supply chain insights global summit 2013 - supply chain excellence with lora cecere

Supply Chain Insights Global Summit #SCISummit September 2013, p.1TM

Lora Cecere

Founder and CEO

Supply Chain Insights

What Is Supply Chain Excellence?

Supply Chain Insights Global Summit #SCISummit September 2013, p.4TM September 2013, p.4TMSupply Chain Insights Global Summit #SCISummit

Supply Chain Insights Global Summit #SCISummit September 2013, p.5TMSupply Chain Insights Global Summit #SCISummit September 2013, p.5TM

• Defining Supply Chain Excellence

• Conquering the Effective Frontier

• The Supply Chain Index

• Imagine

Agenda

Current State

Agility

Need for Strategy

Process Evolution

Align: Market Driven

Build Horizontal Process Connectors

Continuously Test,Learn & Improve

in Market

OrchestrateDemand and Supply

Source: Supply Chain Insights LLC

Adapt: DemandDriven

Sense Demandand Supply

Shape Demand and Supply

Based on Market

Resilient

Absorb DemandVolatility

AbsorbSupply

Volatility

ReliableRight Product

Right Place

Right Time

Right Cost

Efficient

Procure to pay/ order to cash

What Is Supply Chain Excellence?

• Perform better than peer group

• Improve year-over-year results

• Align internally on metrics

• Deliver against the business strategy

• Demonstrate consistency in results

• Use innovation in supply chain processes

• Balance. Be leaders in managing trade-offs

• Imagine

Agenda

Definitions

• Supply Chain Excellence: The behavior of companies working to maximize value through the setting of targets for supply chain financial ratios and aligning metrics that matter (tied to value chain strategy).

• Supply Chain Effective Frontier: The balance of growth, profitability, cycle and complexity metrics to deliver the supply chain strategy. It may or may not maximize the company’s market valuation.

• Supply Chain Index: A formulaic representation of supply chain financial ratios correlated to stock market capitalization valuation.

The Supply Chain Effective Frontier

Mining 20 Years of Financial Data

Most Interesting Patterns

• Cash to Cash versus Inventory Turns• Revenue per Employee versus Inventory Turns• Operating Margin versus Inventory Turns

What Have We Learned?

• Each industry has a different pattern of trade-offs of balancing growth, profitability, cycles and complexity.

• Companies that are supply chain leaders have very small movement with a balanced portfolio of metrics.

• It is about MUCH more than Return on Assets (ROA), growth and inventory.

Productivity in Manufacturing

Productivity in Retail

Progress in Inventory Turns and Operating Margin (2000-2012)

Impact of A Recession

0 250 500 750 1,000 1,2500

2002 2012

The Dow Chemical Company

Revenue per Employee (K$)

Visualizing the Patterns

Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from One Source

Best Scenario

DOW999, 6.7

Trace the line from 2002 point to 2012 point to follow the performance over time. The diamond shows the company’s average over the period.

Ex: The Dow Chemical Company (DOW) has an average of 461 K$ for revenue per employee and 4.0 for inventory turns.

Ideally, companies are increasing inventory turns and revenue per employee, moving towards the upper right corner of the graph over time.

Here, we plot inventory turns (y-axis) vs. revenue per employee (x-axis).

Average (Revenue per Employee, Inventory Turns)

Beverage

Cereal

Household Products

A Closer Look

Another View

Comparison Chart (2000-2006, 2007-2009, 2010-2012)

• Imagine

Agenda

A formulaic representation of how companies are trading off growth, profitability, cycle and

complexity performance on selected supply chain financial metrics against

market valuation.

Household & Personal Products Equation

Y = 2.93 – 0.01(DOI) + 0.02(DPO) + 0.01(DSO) + 3.07(FCF) –

0.93(ROIC) + 0.28(SGAC) – 4.10(WC)

NOTE: Full equation is Y = 2.931928671 - 0.006302786 (Days of Inventory) + 0.019638717 (Days of Payables Outstanding) + 0.008347971 (Days of Sales Outstanding) + 3.06558272 (Free Cash Flow Ratio) - 0.929537849 (Return on Invested Capital) + 0.282841974 (SG&A to COGS Ratio) - 4.097122543 (Working Capital Ratio). We utilized adjusted which accounts for the occurrence of large p values. Outlier values were defined and excluded as those 5 times larger than IQR.

Correlation Strength

Household & Personal Products Equation

CPG Ranking 2012

Mean Absolute Percent Error & Value

• Imagine

Agenda

Digital Manufacturing

Internet of Things

Big Data

Digital Path to Purchase

CSR as a Brand Advantage

New Forms of Analytics

Business Networks

Inter-Enterprise Systems of Record

3D Printing

Collaborative Economy

imagine

Imagine

Conventional Manufacturing

Use of 3-D Printing

Yelling Listening Functional Silos T-Shaped ManagersFunctional Silos

BREADTH

Re-aligning Process & People

• Most Companies Are Stuck

• New Practices Are Emerging

• We Must Design with the End in Mind

Thanks to Our Sponsors!

Visit the Supply Chain Insights Global Summit website for all conference content:

Continue the Discussion

www.supplychaininsightsglobalsummit.com

Save the Date!

Supply Chain Insights Global Summit 2014September 10-11, 2014

The Phoenician – Scottsdale, AZ USA

Enjoy the Conference!

supply chain insights global summit 2013 - supply chain excellence with lora cecere

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