conferencia magistral rick blasgen

Council of Supply Chain

Management Professionals

Raw Material

Purchasing

Factory Manufacturer’s DC Customer’s DC Consumer

Rick D. Blasgen

President & CEO

CSCMP

March 18, 2015

We absorb the shock!

SCM = Seed to Table

Tech

nologies

Storage Manufacturer Storage Distributor Retailer End User Supplier

A Typical Supply Chain Pe

ople

Proc

ess

es

Product

Sourcing Manufacture Storage Storage Distributor Retailer

Customer

Order

Receipt

Functional Orientation • Purchasing • Operations • Marketing • Package Engineering • Transportation • Inventory Mgt. • Warehousing • Manufacturing • Suppliers • Customers • etc.

Logistics

Supply Chain

Management-

We became

Global!

1950 1970 1980 1990 2000 1960 Beyond

Focus

More Attention

From Senior

Management

More Attention

From Senior

Management

Evolutionary Perspective

Logistics Costs $1.310 t $1.354 t $1.385 t 2,2%

% of GDP 8.4% 8.3% 8.2% 1.2%

Trans Costs $821 b $846 b $862 b 1.9%

Inv. Carrying $439 b $457 b $469 b 2.6%

Metric 2011 2012 2013 %

US State of Logistics

Logistics Cost As A Percent of GDP

8

1.04

1.20

1.34 1.42

1.36

1.12

1.24 1.31

1.35 1.39

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ T

rillio

ns

Logistics Costs have risen 110%

Average annual increase = $30b

2013 increase was $31b

Since 1990…

As a % of GDP, Logistics expense went from

11.4% to 8.2%, a reduction of 28%

Also….

Global Comparison of Logistics

Expenditures

Asia 17% GDP

China 18% GDP

Europe 13% GDP

India 13% GDP

Japan 11% GDP

Mexico 14% GDP

Economy Higher Output--GDP

Better use of resources

Multi-use Infrastructure

Businesses Market Access

Market Integration

Cost Efficiency

Consumers More Goods and Services

Wider Availability

Lower Prices/Income

U.S.

8.2% GDP

So what is Supply Chain Strategy?

Why is Leadership & Talent so

Important?

Supply Chain Strategy is figuring out the best way

that participants and processes should work

together to meet an organization’s goals and

objectives.

A study by Georgia Tech showed that a company’s stock price drops 8%

when the company experiences a glitch in its supply chain.

A study at Miami University of Ohio showed that when a company adopts

a new supply chain innovation the company’s stock price increases.

A study by Bain & Company showed that companies employing

sophisticated supply chain methods enjoyed 12 times greater profit

than companies with unsophisticated methods.

Wall Street: New found respect for SCM. In one SCM MBA

program in the US, 21/32 grads received job offers from Investment

Banking firms because of the importance of SCM to their clients.

SCM Has Strategic Profit Impact

Wal-Mart's supply chain management success is

improving productivity in the United States:

The effects of the company's supply chain

innovations on the retail industry led to a 3.1

percent decline in overall consumer prices.

Consumers spent $263 billion LESS than

they would have if Wal-Mart were not

around! That translates to $895 per

person, or $2,329 per household.

When Supply Chains Work Well

When Supply Chains Don’t Work So Well

The Great Companies Get It Right

Migration from Traditional to

Holistic Supply Chains…

To (Horizontal) Integrated Supply “CHAIN”

Supplier Distribution Manufacturing Sourcing Customer

From Traditional Independent Functions

Supplier Sourcing Manufacturing Distribution Customer

Top management is interested

in what we do!

But we must communicate

more effectively.

Transparency!

Leadership

It’s much easier to solve a problem when the direction is clear!

21

!

Take THAT hill soldier!

But what happens when you are asked to choose

which hill you should take?……

? Which

way do we go

George?!?

Not only should you charge your hill with confidence, but you should start thinking about what could be waiting for you on the other side!

Revenue

Cash Flow

Profitability

Market Share

What keeps the CEO up at night?

Shareholder Value

Decisions

Different

Decisions?

$30

$145

The World Has Changed

Shrinking global marketplace

Information is readily available,

Leaders have to know how to use it!

Retail

DC

Retail

store

Here is what we have to consider just to make a bicycle

Distribution

Center Distribution

Center

Outsourced

DC

Truck and/or

Rail

Top Trends and Challenges

• Globalization. Growing complexity and

pressure of dealing with global

partners, suppliers and competition.

Culture and geopolitical issues.

• Multi Channel Madness!

• Macy’s, FedEx, UPS, Wal-Mart, etc.

• Big Data – How big is too big? How do

we scale?

