Creating Market-driven Value Networks. Lora Cecere of Supply Chain Insights

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1 Creating Market-driven Value Networks Lora Cecere of Supply Chain Insights

2 About Us Supply Chain Insights is focused on delivering independent, actionable and objective advice for supply chain leaders. A company dedicated to research, turn to us when you want the latest insights on supply chain trends, technologies to know and metrics that matter. Supply Chain Insights LLC Copyright 2013, p. 2

Over 30 Reports Planned for 2013 #sciwebinar

5 Second Printing of Bricks Matter: 17 Five-Star Reviews on Amazon This is the new bible for all supply chain executives. It provides an insider s perspective that will prove incredibly valuable to even the most grizzled supply chain veteran. This is the next must-have business book. --Bruce Richardson, Chief Enterprise Strategist, Salesforce.com Today, the worlds of social business and supply chain management have many degrees of separation. I enjoyed working with Lora to understand what the future transformation of digital marketing to digital business could look like. --Jeremiah Owyang, Research Director, Altimeter Book can be ordered from Amazon.com in Hardcopy or Digital Format Supply Chain Insights LLC Copyright 2013, p. 5

6 Right Use of Assets Expansion into BRIC Countries (Brazil, Russia, India and China) Supply Chain Process Knowledge

2013 Publications Publishing Two ebooks in 2013 on Supply Chain Metrics That Matter Consumer

8 Where are we on Delivering on Supply Chain Excellence?

A Supply Chain is a Complex System with Complex Processes with

Mining 20 Years of Financial Data Supply

14 Our Point of View: Definition of Supply Chain Excellence Perform better than peer group Improve year-over-year results Deliver against the business strategy Demonstrate consistency in results Use innovation in supply chain processes Balance. Be leaders in managing trade-offs Supply Chain Insights LLC Copyright 2013, p. 14

15 To Drive Corporate Performance In a way that is: Resilient and predictable Balanced across the set of metrics to maximize value Showing year-over-year improvement against peer group Supply Chain Insights LLC Copyright 2013, p. 15

16 Most Interesting Patterns Revenue per Employee versus Inventory Turns Operating Margin versus Inventory Turns Cash-to-Cash Cycle versus Inventory Turns Supply Chain Insights LLC Copyright 2013, p. 16

17 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. Supply Chain Insights LLC Copyright 2013, p. 17

Progress in Inventory Turns and Operating

23 Visualizing the Patterns Here, we plot inventory turns (y-axis) vs. revenue per employee (x-axis). Best Scenario Ideally, companies are increasing inventory turns and revenue per employee, moving towards the upper right corner of the graph over time. Trace the line from 2002 point to 2012 point to follow the performance over time. DOW 999, 6.7 The diamond shows the company s average over the period. Ex: The Dow Chemical Company (DOW) has an average of 999 K$ for revenue per employee and 6.7 for inventory turns. Average (Revenue per Employee, Inventory Turns) Source: Supply Chain Insights LLC, Corporate Annual Reports from One Source Supply Chain Insights LLC Copyright 2013, p. 23

28 Who Does Supply Chain Best? October 2013

35 Who Does Supply Chain Best? October 2013

46 Introducing the Supply Chain Index A formulaic representation of how companies are trading off growth, profitability, cycle and complexity performance on selected supply chain financial metrics against market valuation. #sciwebinar Supply Chain Insights LLC Copyright 2013, p. 46

47 Wrap-up Supply chain is a complex system with increasing complexity. Different industries have different patterns, but the cash-to-cash metrics have the highest correlation to market capitalization with some of the poorest performance. Supply Chain Insights LLC Copyright 2013, p. 47

48 Next Steps 1. Finish the work on the Supply Chain Index 2. Place the rankings on balance, strength and resilience into the Supply Chain Insights Community for Shaman Circle members to vote on supply chain excellence 3. Final analysis of companies to be revealed at the 2014 Supply Chain Insights Global Summit Supply Chain Insights LLC Copyright 2013, p. 48

49 Building Market-driven Value Networks

Process Evolution Align: Market Driven Building Horizontal Process

Demand and Supply Adapt: Demand Driven Sense Demand and Supply Resilient

Shape Demand and Supply based on Market Absorb Supply Volatility Right

50 Process Evolution Align: Market Driven Building Horizontal Process Connectors Continuous Testing Learning Improving In Market Orchestrate Demand and Supply Adapt: Demand Driven Sense Demand and Supply Resilient Absorb Demand Volatility Reliable Right Product Right Place Efficient Cost Shape Demand and Supply based on Market Absorb Supply Volatility Right Time Right Cost Procure to pay/order to cash Supply Chain Insights LLC Copyright 2013, p. 50

51 What Is a Demand-driven Value Network? A network that senses demand with minimal latency to drive a near-real time response for demand shaping and demand translation. Supply Chain Insights LLC Copyright 2013, p. 51

54 What Is a Market-driven Value Network? An adaptive network focused on a valuebased outcome that senses and translates market changes (buy and sell-side markets) bi-directionally with near-real time data latency to align sell, deliver, make and sourcing operations. Supply Chain Insights LLC Copyright 2013, p. 54

