Council of Supply ChainManagement Professionals

Raw MaterialPurchasing

Factory Manufacturer’s DC Customer’s DC Consumer

Rick D. BlasgenPresident & CEO

CSCMP

April 12, 2012

SCM = Seed to Table

Functional Orientation• Purchasing• Operations• Marketing• Package Engineering• Transportation• Inventory Mgt.• Warehousing• Manufacturing• Suppliers• Customers• etc.

Logistics

Supply ChainManagement

1950 1970 1980 1990 20001960 Beyond

Focus

More AttentionFrom SeniorManagement

More AttentionFrom SeniorManagement

Evolutionary Perspective

Logistics Costs $1.343 t $1.097 t $1.211 t 10.4%

% of GDP 9.4% 7.8% 8.3% 6.4%

Trans Costs $872 b $695 b $768 b

10.5%

Inv. Carrying $419 b $359 b $396 b 10.3%

Metric 2008 2009 2010 %

US State of Logistics

Logistics Costs have risen 184%

Average annual increase = $28b

2010 increase was $114b

Since 1990…

As a % of GDP, Logistics expense went from 11.4% to 8.3%, a reduction of 27%

Also….

Global Comparison of Logistics Expenditures

Asia 13-20% GDPChina 15% GDP

Europe 12-14% GDPIndia 13% GDPJapan 11% GDPMexico 14% GDP

EconomyHigher Output--GDPBetter use of resourcesMulti-use InfrastructureBusinessesMarket AccessMarket IntegrationCost EfficiencyConsumersMore Goods and ServicesWider AvailabilityLower Prices/Income

U.S. 8.3% GDP

Some Magnitudes

The cost of logistics in the US was $1.2 trillion in 2010, 8.3% of the US GDP. It was 17.9% in 1980.

US expenditures on logistics is larger than the national GDP of all but 12 countries.

Total domestic business inventories are valued at $2 trillion.

By comparison, estimated logistics costs represent 15% of China’s GDP and 13% in India.

Wal-Mart's supply chain management success is improving productivity in the United States:

The effects of the company's supply chain innovations on the retail industry led to a 3.1 percent decline in overall consumer prices between 1985 and 2004.

In 2004, consumers spent $263 billion LESS than they would have if Wal-Mart were not around! That translates to $895 per person, or $2,329 per household.

When Supply Chains Work Well

When Supply Chains Don’t Work So Well

A study by Georgia Tech showed that a company’s stock price drops 8% when the company experiences a glitch in its supply chain.

A study at Miami University of Ohio showed that when a company adopts a new supply chain innovation the company’s stock price increases.

A study by Bain & Company showed that companies employing sophisticated supply chain methods enjoyed 12 times greater profit than companies with unsophisticated methods.

Wall Street: New found respect for SCM. In one SCM MBA program in the US, 21/32 grads received job offers from Investment Banking firms because of the importance of SCM to their clients.

SCM Has Strategic Profit Impact

Top management is interestedin what we do!

But we must communicate more effectively.

Transparency!

Decisions

Different Decisions?

$30

$145

•Revenue

•Cash Flow

•Profitability

•Market Share

What keeps the CEO up at night?

Shareholder Value

The World Has Changed

Shrinking global marketplace

Information and visibility driven

SustainabilityBetter use of capital

Profit contribution

Less inventory

New Boardroom Expectations of SCM

Reduce costs

• CEO / CFO’s - discovered the power of Supply Chain Management.• Wall Street

– Watching industry dynamics– Logistics industry represents almost 10% of the

economy• 3PL’s – Significant growth• Supply Chain Risk Management is critical – think

about recent events, middle eastern uprisings, Suez Canal, Japan, Thailand, etc.

What does this all mean?

Mega Trends – Shifting Demographics China’s middle class could grow from 20% to 40% by 2020

Today, 450 million Indianshave middle class incomes

In Brazil, 30 million have moved to the middle class – Income is up 67%

95% of the world populationgrowth through 2050 will occurin developing nations

Urban areas will produce nearly allof the population growth over the next 25 years

Graying population shifting to global youth

Supply Chain Trends and ChallengesGlobalization. Growing complexity and pressure of dealing with global partners, suppliers and competition. Culture and geopolitical issues.

Emerging Asian countries such as China, India and Southeast Asia will become major centers of growth.

A lot of talk about manufacturing moving back to US or NA.

Lack of Predictability. Supply chain whiplash….oil prices, commodities, currency valuations.

Supply Chain Trends and Challenges

Consumer Attitudes and Demographics. Aging population. Growing demand for environmentally sustainable and socially responsible products by younger consumers. How to meet needs and maintain loyalty of the consumer?

Information Technology will continue to revolutionize the discipline.