• Increasing “nearshoring” manufacturing

Manufacturing “Finding a home in North America”

• Apple

• Yamaha

• Michelin

• Wham-O

• Bayer Chemical

• Caterpillar

• GE

• NCR

• Rolls Royce

• Honda

• Lenovo

• Airbus

• Toshiba

• Toyota

• Flextronics

• Siemins

Order from Anywhere

Fulfill from Anywhere

Customer

Call Center

Tablet/Mobile

Web Site Brick and Mortar

Stores

Catalogs

Flash Sales

Pop-Up Stores

Outlet Locations

Retail DC(s)

eCommerce

DC(s) Brick and Mortar

Stores

Kiosk

Top Trends and Challenges

• Need to update infrastructure

• Risk Management & Sustainability

• Focus on workforce and automation –

traditional 8 hour workday still make sense?

• Energy - Natural Gas reaches a tipping point

• Rise of Amazon

• 30% Revenue increases, approaching

$60B

• Added 18 New Distribution Centers

If you've ever ordered anything

from Amazon, you will be

interested in this…

• There are 80 warehouses located near key

shipping hubs around the world.

– Some over 1.2 million square feet (111,484 square meters)

– With over 65,000 people

• “Chaotic storage”

Amazon’s Giant Warehouses

Organic shelving system without

permanent areas or sections.

• Organized confusion – not like what you would

find at a retail store.

– No area just for books,

televisions, etc.

– Product characteristics

are irrelevant.

• Unique barcodes

Chaotic Storage

• Every shelf space has a barcode

• Every product requiring storage is assigned a

matching barcode

• Sophisticated database

– Tracks and monitors

every product

– Keeps a tally on shelf

space

Unique Barcodes

• Flexibility – Free space can be refilled

immediately

• Simplicity – New employees don’t need to learn

where types of products are located

• Optimization –

database provides

employees an

optimized route to

complete fulfillment

of millions of orders.

Key Advantages

Real Estate and Supply Chain

• The two are inextricably linked

• Real estate is critically important to the

success of a company’s supply chain

• “Buildings” should be viewed as assets

that contribute to supply chain value

Skechers consolidated its distribution operations which was

spread out among six warehouses in Ontario, into a new 1.82-

million-square-foot $250 million facility in Moreno Valley.

It's big enough to hold 40 football fields!

CEO / CFO’s - discovered the power of Supply

Chain Management.

Wall Street

• Watching industry dynamics

• Logistics industry represents almost 10% of the

economy

Supply Chain Risk Management is critical – think

about recent events, middle eastern uprisings, Suez

Canal, Japan, Thailand, Sandy, etc.

3PL’s – Significant growth

What does this all mean?

Third Party Logistics Market

44

Source: Armstrong and Associates

89.4

103.7

113.6 119.0

127.0

107.1

127.3 133.8

141.8 146.4

0

20

40

60

80

100

120

140

160

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

$ B

illi

on

s

Why is Risk Management important?

Asia is 4X more likely to be affected by

natural disasters than Africa, 25X more likely

than Europe or North America

7major cities classified as extreme risk are all

in Asia

Floods have become 3X more frequent in the

past 30 years

152 Million people in Asia are vulnerable to

natural disasters every year!

POLITICAL CHANGE

UNIONIZATION

SHIFTING WAGES

INFRASTRUCTURE CHALLENGES

EARTHQUAKES

TYPHOONS

WILDFIRES

PROTESTS

YOUNG, MOBILE ORGANIZATION

LABOR STRIKES

Challenge as a Way of Life

Strategically Resilient

Firms

Swink, Morgan (2012)

Top Supply Chain Companies

• Identified from various rankings and studies

(AMR/Gardner, MSU study, Supply Chain Digest)

• From 2004 – 2007, on average these firms had:

– 58% higher ROA

– 31% higher ROS

– 41% higher ROE

– 4X stock returns

– 45% greater market value

Are They “Strategically Resilient”? • Like others, the top companies suffered lowered sales growth, disruptions,

and other problems

• However, most top companies held or even improved their leads in the

2008 – 2010 timeframe.

400%

58%

31%

41%

9%

98%

57%

100%

52%

-10%

10%

30%

50%

70%

90%

110%

Sales Growth ROA ROS ROE Stock Returns

Outperformance

of Top Firms vs.

Benchmark

2004-2007

2008-2010

Emerging (Emerged?)

Supply Chain Trend

Collaboration

Emerging (Emerged?)

Supply Chain Trend

Collaboration – “To cooperate with

an enemy that has invaded your

country”

Cultural

Barriers to Collaboration

• Tunnel vision

• “Not invented here” mentality

• Personal comfort zones - Trust

• “My business is different and its unique

characteristics demand that the status

quo must be maintained.”

Leadership

Barriers to Collaboration

• Non-existent change management skills

• Internally focused organizational silos

• Leadership focused on wall street and

making the numbers regardless of the

impact to the long term prospects of the

company.

Structural

Barriers to Collaboration

• Misalignment of goals

• Compensation that promotes a silo mentality

• Legacy systems

Relationships are critical

The essence of SCM is collaboration – it is not

an option.

involves all key participants

working toward common goals. Absent collaboration, the supply chain will

be nothing more than a collection of firms, each

following their own pathways.

