Agility Beyond Operational Excellence Transforming the organization to be Lean, Responsive and Agile. DOAG Conference Dortmund, May 7, 2014
Agenda 1. Introduction EY s competence in supply chain management 2. Agility what does this mean for your business? 3. Agility in your business Ensuring adaptiveness to changed market conditions 4. What is the speed you need time horizons of agility 5. Sources of agility levers in organization, processes, systems, staff Page 2
Introduction EY Page 3
Global compentence in Value Chain optimization 140 countries 27k professionals $4.3b revenue Germany Switzerland Austria (GSA) 900 EY professionals (in that 250 ex-j&m professionals) Americas 9,700 professionals EMEIA 12,400 professionals APAC 3,900 professionals Page 4
Our service offering Supply Chain Structures Creation of demand and/or supply driven segments Differentiation of manufacturing and supply strategies SC complexity reduction or control improvements Total view on the supply chain Integration of suppliers and customers into planning and delivery processes Consideration of individual constraints and performance requirements Sales and Operations planning used as core business management process Collaboration across functions and across corporate boundaries SC Strategy alignment to business strategy and market requirements International supply chain structures Based on relevant SC maturity Supply Chain Segmentation End-to-End Supply Chain Design Integrated Value Chain Management Service Offering Supply Chain Technologies Supply Chain Performance and controls Supply Chain Organization Monitoring of current supply chain performance Matching with customer requirements Targeted controls and KPI to monitor and improve SC Global, regional, and local leadership structures and roles Required formal empowerment to drive operational performance and required improvements Escalation procedures and accountabilities Integrated processes, procedures, rules/policies, responsibilities SC processes designed based on lean principles Operations structured according to SC principles Supply Chain Day-to-Day Operations Integrative information flow across systems From demand signals to demand fulfilment Focus on ERP and APS functionalities SAP ERP, SAP SCM, SAP EIS, SAP S&OP on HANA, SPP DS, Icon SCM, Asprova, I2, Infor, OMP, OrSoft,Steelwedge, et al. Page 5
Current highlights for You Supply Chain Trend Study 2014 Starting June 2014 www.de.ey.com/supplychaindays Dieter.boelzing@de.ey.com Page 6
Agility what does it mean? Page 7 Presentation title
Some definitions Agility in value chains describes the ability of companies to adapt to changed market conditions, providing appropriate responses in a meaningful frame of time 3 Factors are decisive for business agility: Ability for early recognition of changes in Markets, and the need to initiate the adaptation in the company. This includes access to the nature of changes, but also to learn to accelerate and improve this capability over time. Flexibility to rapidly initiate, implement, and accomplish changes in regards to product, processes, and organizational, being in internal structures and setups, as well as in the external interfaces to customers and suppliers, and other stakeholders Transformation velocity, being defined by the time required, to initiate, implement, and accomplish the required changes in the company and ist environment competently and in a secured fashion Page 8
Agility requires some level of collaboration 1. Functional Silos Sourcing and purchasing Innovation & Product Lifecycle Management Order Mgmt Supply Chain Operations Quality Mgmt Sales and marketing Service and spare parts Mgmt 2. Internally integrated SCM Innovation & Product Lifecycle Management Supply Chain Management Sourcing & Purchasing Order Mgmt Supply Chain Operations Quality Mgmt Sales and marketing Service and spare parts Mgmt Finance & and Controlling controlling Finance & and Controlling controlling 3. Integration with customers and suppliers Supplier Supply Chain Management Sourcing and purchasing Innovation & Product Lifecycle Management Order Mgmt Supply Chain Operations Quality Mgmt Distribution Planning Maintenance Production Warehousing Logistics Distribution Planning Maintenance Production Warehousing Logistics Distribution Planning Maintenance Production Warehousing Logistics Sales and marketing Service and spare parts Mgt Supply Chain Champions 2012 Customer Finance and controlling Page 9 EY SCM Service Offering / Advent International 18.2.2014
Agility ensuring adaptiveness Page 10
Transformation is essential due to megatrends in a fast-changing world companies are facing today Highly individualised & volatile customer demands Globalisation Cost Pressure Urbanisation Financial Risk Mobility Shortage of Resources Demographic Change Ubiquitous Internet Fast-changing & complex product & service portfolio Page 11
Main challenge are the dynamics from intensive interaction between the individual challenges Highly individualised & volatile customer demands Globalisation Cost Pressure Urbanisation Financial Risk Mobility Shortage of Resources Demographic Change Ubiquitous Internet Fast-changing & complex product & service portfolio Page 12
Game changing business trends: Acceleration Moment of Need Moment of Fulfilment Moment of Fulfilment Select Internet Produce Customized to Order Deliver 24 hr Delivery Structural Reduction Hours Days Weeks Months Traditional process Time New Enablers Page 13
Game changing business trends: IT-Integration Supply Chain Cockpit Sourcing Signals Shipment Signals Production Signals Demand & Supply Data Page 14
