Are You Ready for the Sea Change in Supply Chain Strategy?

Are You Ready for the Sea Change in Supply

Chain Strategy?

April 2012

Roddy MartinSVP Supply Chain

Transformation Competitive Capabilities International

© Competitive Capabilities International

Competitive Capabilities International (CCI)

Roddy Martin

SC Transformation Thought Leader Executive South African Breweries (SABMiller)

– Engineering Leadership– Manufacturing Strategy – IT Leadership

AMR Research – Gartner SC leadership

CCI SVP SC



Starting Thoughts

3

SC and IT Alignment: So, what’s new?• IT Alignment, IM Capabilities & Architecture • Prioritized and Synchronized to Support End to End Digitization of the Demand–driven

Value Network

4 Management Systems: Decoupling Layer The End to End Supply Chain Starts at the “Buyer:” Shopper/Customer

• The Journey : Readiness to Change / Performance Improvement Maturity is a Critical Factor.

• Not Just “One Supply Chain” Demand-driven Segmentation Reduces Complexity!

Supply Chain Strategy is the Business Operating Strategy • Top Down Change Leadership is Fundamental to Sustainable Transformation.• Supply Chain Undergoing Sea Change Transformation – from Functional Outputs to

Business Outcomes

Building End to End Process Capability is More Than a Set of Projects • Building Sustainable Process Capabilities while Managing Day to Day Business

Performance – More Than “Integration”



Today,Tomorrow, 2020 Capabilities Challenge: Future Proofing

4

2020

Growth ?

Today

Costs

Process capability to be

agile across end to end

Demand-driven Value Network

Journey to build agility

“Real”

Money Requires “More” than Projects

& Integration”…………



“Linear Supply Chains Lack Scale Process & Visibility” --P&G Chief Supply Chain Officer

Disconnects… Silo’d & Functional Focus vs End to End Demand–Driven Processes

MaterialsMgmt Manufacturing Distribution

Suppliers

New Product or ServiceMerges to the Base Supply Process

CustomersPatients

Consumers

SuppliersPartners

ManufacturersAssemblers

DistributorsWholesalers Customers

ConsumersUsers; Buyers

Risk

Risk

Risk Risk Risk Risk

Risk

Projects and Programs

5 day demand change 90 day response time

Manufacturer

• Agility and responsiveness• Sustainable performance improvement• End to end process capabilities• Managed complexity & risk• Structure for “global operations” • End to end talent & skills, people development• Enabling end to end process "information”

X

“Change”

Risk

“Agility to Change”

gold oil



Gartner, AMR Research

Fundamental

Competitiveness

Differentiators

Outside In view End to End Supply Chain ProcessTechnology Aligned Cross Functional Goals & Objectives

Risk Management Demand Management Global Network ManagementCost Optimized Supply Chain

Align to customer value Sustainability ServicesProfitable Trade Offs

“North-South” Goal

Alignment

MeasurementAptitude

Change Leadership

Continuous Improvement

Culture

Power Through Process (e.g. S&OP)

ST

ICK

YG

LU

E

“East-West”Process

Performance



Consumers, Shoppers & Buyers

Make Choices

Point of Purchase

Stock Outs

Product QualityOn The Shelf

Costs to ServeAccount Profitability

Winning in New Markets

ComplexityCosts or Differentiates

Demand Supply

Product

“Supply Chain” Starts with the Buyer Choice; Is Outside-In; End to End & An Interdependent Network

Risk Embedded

Risk Management

“IntegrativeImprovement

Actions & Trade Offs”

…& Impacts Capabilities Here

Starts here …..

Open Innovation



The Demand-driven Value Network Framework: P&G “CDSN “Thought Leadership

Product & Service Innovation

Segmented Pull

Cu

sto

mers

, B

uyers

, U

sers

,

& C

on

su

mers

Channel Demand

&Demand

Management

Demand Visibility

User/ Consumer/Demand Insights

Su

pp

liers

& P

artn

ers

Segmented Push

Reliable, Profitable

Response from Supply

Network Based on Demand

Supply Visibility

decoupling

Demand Translation

& Trade Offs

Integrated Strategy, Business Sufficiency &

Value Network Planning

Adapted from AMR Research

Customer – Patient back design

8



No Systemic Continuous

Improvement Plans or structure.

Fire Fighting

The 5 Stages of Performance Improvement Maturity

Imp

act

Expert Led /Based Projects

Implementation of

Improvement Projects led by

Experts

(Ad Hoc - Projects)

Integrated FunctionalExcellence

Structured Integration Within

Core Functions

(Systemic – Limited Integrated of Functions )

End-to-endIntegrative

ImprovementSystem

Codified

Integrative

Improvement

(Situational and Systemic)

LearningNetwork

Culture of Innovation and

Sharing

(Situational, Systemic and

Strategic)Reactive

Fixes

Stage 1

Stage 2

Stage 3

Stage 5

Stage 4

Average

Leaders ”The Promise

Of IT”

9

Stages Of Performance Improvement Maturity



IISd Scores ( April 2012)



Polling Question

Where do you think your maturity level is ?1. Stage 1: Reactive2. Stage 2: Expert-Led Projects3. Stage 3: Integrated Functional Excellence4. Stage 4: End-to-End Improvement System5. Stage 5: Learning Network

11



Transformation - Two Core Thrusts of Work; Today and Tomorrow!

