1

ISM Chemical Group2006 Mid-Winter Conference

February 24, 2006Friday

9:45a.m.

2

Next StageSUPPLY CHAIN MANAGEMENT

Presenter:Marilyn Gettinger, C.P.M.

New Directions Consulting Group908-709-0656

mgettinger@aol.com

3

Next StageSUPPLY CHAIN MANAGEMENT

• Define Supply Chain Management

• Historical view• Next Stage Here• New-School Supply Chains• The Four Pillars of SCM

Excellence• Supply Chain Drivers• The Resilient Supply• The New Language• The Global Supply Chain

• SCM Models• SCM Benchmarking – A

Better Way• 18 Best Practices for Risk

Management• Winning Supply Chain

Strategies• The Ten Rules of SCM

Excellence• Eight Key SCM Processes• The Top Ten Mistakes• Excellence in Procurement• SCM and the Future

4

Supply Chain Management• SCM considers all interdependent functions

within an organization and all external organizations involved in the process of making a product or service available for use or consumption. It is an orchestrated network that creates value for the consumer through the streamlining of the process that purchases, stores, converts, and ships to the customer and meets required expectations of the customer

5

Supply Chain Management• Identifies the processes necessary to

meet customer expectations• Engineers SCM processes as the core

of the business• Moves from silo to a team philosophy• Integrates internal processes• Integrates external processes• Defines metrics

6

More Than A DecadeLean Manufacturing/JIT

Third-Party Logistics

MRP II

Exchanges

Integrated Products and Process Development

Product Data Management

Supplier Integration

ManufacturingOutsourcing ERP PLM

CRM CPC

e-Procurement

Warehouse Management e-Fulfillment

TQMAdvanced Planning and

Scheduling

Manufacturing Execution Systems Collaboration

Integrated SC

1992

7

Supply Chain Staircase

Enterprise Integration

Corporate Excellence

Partner Collaboration

Value ChainCollaboration

Full Network

Connectivity

Functional/Process Unit

Intra-Enterprise

Inter-Enterprise

External

Total BusinessSystem

8

Supply Chain Barrier Breakers

• Those who used the supply chain to “change the game”

• Those who partnered with the unusual

• Those who changed the cost structure to cut costs

• Supply chain initiatives – Cut costs– Improve efficiencies– Enhance customer

service and revenue generation

– Improve competitiveness

9

Next Stage Here• The front end of the supply chain will

become as important as the back end in maximizing total economic yield.

1

3 2 Tier 1Buying

Organization Customer Tiers

10

Next Stage Here• As companies

migrate from internal-only to extended supply chains, collaboration will become the most strategic capability.

• Assets and functions not core to value delivery will be divested to specialists that can make more money on them.– Profit-sharing

2 3

11

Next Stage Here• The greatest margin

potential will occur after the product ships, as service and support become as important as the product itself.– Bundling great products

with strong service offerings

– Total cost of ownership focus

– Delivery of the initial product but also an ongoing stream of products and services to the customer

• The ability to integrate new and innovative capabilities with corporate business models will drive higher levels of value creation.– Rapid and “virtual”

partnering

4 5

12

Next Stage Here• Target emerging

customer and channel needs

• Integrate the front and back end of the supply chain

• Achieve real collaboration with partners

…to exploit new revenue opportunities

…to maximize long-term customer revenues

…to create many more business model options

13

Next Stage Here• Deploy supply chain

assets• Tie new service

offerings to the product

• Integrate needed capabilities from multiple parties

• …to those most qualified to make money on them

• …to capture increasing revenues

• …to create the most compelling value proposition

14

New-School Supply ChainsUse the Supply Chain to

Grow revenueIncrease market share

Create competitive advantage

Target opportunities forNew value-added

serviceInvest in very specific

opportunities

Create a distinctbusiness model

Use new capabilities to change

the customer relationship

15

The Four Pillars of SCMExcellence

HumanResources

OrganizationalDesign

InformationTechnology

OrganizationalMeasurement

16

Pillar of Excellence• Supply chain professionals

who:– View the supply chain

holistically in terms of linked processes

– Manage critical relationships– Understand the business model– Engage in statistical analysis

and fact-based decision making– Practice advanced cost

management– Understand electronic business

systems

• Organizational design includes:– Centrally coordinated supply

teams– Executive responsibility for

coordinating supply chain activities

– Co-location of supply chain personnel with internal customers

– Cross-functional teams to manage supply chain processes

– Supply chain strategy coordination session between business units

– Executive buyer-supplier council to coordinate supply chain activities

17

Pillar of Excellence• Real-time and shared

information technology systems that support:– Demand planning, order

commitment, and scheduling

– Distribution and transportation planning

– Order management– Material replenishment– Production management

• Supply chain measures that:– Use data from sources

visible throughout the organization

– Quantify what creates supply chain value

– Use targets that change over time

– Rely on benchmarking to establish performance goals

– Link to business goals and objectives

– Feature efficiency and effectiveness

– Include assigned ownership and accountability

18

Supply Chain Drivers• Growing by reaching new markets• Improving customer service• Differentiating from competitors• Improving cash position• Enhancing productivity

19

The Resilient Supply Chain• Transportation channel management• Multiple supply bases• Strong management of trade-off areas

