Supply Chain Innovation: Thinking Outside the Box

Transcription

1 Supply Chain Innovation: Thinking Outside the Box Joel Sutherland Managing Director Supply Chain Management Institute University of San Diego

2 USD & SCMI (Supply Chain Management Institute) SCMI founded in 1999 SCM program started 1984 Develop / disseminate SCM knowledge in three areas: Collaborative Relationships World-Class Education Applied Research

3 Evolving Discipline Driving Innovation Fragmented 1960 s Increased Integration 1970 s 1990 s Today

4 Boardroom Expectations Growth Reduce Costs Less Inventory Risk Management Innovation Source: Deloitte; Aberdeen; SCMI

5 What is Supply Chain Innovation? New Products New Processes New Technology Product Innovation Different than SCI New Application (Old Processes / Technology) Supply Chain Innovation Supply Chain Innovation must result in quantifiable and sustainable results in terms of cost savings, revenue improvement, customer satisfaction, etc.

6 The Hard Way to Innovate

7 Innovative Products/Services Need to be Used 19th President of the United States ( )

8 Why is SC Innovation Important? Gain competitive advantage - Differentiate Capture market share Enhance profit contribution Survival! Why not develop a culture of innovation?

9 CEO s Consider Innovation a Priority Innovation is increasingly viewed as critical to sustaining a competitive advantage in the changing global marketplace 61% of CEOs worldwide say that innovation is a priority or a primary focus within their business. but Source: Accenture Source: PWC

10 Innovation Efforts Sluggish/Ineffective Many firms indicate their efforts are lacking 55% Don t effectively seek innovation opportunities 66% Don t have welldefined innovation strategies. What s Stopping Them? Source: Accenture Resource constraints (Time & People) Budget constraints Lack of structured innovation processes or procedures Source: Forrester

11 Five Ingredients for Innovation Source: PWC

12 Innovation Done Right = Revenue+ Top innovating companies Other companies Source: Bain

13 We need to identify and apply INNOVATIVE SC solutions to meet these evolving needs. We cannot solve our problems with the same thinking we used when we created them. A. Einstein To be innovative, we need to...

14 Supply Chain Innovations that Changed the World Breakthrough

15 Principles of Scientific Management Late 1800 s: Frederick Taylor invents concept of using time studies leading to time & motion. Influenced the development of best practices to increase work efficiency = Modern Industry

16 Next-Business-Day Delivery Service 1970 s: Fred Smith founded FedEx to provide overnight delivery for time-sensitive products. Mid- 80s: Introduced computerized tracking system providing near real-time info on delivery status.

17 Continuous Flow Production 1913: Ford applies Continuous Flow concepts to assembly line processes. Total time to assemble a single car fell from 12.5 labor hours to 1.5 labor hours.

18 The Ocean Shipping Container 1956: Malcom McLean invented the steel shipping container at the port of New Jersey. Innovation reduced shipping cost by a factor of 100.

19 Toyota Production System (TPS) Sakichi Toyoda Taiichi Ohno TPS House : Developed an integrated system that combines its management philosophy & practices. Evolved into Lean manufacturing and influenced supply chain practices in every area of business.

20 Universal Product Code (UPC) 1970: Standard developed to identify a specific SKU with a bar code. Invention triggered the auto ID movement, forever changing SC practice and info flow.

21 Who is This Famous Innovator? 1989: British computer scientist, best known as the inventor of the World Wide Web. Sir Tim Berners-Lee (2012) SC professionals around the world have since developed innovative ways to use the internet to improve SC processes.

22 Delivery Services In 2014, UBER entered the delivery business. UberRush: Business door-to-door delivery service UberEats: Restaurant to consumer food delivery service Uberization of logistics industry occurring at a rapid pace connecting shippers and drivers, eliminating the middleman.

23 Supply Chain Innovations that Changed the Business Incremental

24 Uncovering Innovation Opportunities Go slow to go fast It s amazing how many opportunities for innovation you can identify by carefully observing your surroundings. Toyota expression

25 Most SC Innovations are Incremental Shorten order to delivery cycle times Increase inventory turns Improve service quality Reduce operating costs

26 Favorites from Personal Experience Just Born Formica Transplace ConAgra Denso

27 How Would You Solve This Problem? New Processes How can we compete with the Big Boys?

28 The Challenge to Solve Lacked sufficient freight volume to fill trucks and meet customer delivery requirements Could not compete with the big boys Shipped partially filled trucks to match delivery schedules Result: Costly, with empty miles and out-of-routes

29 Innovation through Collaboration Collaborated with other (5-7) confectionery companies to achieve critical mass = Shared warehousing, transportation, and distribution Like-products delivered to same customers Co-loading freight among multiple shippers Reduced freight expense 25-40%

30 How Would You Solve This Problem? New Application (Old Processes / Technology) We Never Saw it Coming

31 We re the King of the Mountain Problem: Formica offered 6 week order to delivery times - but customers, especially jobbers, were demanding much shorter cycle times. Brand Recognized worldwide like Kleenex Dominate global market share ~90% in North America Oppressive union environment difficult to change Complacent attitude don t see reason to change Little competitive threat in product quality or price

32 Innovation by Listening to the Customer Wilsonart, a little known competitor, developed a superior process, simplified, streamlined, and little waste, and was able to offer a guaranteed two week max cycle time 1/3 the time!!! Result: Within a few years, Formica had lost significant market share, was unable to recover with existing management and labor constraints, and filed for bankruptcy protection.

33 How Would You Solve This Problem? New Processes New Technology New Application (Old Processes / Technology) We Need Critical Mass

34 JB Hunt Logistics Non-asset business ¼ the size of Schneider Logistics at ~$1+ billion managed transportation JBHL had created superior technology platform (internet + optimization technology) but lacked sufficient critical mass to leverage volume Web-Based Systems Connectivity Critical Mass Optimization Technology

35 Solution In July 2000, the six largest publicly-traded North American transportation companies combined logistics management capabilities (non-asset based) into a shared 3PL and technology services firm to become Transplace. Merger effectively tripled the volume = critical mass!

36 How Would You Solve This Problem? New Technology Where s the Beef?

37 Poor Demand Forecasting Let s load the trailers and let them wait until we get an order.

38 Results of Poor Demand Forecasting 16,000~20,000/day Firm orders = 10,000~12,000/day Overproduction = 4,000~10,000/day Problem: Consumers want certain cuts to suit the weather - roasts in winter; steaks on the BBQ when it s warm outside. Without accurate demand forecasts, product goes unsold.

39 Innovating with New Technology Solution: Developed new demand forecasting software incorporating 7 10 day weather forecast in order to more accurately align production planning with demand Results: 35% improvement in production / demand forecast accuracy

40 How Would You Solve This Problem? New Application (Old Processes / Technology) The Curse of the 60 x 60 Pallet

41 The Curse of the 60 x 60 Pallet Problem: Not filling trailer to capacity (Toyota group company and Toyota s largest global parts supplier)

42 Innovating to Solve the Problem Automobile Air Conditioner

43 Results of Innovation Packaging redesigned for 48 wide pallets Reduced transportation costs 30~40% Pallet costs reduced significantly

44 Requires leadership to establish a vision and support innovation Responds to customer demands Is not a project but a culture