Business Management

Role

Control & Manage the

Business& Compliance

Compliant &

ControlledBusiness

Performance

Leadership Role Business Strategy,

Intent, &Focus Areas

PrioritizedWork

Build Sustainable Improvement & Compliance

Capabilities

Sustained &

Compliant Agility

Capabilities

Future-izeThe Business

Change Management & Alignment

Vision

Strategic Intent

Managing The Change



The Ultimate Goal… Sustainable, Anchored Capabilities

Exc

elle

nce

in

Res

ult

s

Excellence in Work Practices

Sustainable Business Performance Improvement

Necessary but not Sufficient

“ lean and efficiency improvements”

“si

lo c

ost

focu

s ” • Balance

• Capabilities• Processes • Change Leadership

Unsustainable Performance

Stage B

ased Jo

urney



4 Layers of “Management Systems”….illustrative process examples only

High Performance Transaction Processing Application Architecture

High Performance Information Technology

Enabled Work Flow

System & Business Process

Management

High Performance

Business Operating

System

Integrative Improvement System Deployment & Capability Development

ERP

CRM

SCM/E

PLM

S & OP

CPFR

1 2 3 4 5

VMI

RFID Traceability

Planning

Stages of Process-based Operating & Performance Improvement Maturity to Demand Driven Value Network Sufficiency

The end to end way the business actually operates

Technology modeled workflows and business processes using business & transactional data

Technology based applications, data processing & data

management

Systems of Record

System of Process

Business Operating System of Venture

andSufficiency S & OP

Balancing Process &

Profitability Analyses

BusinessSufficiency Planning

Demand Forecast Accuracy & Planning

Innovation & Value driven Business Tradeoffs

?

?

Technology Enabled Work Flow Processes

& Data Management

Business Operating Strategy, Execution, & Culture

Improvement Goals & Projects

FunctionalProcess Integration

Demand-driven end- end SC process integration

Value driven Business tradeoffs & network

“MES”

Supply Reliability & Supply Planning

Integrated Quality

& compliance

Performance Maturity – based context of data &

information

Master data & process-based

context of data

Systems of Process and

Control

Real time & Process Control

Data High Performance

Automation Architecture

Machines Controls

Measurements

SRM

Sourcing &

Procurement

Logistics &

Distribution

WHM

14

Process – Model Based Decision Support

1

2

3

4



Layers of “Management Systems”….illustrative process examples only

High Performance Transaction Processing Application Architecture

High Performance Information Technology

Enabled Work Flow

System & Business Process

Management

High Performance

Business Operating

System

Integrative Improvement System Deployment & Capability Development

ERP

CRM

SCM

PLM

S & OP

CPFR

1 2 3 4 5

VMI

RFID Traceability

Planning

Stages of Process-based Operating & Performance Improvement Maturity to Demand Driven Value Network Sufficiency

The end to end way the business actually operates

Technology modeled workflows and business processes using business & transactional data

Technology based applications, data processing & data

management

Systems of Record

System of Process

Business Operating System of Venture

andSufficiency S & OP

Balancing Process &

Profitability Analyses

BusinessSufficiency Planning

Demand Forecast Accuracy & Planning

Innovation & Value driven Business Tradeoffs

?

?

Technology Enabled Work Flow Processes

& Data Management

Business Operating Strategy, Execution, & Culture

Improvement Goals & Projects

FunctionalProcess Integration

Demand-driven end- end SC process integration

Value driven Business tradeoffs & network

“MES”

Supply Reliability & Supply Planning

Integrated Quality

& compliance

Performance Maturity – based context of data &

information

Master data & process-based

context of data

Systems of Process and

Control

Real time & Process Control

Data High Performance

Automation Architecture

Machines Controls

Measurements

SRM

Sourcing &

Procurement

Logistics &

Distribution

WHM

15

Business Operating SystemIntegrative Improvement System

Application, Data and IT Process Architecture

Flexible Decoupling Information & Analytics Model Layer – Decision Support Models



Polling Question

• Is the “Decoupling Information Layer” a priority ?– Yes – No – Already in place

Is your IT deployment strategy aligned and synchronized to your Supply Chain performance development strategy ?– Yes – No

16



The Integrative Performance Improvement System (IIS)Connects the Dots in Supply Chain Transformation from Traditional to Demand-Driven

The Execution Challenge !

