jonah's scv presentation (26-may-2015)

GT NEXUS CONFIDENTIAL | THE CLOUD SUPPLY CHAIN PLATFORM | 1

Conceptual Foundations29th May, SSIA Supply Chain Management Conference

Supply Chain Visibility


Presentation Outline

Where to Get More Information4

What is Supply Chain Visibility?1

Link to Industry Challenges2

SCV Trends of Importance3


Definition and Theory is Important

“Everything is vague to a degree you do not realize until you have tried to make it precise.” Bertrand Russel

“All science is either physics or stamp-collecting.”

Ernest Rutherford


A Definition for Supply Chain Visibility

“The practice of capturing and integrating data, creating intelligence, and altering decisions based on the three cross-organizational flows in the supply chain (materials, capital, and information) along with their relevant environmental details”


What are the Prerequisites to Success with SCV?

Capture Data

Integrate Data

Create Intelligence

Interrupt Decisions

Supply Chain Visibility

Technological

CapabilitiesData

Quality

OrganizationWillingness

Prerequisites


Two Vectors for Business Impacts

Information Quality Decision Mechanics

Visibility improves business decisions by either improving the information quality feeding the decision maker (timeliness, accuracy, completeness, etc.), or by changing the mechanics of the decision making process (automating it, involving more parties, documenting how it was decided, etc.)


Example: A supply of components must arrive at an OEM by Nov 22nd (capture data); the shipment it is on is re-estimated to arrive on Nov 20th (capture data). These two data points are connected by matching unique references (integrate data). A dynamic reforecast for this shipment also projects 48 hours from shipment arrival to final delivery (integrate data). This indicates the shipment will be later than the booking target delivery date (integrate data). If this is beyond the tolerance level of the OEM, an email alert is created (create intelligence) and production planners can look for expedited delivery options or agree to change the target production plan (interrupt decisions).

An Example…


Supply Chain Visibility for Physical Flows

We must re-plan in order to run a bottleneck machine 15 days straight prior to changeover

Where are the inputs for that machine? Could Something be

delayed?

WIP Status, Inventory, Inbound

Shipments, Past yield rates, etc.

Intelligent and flexible data

modelling


Supply Chain Visibility for Financial Flows

How Much Working Capital to Borrow?

What are receivables and

forecasted payments?

Orders, Shipments, Inventory,

Chargebacks, Payments, Legal

Framework

Intelligent and flexible data

modelling


Visibility Effectiveness is Measurable: Example Scoring Criteria

Score Description0 The system has no explicit input to this

business decision. It is only “optional” in the decision process

1 The system is a required information source for the decision maker. A user must look for and find the event, and then can take actions as they want.

2 The system is a required information source for the decision maker. The system asks the user to look at the event, but does not attempt to help with further actions

3 The system offers a set of action alternatives based on the event, or

4 narrows the selection down to a few, or

5 suggests one action, and6 executes that suggestion if the human

approves, or

7 allows the human a restricted time to

veto before automatic execution, or8 executes automatically, then necessarily

informs humans, or

9 informs the human only if asked, or10 The system decides everything and acts

autonomously, with no notice given to the users

Interrupt Decisions

Score Description0 Data remains in the capturing systems

with no attempt to integrate the data for later use

1 Data remains in the capturing systems, but processes allow them to be manually integrated (i.e. agreed global IDs, etc)

2 Capturing systems or their middleware render all the decision-relevant data as interconnectable. There are no solitary data objects.

3 Data is centralized but not directly available to the decision maker using the search or browse methods they want

4 All relevant decision-support data is centralized and accessible by any relevant path the decision maker could use.

5The system’s approach to integrating data is easily updatable

6 The system’s approach to integrating data is self-updating

Integrate Data

Score Description0 No data is captured to support the

target business decision

1 Some relevant data is captured, but is incomplete compared to what is needed for the business decision

2 All data is captured but the accuracy of the data is unknown or known to be low

3 Data is complete and consistently biased (i.e. low quality but predictable)

4 All data needed to support the decision is captured, complete, consistent, and measurably high in accuracy

Capture Data

Score Description0 There is no automated recognition

from the system that a business decision is needed

1 There is recognition from the system that a business decision is needed sometimes, but not for all decision-inducing circumstances

2 There is system always knows that the business decision is needed

3 The system’s approach to recognizing the need for a business event is easily adaptable by users

4 The system’s approach to recognizing the need for a business event is self-updating

5The system’s approach to recognizing the need for a business event, integrating data to support the event, and to action-taking for the event, are self-updating

Create Intelligence


Specific Example: Scoring Decision Interruption

Score Description0 The system has no explicit input to this business decision. It is only “optional” in the

decision process

1 The system is a required information source for the decision maker. A user must look for and find the event, and then can take actions as they want.