56 Collaboration: The Right Stuff SHARED VISION + SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION SHARED VISION + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY SHARED VISION + SKILLS + INCENTIVE + RESOURCES + LEADERSHIP = FALSE STARTS SHARED VISION + SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION SHARED VISION + SKILLS + RESOURCES + PLAN + LEADERSHIP = GRADUAL CHANGE Source: J.P. Kotter Supply Chain Insights LLC Copyright 2013, p. 56

Market-Driven Value Networks Characteristics

58 Orchestration Levers Demand-shaping Levers New Product Launch Marketing Sales Incentives Trade Promotions Distributor Incentives Assortment Price Run-out of obsolescence or markdown strategies Market-driven Orchestration Levers Price to Price Orchestration Alternate Bill of Materials Alternate Sourcing Change in Assortment Orchestration of Product Mix (Incent products with less commodity variability) Changes in Demand Shaping Strategies Commodity Hedging Supply Chain Insights LLC Copyright 2013, p. 58

Value Network Strategy Business Strategy What are the right things to do to increase company value? Value-network Supply Chain Strategy What are the right ways to support the business strategy?

59 Value Network Strategy Business Strategy What are the right things to do to increase company value? Value-network Supply Chain Strategy What are the right ways to support the business strategy? What are the right trade-offs between value drivers for each value network? Align demand Right product Supply relationships chain strategy platforms Demand Networks Joint Value Creation Strategies Design Networks Innovation Methodologies Design the supply response Supply Chain Network Design Build organizational systems and manage talent Continuous Improvement Capabilities Required Align supply relationships Effective Supply Networks Execution of buyside strategies Business Process How do I do the right things right? Source: Supply Chain Insights, LLC Supply Chain Insights LLC Copyright 2013, p. 59

Building an Effective Center of Excellence

61 Race for Supply Chain 2020

Supply Chain 2020 Tipping Points 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Talent Shortage Compliance on Safe & Secure Orchestration Big Data Supply Chains Internet

62 Supply Chain 2020 Tipping Points Talent Shortage Compliance on Safe & Secure Orchestration Big Data Supply Chains Internet of Things Learning Supply Chains Digital Manufacturing Supply Chain Excellence = Value-Based Outcomes Delivered by Value Networks Outside-In Supply Chain Insights LLC Copyright 2013, p. 62

67 Big Data Definition Structured Data Transactional Time phased data Challenges: Unstructured Data Sensor Data New Data Types Social Channel Customer Service Warranty Temperature RFID QR codes GPS Mapping and GPS Video Voice Digital Images Velocity Volume Variability Supply Chain Insights LLC Copyright 2013, p. 67

Podcasts www.supplychaininsights.com/podcast Research Anytime, Anywhere!

73 Podcasts Research Anytime, Anywhere! Straight Talk with Supply Chain Insights is a fresh and engaging podcast series on supply chain research, blog posts, hot topics, and current events plus interviews with supply chain professionals. Supply Chain Insights LLC Copyright 2013, p. 73

Public Training November 11-12, 2013 Chicago Illinois USA January 16-17, 2014 Atlanta, Georgia

October 11: Supply Chain Metrics that Matter

Value Networks December 12, 2013: Digital

June 13, 2013: Sales and Operations Planning:

76 Free Webinars UPCOMING WEBINARS October 11: Supply Chain Metrics that Matter November 14, 2013: Insights on Healthcare Value Networks December 12, 2013: Digital Manufacturing PAST WEBINARS: ON DEMAND From June 13, 2013: Sales and Operations Planning: State of the Union From May 23, 2013: Supply Chain Index, Part II: How and Why? From May 17, 2013: How Do We Heal the Healthcare Value Chain? From August 17, 2013: Supply Chain Talent, the Missing Link Supply Chain Insights LLC Copyright 2013, p. 76

77 Who Is Lora? Founder of Supply Chain Insights Partner at Altimeter Group (leader in open research) 7 years of Management Experience leading Analyst Teams at Gartner and AMR Research 8 years Experience in Marketing and Selling Supply Chain Software at Descartes Systems Group and Manugistics (now JDA) 15 Years Leading teams in Manufacturing and Distribution operations for Clorox, Kraft/General Foods, Nestle/Dreyers Grand Ice Cream and Procter & Gamble. Supply Chain Insights LLC Copyright 2013, p. 77

Where Do You Find Lora? Contact Information: lora.cecere@supplychaininsights.com Blog: www.supplychainshaman.com (5000 pageviews/month) Twitter: lcecere 4270 followers.

78 Where Do You Find Lora? Contact Information: Blog: (5000 pageviews/month) Twitter: lcecere 4270 followers. Rated as the top rated supply chain social network user. LinkedIn: linkedin.com/pub/loracecere/0/196/573 (5450 in the network) Supply Chain Insights LLC Copyright 2013, p. 78

Market-driven Value Networks. Lora Cecere of Supply Chain Insights

Market-driven Value Networks. Lora Cecere of Supply Chain Insights Market-driven Value Networks Lora Cecere of Supply Chain Insights About Us Supply Chain Insights is focused on delivering independent, actionable and objective advice for supply chain leaders. A company