“Evolving READINESS”

1 2 3 4 5

Projects Processes Demand-driven Value Network> >

GOAL ALIGNMENT

Strategy

Metrics

Organizatio

n IT

INTEGRATED PROCESSES

Supply Demand

S & OP

A Strategic Enterprise Initiative to

Lead Alignment & Develop Capabilities

Using IIS Platform

Transformation COE

Process –based Performance Analytics

& Decision Support



Integrative ImprovementBusiness Goal: Eliminate Stock Outs

18

Pra

cti

ce b

ased

Perf

orm

an

ce

Team

work

&

Ch

an

ge M

an

ag

em

en

t

Info

rmati

on

an

d T

ech

nolo

gy

Dem

an

d F

ore

cast

Accu

racy

Asset

Reli

ab

ilit

y &

p

erf

orm

an

ce

New

Pro

du

ct

Lau

nch

an

d

Intr

od

ucti

on

-

Inven

tory

Level

Op

tim

izati

on

Kn

ow

led

ge m

an

ag

em

en

t an

d

Sta

nd

ard

s

S &

OP

20%

10%

5%

Sto

ck O

ut

Perfo

rman

ce

1.9

2.3

3.1

Man

ufa

ctu

rin

g G

ate

Q

uali

ty

Perf

ect

Ord

er

perf

orm

an

ce

Sou

rcin

g a

nd

Pro

cu

rem

en

t C

osts

+ +++++++ + + +



S & OP

19



S&OP must Confront Conflicting Goals

Demand-side Supply-side

Finance

Goal: Make the financial budget. Tops-down Focus. Desires control and wants predictability of operations.

Forecast definition: The budget

Goal: A feasible plan. Bottoms-up focus. Wants to minimize risk and disruptionForecast definition: The demand plan

Supp

ly

Cha

in

Operations

Goal: Factory optimization, improve costs and minimize

demand uncertainty

Forecast definition:

Manufacturing Plan

Sales and Marketing

Goal: Maximize revenue &

market share, wants

guaranteed product

availability

Forecast definition: Sales plan

Mold, color, ship-to at the

customer level

Mold, color, manufacturing

location

Adapted from AMR Research



Integrated Business Planning

Planning Integration Evolves Through Stages of Maturity

Demand Planning

Supply Planning

S&OP

Supply Chain Alignment

Demand Planning

Supply Planning

S&OP

Supply Chain Alignment

Integrated

Business Planning

Supply Chain

Alignment

SupplyChain

Alignment

Stage 2 Stage 3 Stage 4 Stage 5

Risk, Complexity, Organization Design, Leading and Managing Change, Enabling IT

Projects Integrated Processes & IT End -End SC Improvement Demand-driven Value Network



Conclusion

22



Closing Thoughts

The End to End Supply Chain Starts at the “Buyer:” Shopper/Customer• The Journey : Readiness to Change / Performance Improvement Maturity is a Critical

Factor. • Not Just “One Supply Chain” Demand-driven Segmentation Reduces Complexity!

Supply Chain Strategy is the Business Operating Strategy • Top Down Change Leadership is Fundamental to Sustainable Transformation.• Supply Chain Undergoing Sea Change Transformation – from Functional Outputs to

Business Outcomes

Building End to End Process Capability is More Than a Set of Projects • Building Sustainable Process Capabilities while Managing Day to Day Business Performance

– More Than “Integration”

SC and IT Alignment: So, what’s new?• IT Alignment, IM Capabilities & Architecture • Prioritized and Synchronized to Support End to End Digitization of the Demand–driven

Value Network• 4 Management Systems: Decoupling Layer

23



Transformation - Aligned Through a Transformation “Office”

Business Management

Role

Control & Manage the

Business& Compliance

Compliant &

ControlledBusiness

Performance

Leadership Role Business Strategy,

Intent, &Focus Areas

PrioritizedWork

Build Sustainable Improvement & Compliance

Capabilities

Sustained &

Compliant Agility

Capabilities

Future-izeThe Business

Sustainable & Compliant Performance Improvement Culture

Change Management & Alignment COE

Vision

Strategic Intent

Managing The Change

Vision

Strategic Intent

Managing The Change

Imp

act

1950 2010

Expert based

Functional

Excellence

Integrative

Improvement

System

Learning

Network

No Continuous Improvement Plans or structure.

Implementation approach based on the capability of the local expert

(Ad Hoc)

Structured

implementation approach within the functions

(Systemic)

Codified and integrated implementation

(Situational and Systemic)

Culture of Innovation and Sharing of Production Know How

(Situational, Systemic and Strategic)

No Cont. Imp.

2013

Stage 1 Stage 2

Stage 3 Stage 4

Stage 5

Are You Ready for the Sea Change in Supply Chain Strategy?

Technology

Transcript of Are You Ready for the Sea Change in Supply Chain Strategy?