2 The system is a required information source for the decision maker. The system asks the user to look at the event, but does not attempt to help with further actions

3 The system offers a set of action alternatives based on the event, or

4 narrows the selection down to a few, or

5 suggests one action, and6 executes that suggestion if the human approves, or

7 allows the human a restricted time to veto before automatic execution, or

8 executes automatically, then necessarily informs humans, or

9 informs the human only if asked, or10 The system decides everything and acts autonomously, with no notice given to the users


Typical Data Objects Collected for SC Visibility

Visibility

Invoices & Payments

Forecasted Demand

Purchase & Make Orders

Inventory

ShipmentsForecasted

Capacity


Supply Chain Visibility Impacts on Economic Value Add

Fixed Assets

Working Capital

Revenue

Assets

EVA

Operating Expenses

Selling, General & Administrative

Depreciation & Amortization

Cost of Goods

Price

Sales Volume

Returns

EVA = (Net Profit - Adjusted Taxes) - (weighted average cost of capital * Capital Employed)

Tax Adjustment

Available to Promise from Virtual Inventory Pools

Improve Service Levels Launch new products faster

Negotiate lower 1st costs via payment visibility Negotiate lower 1st costs via supplier scorecarding Chargeback Automation Improve manufacturing throughput via coordination

of material flows SKU-Level total-cost-to-serve visibility enables

product-to-service rationalization

SKU-Level total-cost-to-serve visibility enables product-to-service rationalization

More effective supply chain analyst staffing, by removing data collection, cleaning, & rote analytics

Enable advanced distribution tactics

Enable trading company for tax arbitrage

Reduce FG and raw materials, in-transit and safety stock levels

Reduce carrying costs for inventory

Improve machine utilization via material flow coordination


Typical Reported Supply Chain Visibility Benefits

1. Several days of inventory reduction from in-transit and also from safety stock

2. Reduced logistics spend

3. Reduced cost of goods sold

4. Improved staff effectiveness in planning, network design, supply chain negotiations, and so forth.

5. Multiplied effectiveness of the ERP systems landscape

60% of 1st Full Year Impact



2.5% of 1st Full Year Impact

2.5% of 1st Full Year Impact


Detailed Example: Reducing Inventory Levels via Visibility

Example: the SAP-APO is set to hold a minimum of ten days of safety stock in inventory for a given raw material, and to expect inbound lead times of 12 days transit from the manufacturer…

Are the assumptions about inbound or outbound lead-time valid? Often they are outdated or averages with buffers added.

…Right-Size the APO Settings

Are there ways to split fast from cost-effective supply chain activities? Update SOPs accordingly and shorten the lead time in SAP-APO.

…Improve Segmentation

Is lead-time variability well understood and controlled? A 95% on-time short-transit is of no use if the planning system uses the longest variability in its planning .

…Minimize Operational Variability


Five Characteristics of the Semiconductor Supply Chain

1. Diversity of business models, leading to diversity of supply chain operations

2. Capital intensiveness: R&D, Fixed-Assets, and Process Engineering

3. Cyclical and volatile demand

4. Short product lifecycles

5. Extreme market competitiveness, leading to cost and service/quality ops. focus


Three Current Business Strategies… and their SC Counterpart

Fab-lite strategies and diversity of business models lead to blends of make-buy for almost all product lines

#1: Make-Buy Optimization

Capacity & Asset Optimization


Varying Business Models & Any Player Could Change Approach

Pack

& T

est

Pro

duct

ion

Desi

gn

In-House Mix ExternalOperating

Model

Key P

rocess

At Least Five Models:1. Merchant

Foundries2. IDMs3. OSAT4. Fabless5. Fab-lite


Visibility Data That Impacts Make-Buy

Visibility

Cost to ServeForecasted

Demand

Inventory

Forecasted Capacity

Visibility improves the make-buy decision primarily by improving the information quality inputs… faster to collect, more accurate, more complete, etc.





#2: Early Market Share

Attaining early and definitive market share allows for stronger pricing and realization of sales during highest profit phase of the product lifecycle


Fast & Effective Launch


Market Share vs. ROIC in 2009

iSuppli; McKinsey; Gartner


IDM Market Share vs. ROIC in 2015

IHS iSuppli Semiconductor rankings for 2013; MarketWatch; Morningstar

7% 9% 11% 13% 15% 17% 19%0%2%4%6%8%

10%12%14%16%

Intel Samsung Qualcomm Infineon NVIDIA

Mar

ket S

hare

ROIC

Returns Below Weighted Average

Cost of Capital


Visibility Data That Impacts Product Launch Success

Visibility

Invoices & Payments

Purchase & Make Orders

Inventory

Shipments

Visibility improves product launch success by making novel process, partners, and distribution channels transparent. It improves the quality of information, and automates some decisions to allow scaling up faster.