Supply Chain Trends and Challenges

Current economic and political climate hinders free trade, Freer trade flows will still be the route to lift countries out of poverty.

CSA 2010, 2011, 2012, 2013….forever?

Panama Canal expansion - May provide more economies of scale and port diversification options to major US population centers

Supply Chain professionals have an important role to play in communicating with decision makers the value of collaboration and cross country business.

Real Estate and Supply Chain

• The two are inextricably linked• Real estate is critically important to the

success of a company’s supply chain• “Buildings” should be viewed as assets

that contribute to supply chain value• Knowing fundamentals of SCM will help

you communicate to clients/potential clients

Recent Warehouse & DC Operations Benchmark Study

• Inventory turns have increased after three years of continued decline

• More expansions are being planned to distribution operations

• Managers are re-installing incentive plans as company coffers are starting to slowly, but surely show signs of new life

• To realize transportation savings, many are adding satellite DCs and renegotiating freight rates

Source : Logistics Management’s 5th Annual Warehouse & Distribution Center (DC) Operations Survey

Thoughts about 2012 and beyond…

• Shippers will continue to examine outsourcing opportunities

• Access to capacity will be a major factor• Transportation will drive network

changes• Transitioning to a “Trucker’s Market”• Let’s learn from the past! A nickel a

hundredweight never made anyone rich!

Emerging (Emerged?) Supply Chain Trend

Collaboration

Emerging (Emerged?) Supply Chain Trend

Collaboration – “To cooperate with an enemy that has invaded your country”

Relationships are critical

The essence of SCM is collaboration – it is not an option.

involves all key participants working toward common goals.

Absent collaboration, the supply chain willbe nothing more than a collection of firms, eachfollowing their own pathways.

Back to the Future?

“New Ideas?!”

Sales and Operations PlanningMulti Vendor ConsolidationForecasting – let’s include customer promotional activity Let’s connect supply to demand!Should we consider outsourcing?Manufacturing should produce what the customer wants ☺.Etc.!

Traditional Supply ChainFunctional Career Path

Demand/SupplyPlanning

Global LogisticsManufacturingProcurement

Executive Level

Senior Level

Advisory Level

Staff Level

Entry Level

Fulfillment

Corporate Executive

Level

Leading Edge SCM Career Path

Demand/SupplyPlanning

Global LogisticsManufacturingProcurement

SCMConsulting

Level

SCMSr. Level

SCMAdvisory

Level

ISC Staff Level

ISC Entry Level

Fulfillment Supply Chain Management

Expe

rienc

es o

utsi

de o

f ISC

The Future of Supply Chain Professionals

Inventory Management

Transportation

Warehousing

Production Planning & Manufacturing

Customer Service

Proficient competenciesTechnicalManagerialLeadership

Must have excellent interpersonal skills

Materials Planning

Procurement

Ability to sustain collaborative relationships

Supply Chain Concierge Service

CSCMP’s Evolving Role

• GoalBetter deliver intellectual capital and educational resources to corporate training/education and SCM personnel through greater collaboration and more formal relationships.

CSCMP’s New Certification!

Become a Supply Chain Superstar

with SCProTM

ADVANCE YOUR CAREER WITH CSCMP’S SCPRO™CERTIFICATION

Three (3) level certification includes:

Level One – Cornerstones of Supply Chain Management

Level Two – Analysis and Application of Supply Chain Challenges

Level Three – Initiation of Supply Chain Transformation

Visit cscmpcertification.org for more information or to apply today!

It’s rigorous,It’s globally relevant,It tests a broad range of industry skills and mastery of end-to-end supply chain functions.

Over 80 Current Corporate Members

Brazilian Army Commission

Corporate Membership Benefits

• Individual corporate memberships –belong to company

• Exclusive bundle packages onlyavailable to corporate members

• Great company advantage by overall company savings realized

SummaryThis discipline is a corporate necessity, yet can be a growth vehicle – a revenue generating engine.

We improve the financial position of companies and economies.

Our stature and credibility is increasing.

Supply chain professionals need to develop cross cultural skills and a global mindset to maximize opportunities in the increasingly globalized world.

To prosper, to tackle these challenges, to take advantage of the opportunities, we need to work closely together!

ProcurementMarketing

Manufacturing

Information Tech

Suppliers Customers

SCM Pro

SCM Conducts a SymphonyWe matter!

Sales

Peter Drucker

“If people are committed to maintaining yesterday, they are not available to create tomorrow”

Sometimes, we have to learn to

forget

Innovation!Be Creative in your Response to

Supply Chain Problems

Warehou

sing

and Tr

anspor

tation

Physica

l

Distrib

ution

Logisti

cs

Incept

ion of

SCM Full Im

plement

ation

of Coll

aborat

ive

SCM

The Evolution of SCM

Prehistoric 2000

1950 1982

How long will it take??

2???