What Drives Supply Chain Excellence Webinar

What Drives Supply Chain
Excellence?

Supply Chain Insights LLC Copyright © 2018, p. 2
Speaker
Lora Cecere, Founder of
Supply Chain Insights

Today’s Supply Chain

Tomorrow’s Supply Chain

Why?
The Traditional Focus Was on Functional
Excellence

• An integrated supply chain concept is limiting. The focus needs to be
on synchronization and harmonization of networks.
• The efficient supply chain is not agile. Efficient supply chains focus on
the lowest cost per unit. An agile supply chain focuses on having the
same cost, quality and customer service given the levels of demand
and supply volatility.
The Issues?

Trade Complexity Is Increasing as Growth Slows

A Balanced Metrics Portfolio Drives Value

Inventory Levels Burgeoning

Unprecedented Commodity Pressures

2006
2017
2.4
2.5
2.6
2.7
2.8
2.9
0.07 0.08 0.09 0.10 0.11 0.12
InventoryTurns
Operating Margin
Personal Products
Personal
Products
0.10, 2.64
◆Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2017 from YCharts
Personal Products
Operating Margin vs. Inventory Turns (2006 – 2017)
Best Scenario

How Do We Drive Continuous
Improvement Through Planning?

Why Are We Not More Focused on Driving KPIs?

Normal
Distribution
SKU/L
SalesVolume
Anything But Normal
The “Long Tail” is Growing

Normal
Distribution
SKU/L
SalesVolume
Anything But Normal
Consistent and forecastable:
874 items representing 77%
of the volume and 74% net
sales. 64% of the volume is
forecastable with a 55%
error.
Inconsistent demand: 1723 items representing
23% of the volume and 26% net sales.
Linear
Optimization
Machine Learning/Pattern Recognition
Not
Forecastable
by
Conventional
Means
The “Long Tail” is Growing: Client Case Study

• Test Engines
• Measure Do You Have a Good Plan
• Train Employees
• Measure, Measure, Measure
Drive Continuous Improvement Through Planning

… I observed one fundamental problem that most companies and experts seemed to
ignore: Ceteris paribus, companies whose supply chains became more efficient and
cost-effective didn’t gain a sustainable advantage over their rivals. In fact, the
performance of those supply chains steadily deteriorated. For instance, despite the
increased efficiency of many companies’ supply chains, the percentage of products
that were marked down in the United States rose from less than 10% in 1980 to more
than 30% in 2000, and surveys show that consumer satisfaction with product
availability fell sharply during the same period. Evidently, it isn’t by becoming more
efficient that the supply chains of Wal-Mart, Dell, and Amazon have given those
companies an edge over their competitors. According to my research, top-performing
supply chains possess three very different qualities. First, great supply chains are
agile. They react speedily to sudden changes in demand or supply. Second, they
adapt over time as market structures and strategies evolve. Third, they align the
interests of all the firms in the supply network so that companies optimize the chain’s
performance when they maximize their interests. Only supply chains that are agile,
adaptable, and aligned provide companies with sustainable competitive advantage.
Hau L. Lee, Stanford
Triple A Supply Chains, Harvard Business Review
October 2004

Looking at the Factors
• Agile
• Adaptive
• Aligned

• Agile
• Adaptive
• Aligned

The ability to have the same cost,
quality and customer service given the
levels of demand and supply volatility.
What is Agility?

An efficient supply chain produces items
at the lowest cost per unit.
What Is Efficiency?

Efficiency ≠ Agility
Tough Lesson

Properly Implemented S&OP Improves Agility

• Agile
• Adaptive
• Aligned

The Brands That Cannot Adapt Will Die

Sensing in 2007 Market Downturn

According to Users, 41% of Their Supply Chain Disruptions
Last Year Were Included in Financial Reporting

_________________________________________________________________________
Source: Supply Chain Insights LLC, Supply Chain Risk Management (Mar-May 2018)
Base: Total (Users, Vendors, Others) (n=93)
Q12A. To the best of your knowledge, what were the top THREE events to impact [your][a typical] supply chain over the [same period][ past five years] (2013-2018)?
52%
40%
30%
22%
20%
19%
12%
12%
12%
6%
5%
4%
3%
3%
16%
Ongoing: Cyber attacks or computer hacking
2015-17: West coast port slow down
2017: Hurricane Harvey
2016+: Brexit (UK withdrawal from the European Union)
2017: Regulations on over-the-road trucks
2017: Hurricane Irma
2013: Typhoon Haiyan in Philippines
2013+: ISIS in the Middle East
2017: Hurricane Maria
2011+: Syrian War / refugee migration
2016: Turkey Unrest
2013: US government shutdown
2016: Eboli outbreaks
2018: US government shutdown
Other
Top Three Events to Impact Supply Chains from 2013-2018
- Users / Vendors / Others -
Three Most
Impactful
Events
Tsunamis, earthquakes
Ukraine crisis
Tariffs, exchange rate / oil price
Slavery / human rights
Hanjin collapse
Chinese environmental regulations

• Agile
• Adaptive
• Aligned

Alignment

S&OP Balance

Wrap-up
Driving supply chain excellence is a
balancing act and requires careful
orchestration by leadership teams
over many years. It is not functional
leadership.
Cross-functional processes and a
balanced scorecard are critical
enablers.
There needs to be a focus on agility,
adaptability and alignment.

ENGAGE WITH US!
Visit Us Online
www.supplychaininsights.com
www.supplychainshaman.com
www.linkedin.com/company/supply-chain-insights
www.slideshare.com/loracecere
Follow Us on Twitter
@scinsightsllc
@lcecere
Attend a Live Event
www.supplychaininsightsglobalsummit.com
www.supplychaininsights.com/the-shamans-circle

Why You Should Come:
1.Hand-Picked Presentations and Keynote Speakers
2.Focus on Supply Chain Excellence, Digital
Transformation, Innovation Leadership and Talent
3.Breakout Sessions on Cognitive Computing / Machine
Learning, Blockchain / Bitcoin, & the Internet of Things
4.Extreme Networking and Facilitated Discussions
Register Now!
• Held at the Science History Institute in Philadelphia
• Seating is limited to 120 attendees
• Registration is $1750 for business users and $3000 for
technology providers, consultants, & 3PLs (invitation-only)
• $1000 for Day One attendance only
• Email us at events@supplychaininsights.com
www.SupplyChainInsightsGlobalSummit.com
Our sixth annual event ⚫ Designed for line-of-business leaders ⚫ Explore the future of business processes

What Drives Supply Chain Excellence Webinar

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