#2: Early Market Share

#3: Market Selection

Attaining early and definitive market share allows for stronger pricing and realization of sales during highest profit phase of the product lifecycle

Semiconductors feed in to a large variety of markets, with various growth and profit potentials. Outperforming peers requires identifying a target market and matching their operations to it.



Supply Chain Segmentation


Importance of Market Selection

Examples:o Texas Instruments divested over 15 companies in 15 years, leaving markets like DRAM and defense-controls in

order to focus on wireless and medical device sectorso Qualcomm focused on licensing of its wireless communication technologieso Applied Materials shifted away from implants and towards solar


Market Selection Leads to Segmentation of Supply Chains

1

Phase Business Strategy

Supply Chain Focus

Visibility Tactics

#1- Prototype / Public Proof of Capability

Claim a defensible niche

Network Design to align capacity and costs to product profile

• Total cost to serve • Capacity-forecast

alignment

#2- Introduction Book all available orders and gain market share

Agility… rapid changes to products, channel, & partners

• Advanced distribution• Supply-demand pooling• Supplier payment

visibility

#3- Peak sales Maintain market share and profit margins

Reliability… defend market share and focus on capacity alignment

• WIP & In-Transit Visibility

• Supplier scorecarding

#4- Commoditization Control price erosion and rebalance capacity to other lines

Costs… these supply chains have to be super-lean, but have little risk from assets

• Virtual inventory pooling

• Total cost to serve• Supplier payment

visibility

#5- End of Life Support selected lines for spare parts and avoid inventory exposure

Assets… the product will sunset and any inventory left is a loss

• Virtual inventory pooling

• Total cost to serve

2 3 4 5


Summary of Industry Challenges, Strategies, and Link to SCVC

orp

ora

teD

epart

menta

l

Stated Strategy

KPI to Measure this

Strategy

What is Success?

Related Supply Chain Strategy

Visibility Solutions

How to Measure the Supply Chain

Fab-lite

Make-Buy Ratio

Book-to-Bill Ratio for Company compared to

Industry

Capacity & Asset

Optimization

• Supply coordination• Forecast-capacity

visibility• Supplier

scorecarding

• Make cycle time• Source cycle time• Cost of Goods

Sold• Throughput &

Capacity Utilization

First to Market

• Sales from products released within 12 months

• Market Share

Long period without viable competitors,

leading to high market share and prices


• Supply-demand pooling

• WIP & In-Transit Visibility

• Advanced distribution tactics

• Make cycle time

• Source cycle time

• Cost of Goods Sold

Market Selection

• Total Addressable Market

• Market Share

Shifting resources to the best market they can be

in 1st or 2nd place

Segmented Supply per

Product Line

• Total Cost to Serve• Virtual inventory

pooling• Supplier

scorecarding

Cost, Reliability, Agility, and Assets… depends on the segment


Five Trends Impacting Supply Chain Visibility

1. Internet of Things… immense, complex, and hands-free data acquisition and consumption

2. Big Data… particularly external & unstructured data

3. Machine Learning… intelligence monitoring and assessment is changing the human role

4. UX Engineering… changing expectations and knowledge about human-software interaction

5. Control Towers… emerging standard for combining tech, process, and people


Five Trends Impacting Supply Chain Visibility

Capture Data

Integrate Data

Create Intelligence

Interrupt Decisions

Control

Towers

Big Data

The Internet of Things

UX Engineering

Machine Learning


For More Information…

1. Blogosphere (www.supply-chain-visibility.com), (www.supplychainshaman.com/the-journal/)

2. Advisors… McKinsey, Accenture, Deloitte, Cap Gemini

3. Analysts… Gartner, Aberdeen, Supply Chain Insights

4. Professional Associations… APICS, CSCMP

5. Technologists… GT Nexus, E2Open, Elementum, SAP, JDA

http://www.supply-chain-visibility.com/

http://www.supplychainshaman.com/the-journal/


Thanks…

Jonah McIntireSenior Director, Innovation & Strategy

Zürich, Switzerland

Company Website: www.gtnexus.comBlog: www.supply-chain-visibility.comLinked-In: https://ch.linkedin.com/in/jonahmcintireEmail: [email protected]

http://www.gtnexus.com/

http://www.supply-chain-visibility.com/

https://ch.linkedin.com/in/jonahmcintire

https://ch.linkedin.com/in/jonahmcintire

mailto:[email protected]

jonah's scv presentation (26-may-2015)

Documents

cloud supply chain platform

supply chain materials

supply of components

gt nexus confidential

capture data

data points

flexible data modelling

visibility effectiveness