The Setting: Global Economy; Supply Chain

Transformation = Big Change

Leadership is Essential!

Wh

y?

Supply Chain

Transformation:

• Process

• People

• Infrastructure

• Sustainability

• Technology Wh

at?

Ho

w?

Continuous Improvement

Characteristics

One step at

a time

Internally

managed

Operating

budget

Low risk Low priority

Takes a long time

Discontinuous Change

Characteristics

Huge change

all at once Project with

dedicated

resources

Project

budget;

capex

Transformation

now!

Commitment High risk

Unintended Consequences

The interconnectedness of everything

Process

Technology

People

Infrastructure

Sustainability

Processes

Technology

People

The Dimensions of Change

• All three dimensions of change are always present

• Benefits only

accrue from the intended dimension

• The consequential

risks are present in all dimensions

Some-

times

things

go

wrong…

The interconnectedness of

everything

Process

Technology

People

Infrastructure

Sustainability

Supply chain Transformation

• What do you want to do?

• Why do you want to do it?

• Where are the benefits coming from?

• Where are the risks?

• How: Which are the appropriate change mechanisms?

What skills will be required for

success?

Art or Science?

What are the skill development needs of

companies today?

• Leadership

• Collaboration

• Communication

• Teamwork

• Multi-cultural perspective

• Relationship management

• Creativity & Innovation

• Forecasting and planning

• Project management

• Problem solving

• Modeling

• Data analytics

• Technology

Traditional Supply Chain

Functional Career Path

Demand/Supply

Planning Global Logistics Manufacturing Procurement

Executive

Level

Senior

Level

Advisory

Level

Staff

Level

Entry

Level

Fulfillment

Corporate

Executive

Level

Leading Edge SCM

Career Path

Demand/Supply

Planning

Global Logistics Manufacturing Procurement

SCM

Consulting

Level

SCM

Sr. Level

SCM

Advisory

Level

ISC Staff

Level

ISC Entry

Level

Fulfillment Supply Chain

Management

Exp

eri

en

ces o

uts

ide o

f IS

C

The Future of Supply Chain

Professionals

Inventory

Management

Transportation

Warehousing

Materials

Planning

Production Planning

& Manufacturing

Customer

Service

Procurement

Proficient competencies

Technical

Managerial

Leadership

Must have excellent interpersonal skills

Ability to sustain collaborative relationships

Supply Chain

Passion

To Supply Chain Mastery

Building Organizational

Excellence

• While there may be an abundance of talent in an

organization, a new style of leadership may

unleash the potential, both individually and

organizationally, enhancing career growth and

total capabilities.

• Consistent credibility breeds investment. If

we’re credible and operate with integrity, the

company with invest in us.

The Fundamentals:

• Set clear expectations: performance and

development

• Provide feedback and coach for

improvement

• Measure results - Inspect what you expect

• Build bench strength – backfills for key

positions

• Celebrate successes – have fun!

Misconceptions / Reasons Supply Chain

Initiatives Fail. . .

• Need Senior Management commitment versus support

• Manage the Change, systems are enablers

• Why are you doing this to me?

Bunker mentality emerges

Supply chain champion viewed as empire builder

Resistance groups spring up

Veil of misunderstanding is drawn - discontent grows

• SCM is viewed as too easy or too complicated

• Financial implications are not understood

Misconceptions / Reasons Supply Chain

Initiatives Fail. . .

• Systems are old - inflexible

• Company is mired in successful way of doing business -

hasn’t learned to forget

• Technology is the enabler - people are the roadblocks

• Compensation / rewards are not aligned

• Customer service goals are not assigned throughout

• Customer is not considered part of, or a beneficiary of, the

supply chain

• SCM simply is not viewed as a core competency

Supply Chain Concierge Service

CSCMP’s Evolving Role

• Goal

Connect, Educate and Develop the

world’s Supply Chain Professionals!

Procurement

Marketing

Manufacturing

Information Tech

Suppliers Customers

SCM Pro

SCM Conducts a Symphony

We matter!

Sales

Summary

This discipline is a corporate necessity, yet can be a growth vehicle – a revenue generating engine.

We improve the financial position of companies and economies.

Our stature and credibility is increasing.

Supply chain professionals need to develop cross functional skills and a global mindset to maximize opportunities in the world.

To prosper, to tackle these challenges, to take advantage of the opportunities, we need leadership and the right talent!

Peter Drucker

“If people are committed to

maintaining yesterday, they are

not available to create tomorrow”

Sometimes, we

have to learn to

forget

Innovation!

Be Creative in your Response to

Supply Chain Problems

You think you’re having a bad day!

Our Challenge……..

It will not be easy, but . . .

It can happen.

Thank you!

Rick Blasgen

+1 630.645.3458

rblasgen@cscmp.org