Awareness, Prevention, Remediation, Knowledge Management

20

The New Language• Event Management

– Monitoring, notifying, simulating, controlling, measuring

• Portfolio Management• Enablers• Dashboard

21

The Global Supply Chain• Travel + communication + inventory +

unit cost + inland transportation+ pier costs + documentation + inspection + ocean freight + insurance + C-TPAT+ CSI + Letter of Credit + Documentation + Customs duties + import licensing + training and developing + harbor fees + customs inspection fees + bonded warehousing

22

SCM Models• DMAIC – Define, Measure, Analyze,

Improve, Control• SCPM – Supply Chain Process

Management Solutions• SCOR - Supply Chain Operations

Reference• DDSN - Demand-driven supply

network• DODSC -Dynamic On-Demand Supply Chain

Map

23

SCM Models• Scor Model

– Plan – plan how to use supply chain resources over a period of time

– Source – Procurement, delivery, receipt, and transfer of raw material items, submissions, product, or services

– Make – Adding value through mixing, separating, forming, machining, and chemical processes

– Deliver – Finalizing the product prior to the receipt of a firm customer order

24

SCM Models• SCOR Model

– Top Level – scope and content – Configuration level – 19 process

categories– Process Element Level – Decompose

processes, identify standards, best practices, and software suppliers, etc.

– Define and implement new supply chain processes

25

SCM Models• DDSN – Demand-driven supply network• A system of technologies and

processes that sense and react to real-time demand across a network of customers, suppliers, and employers

• Demand forecast accuracy, perfect order fulfillment, supply chain costs, cash-to-cash cycle time

• S&OP, RFID, CRM

26

SCM Benchmarking – A Better Way

• Top 20 KPI’s• Logistics• Manufacturing• Procurement• New Product Development• Customer Order Management• Supply Chain Diagnostics

27

18 Best Practices for Risk Management

• Suppliers and SCM risks

• Suppliers’ disruption plan in place

• Disruption costs and resolution in cost factor

• Critical supply relationships

• Global inventory visibility

• Major disruption debriefing

• Early warning systems

• SC intelligence and supply base locations

28

18 Best Practices for Risk Management

• Inventory buffers in distribution channels

• Buffer material by level of criticality

• Decision-making capabilities

• Electronic sharing of information and visibility of material flows

• Predictive analysis systems

• Damage-control plans• Cost trade-offs of risk

decisions• Near real-time

databases

29

Winning Supply Chain Strategies

• Top management commitment

• Supply chains and business strategies

• Integrated operating models

• Rigorous execution and adaptation

• Innovation into operating models– Outsourcing,

internal/external integration

– Supply to Demand

30

The Ten Rules ofSCM Excellence

1. Be visible - on-demand, real time data as to exactly what is happening in the supply chain

2. Let’s get leanThe lean supply chain produces just what and how much is needed, when it is needed, and where it is needed

3. The Metric ReloadedMeasure the right things

4. Metrics that MatterSCOR – Customer – order fulfillmentInternal – (warehouse costs)Shareholder – revenue and profitBalanced Scorecard – Financial – costsCustomer – fill rate, on- time deliveryInternal – Forecast errorTraining – Training hoursCertifications

31

The Ten Rules ofSCM Excellence

• 5. Managing the Measure– Define, collect, create– Data collection processes

and tools• 6. Know Where You Stand

– Benchmarking• 7 Planning: Putting Strategy

Before Technology– Companies with “best in class”

planning systems have supply chains that are up to 40 percent more efficient than those with poorer planning.

• The Performance Measurement Group

• 8. Managing Risk– Long, medium, and

short-term– Decision maker roles

identified– Data decision systems– Supplier relationships– Contingency planning

• 9. Take advantage of technology– Select the correct

technology

32

The Ten Rules ofSCM Excellence

• 10. Control Costs– Fewer suppliers– Collaboration with suppliers– Hidden costs– Improve velocity, visibility, and product

development cycles and reduce inventories

33

Eight Key SCM Processes• 1. Customer Relationship Management• 2. Customer Service Management• 3. Demand Management• 4. Order Fulfillment• 5. Manufacturing Flow Management• 6. Supplier Relationship Management• 7. Product Development and

Commercialization• 8. Returns Management

34

The Top Ten Mistakes• Managing a chain

belief• Doing business as

usual but calling it supply chain

• Having the wrong idea about “control”

• Thinking of transformation – enabling technology

• Pursuing “real time” visibility at all costs

• Failing to synchronize the supply chain

35

The Top Ten Mistakes• Practicing supply chain “monotheism”• Misreading the level of employees’

skills• Confusing globalization with global

brands and cross-border trade• Thinking that supply chain

transformation is a simple process

36

Excellence in Procurement• Value Creation

– Innovation and growth– Value chain optimization

• Core competencies• External partners for non-core competencies

• Risk management and supply continuity• Advanced cost management techniques

– Complexity reduction, tiered sourcing, supplier tiering, design to cost, target costing, collaborative cost reduction, best shoring, value-based sourcing

– A.T. Kearney

37

SCM and the Future• Manage the supply chain flow• Paperless and “near laborless”

– Artificial Intelligence– Robotics

• The Learning Organization• Two types of carriers – line haul and

“last mile”• Transportation infrastructure

38

Thank You• Best wishes for your supply chain

success• Marilyn Gettinger, C.P.M.• President,• New Directions Consulting Group• 908-709-0656• mgettinger@aol.com