will reduce the fragility of global supply chains containing the impact of a disruptive event to a single region. • The last action was to force suppliers to hold as much as a few months’ worth of inventory of specialized components. “After the Great East Japan Earthquake, and after efforts to reduce and mitigate the impact of disasters, we are now able to make assessments of alternative products in a speedy manner,” CFO Kenta Kon said. “And this was one of the factors behind us being able to mitigate the impact of semiconductor supply.”
  26. 26. © 2022 RSM US LLP. All Rights Reserved. © 2022 RSM US LLP. All Rights Reserved. SUPPLIER RESILIENCE: FUTURE CHALLENGES AND OPPORTUNITIES 26
  27. 27. © 2022 RSM US LLP. All Rights Reserved. ESG - Greenhouse Gas (GHG) Emissions Key Considerations for Reducing Supply Chain GHG Emissions 27 For every 1 ton of CO2 GM emits, their supply chain emits 11 tons of CO2. How Are Supply Chain GHG Emissions Classified? Scope 1 emissions are produced from owned and/or controlled sources (e.g., company owned facilities, company owned vehicles). Scope 2 emissions are produced from the generation of purchased electricity, steam, heating, and cooling consumed by the reporting company (e.g., for leased buildings). Scope 3 emissions are produced by activities that occur both upstream/downstream in the value chain (including but not limited to business travel, employee commuting, purchased products, transportation of consumed goods, etc.).
  28. 28. © 2022 RSM US LLP. All Rights Reserved. Tier-N-Visibility Manufacturer Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier … … Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier Supplier … … Tier 1 Tier 2 Tier 3 Tier 4 … Tier N
  29. 29. Q&A TARA DWYER /in/dwyertara/ Webinar Coordinator, Supply Chain Brief supplychainbrief.com BART HUTHWAITE /in/bart-huthwaite/ www.rsmus.com Principal, Management Consulting, Operations and Supply Chain

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