Game changing business trends: Integration in the value chain Lean The 1980 s: Automotive optimizes inbound supply ( JIT ) Supply Production Distribution Consumer Responsive The 1990 s: Retailers optimize inbound distribution ( ECR ) Supply Production Distribution Consumer Dynamic The 2000 s: Electronics optimizes the chain flow ( CPF ) Supply Production Distribution Consumer Customer centric and integrated The 2010 s: E-Tailers integrate with the consumer, and leverage on superior SC capabilities along the entire chain Supply Production Distribution Consumer JIT Just-in-Time ECR Efficient Consumer Response CPF Continuous Product Flow Page 15
Game changing business trends: Volatility from working capital optimization *) Increased volatility in supply chains Increased complexity in the value network New paradigm: Inventories as unwanted capital Impulse Old paradigm: Large inventories as security buffers Increasing upstream demand volatility Extensive global sourcing networks Increasing requirements on flexibility Less time to respond to quality problems Increased product portfolio More exposure to transport risks *) Similar effects account from operational excellence initiatives, streamlining operations, but making them often more vulnerable Page 16
The speed you need Page 17
For a business, agility has two main sides: internal value chain, and value network Internal value chain Value network Internal alignment of functions Being close to customers Collaboration on adjustment scenarios Taking advantage of global capabilities Embedded agility from built-in flexibility Swift adjustments when required Page 18
Agility is the ability to respond in the appropriate time, based on having key enablers in place Enabler Response Your business Trigger Segmentation Organizational response Internal Impulses Modularization Standardization Globalization Management Decisions Product portfolio changes Investments (M&A) Divestments (M&A) Partnering Networks Strategic stocks Financial reserves Process responses External impulses Raw materials Customers Competition Pricing New technologies New practices Page 19
Main objective is to create the readiness to be agile when needed Current structure Low agility Prepare without stress Enabling structure Where does your business stand today? Execute fast Prepare Execute Future state structure t 0 t 1 t 2 High agility For each business, an individual agility concept should be implemented Modularity of the business is a key enabler for having a higher potential agility, and to respond to impulses from the market In case of a disturbance, the required modules can be activated with targeted actions, and thus enable the adaptation of the business to the new situation Preparing in this way, makes the organization much more nimble, and reduces the time span to respond significantly Additional advantage is that all required preparations can be done without direct strain on the business, thus allowing actions to be planned and prepared thoroughly, and well thought through Page 20
Agility needs to address individual prohibitors For each business, an individual agility plan should be developed, depending on its individual agility profile High Existing Structural Agility Low Highly Flexible Structure Responsive change Adjustable structure Incremental change Flexible but needs renewal Fundamental change Inflexible structure Continuous change Key questions to be answered are addressing - the required speed for change - for what type of impulse - to initiate which type of change - to reach which future state - based on which agility levers - who leads the transformation Short term Time to adapt Long term There are specific business conditions which provide limitations to agility, such as large-scale equipment; therefore required to identify ways to reduce the time scale for adjustments by changes of the current investment strategies Main emphasis for the roadmap to higher levels of agility is to identify sources of agility which serve many different types of adjustments Page 21
Sources of agility Page 22
Types of agility levers in organization, processes, systems, staff Business setup Innovation Order management and fulfilment Nimble organizations that can shift according to changing needs Adaptive processes that allow to re-route orders and tasks according to changing requirements Manufacturing Distribution E-o-S E-o-F Integrated systems with standardized interfaces to adapt to new situations Staff that is educated, willing to learn, and ready to adapt to new working styles IT Platforms E-o-S Economies of Scale; E-o-F Economies of Flexibility Page 23
Some examples how to make your company more operationally agile Transparency for flexible supply planning More educated Make-or- Buy Decisions Selective, differentiated use of different sourcing types Develop products and processes jointly with suppliers Use of autonomous developement organizations Build explicit knowledge pools Establish self regulating project teams Build competence networks based on Pooling Integrate with key Supply-Chain-Partners with suitable IT-Systems Detailed evaluation and selection as well as monitoring of suppliers, Establish and ensure dynamic quality assurance Give way for Partnering instead of enforcing market power Drive required changes using extensive, proactive communication Quelle: BME / BVL-Studie: Supply Chain Agility - Strategische Anpassungsfähigkeit im Supply Chain Management, 2013 Use of flexible working time models Page 24
Thank you! Page 25 Presentation title
We create Value Chain Champions Place image here with reference to guidelines Dr. Dieter Bölzing Partner SC Strategy & Planning Tel.: + 49 6196 996 17681 Mobile: + 49 173 65 54 554 E-Mail: dieter.boelzing@de.ey.com Ernst & Young Mergenthaler Allee 3-5 65679 Eschborn www.ey.com Volker Stockrahm Partner SC Strategy & Planning Tel.: + 49 6196 996 17908 Mobile: + 49 160 939 17908 E-Mail: volker.stockrahm@de.ey.com Page 26 EY SCM Service Offering / Advent International 18.2.2014