Managing the Complex Supply-Chain Ecosystem

Matthew LittlefieldPresident and Principal Analyst

Agenda

• About LNS Research

• Supply-Chain Complexity

• Building a Model for Operational Excellence

• Enterprise Quality Management Software

• Supplier Quality Management

• Key Recommendations

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About LNS Research

• Founded in Boston MA, 2011

• Provides executives a platform for accessing unbiased research and benchmark data to improve business performance

• Covering topics related to Quality, Manufacturing, Sustainability, and more

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About LNS Research

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Supply-Chain Complexity

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Drivers of Complexity

• Globalization: Manufacturing, Design, and Demand

• Multi-Tier Value Chain

• Product Complexity

• Compliance

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Globalization: Manufacturing

• JPMorgan PMI Index

� Highly Volatile

� Changing Centers of Power

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Globalization: Manufacturing

• Deloitte Global Manufacturing Competitiveness Index 2010

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Globalization: Manufacturing

• Deloitte Global Manufacturing Competitiveness Index 2010

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Globalization: Design

Single Design Center – No Design Partners

Single Design Center –Multiple Design Partners

Multiple Design Centers – No Design Partners

Multiple Design Centers –Multiple Design Partners

Increasing Complexity

New Proctor and Gamble China Innovation Center

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Globalization: Demand

Multi-Tier Value Chain

• Loss of control by large OEMs, more focus on collaboration and orchestration

• Tier 1 Suppliers are now collaboration partners with design, manufacturing, and distribution responsibilities

• Tier 2 and 3 suppliers quickly expands to 100s or 1000s of companies

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Multi-Tier Value Chain

• Great Example is Boeing 787 Dreamliner Program, 17 collaboration partners distributed globally

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Product Complexity

Typical Car has 100 Million Lines of Code

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Compliance

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Building a Model of Operational Excellence

• Top Strategic Objectives for OEMs

• Top Strategic Objectives for Suppliers

• Quality as a Way of Life

• Key Performance Indicators

• Business Capabilities: People, Process, and Technology

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Top Strategic Objectives

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Top Strategic Objectives - OEMs

• Revenue Growth

� More successful new product introductions

� Improved manufacturing capabilities

� Increased supply-chain responsiveness

� Ensure no disruptions from compliance

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Top Strategic Objectives - Suppliers

• Revenue Growth

� Become trusted trading partner with brand owners

� Provide responsiveness and value added services for customers

� Reduce manufacturing costs

� Ensure no disruptions from compliance

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Quality as a Way of Life

• Quality is not a department but shared responsibility

• Most be infused throughout the organization: people, processes, and technology

• John Chambers, CEO Cisco:

“Quality is doing what you said you would do, when you said you would do it. Quality is never letting the customer down. Quality is being accountable for the total customer experience.”

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Key Performance Indicators

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Key Performance Indicators

• Cost of Quality: Good and Poor Quality

• Successful New Product Introductions: Time, Volume, and Quality

• On Time and Complete Shipments: Quality issues can impact delivery

• Overall Equipment Effectiveness: Availability, Productivity, and Quality

• Supplier Defect Rate

• Cost of Goods Sold

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Business Capabilities

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PeoplePeople

ProcessProcess

TechnologyTechnology

Business Capabilities: People

• Quality is an executive priority

• Open channels of communication and collaboration exist between quality and multiple roles in organizations

• Open channels of communication and collaboration exist between quality and trading partners

• All levels of organization have “buy in” for continuous improvement initiatives

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Business Capabilities: Process

• Flexible and standardized business processes embed quality throughout the organization and between disparate departments

• Automated workflow, collaboration, alerting, and reporting capabilities provide visibility into quality performance

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Business Capabilities: Technology

• Enterprise Quality Management Software standardizes and harmonized quality systems across the organization

• Enterprise Quality Management Software acts as a hub to create interoperability between other enterprise applications

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Enterprise Quality Management Software

• Fast growing and dynamic software space

• Serves a variety of industries and customer sizes

• Quickly becoming an enterprise level application that delivers tangible ROI

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Enterprise Quality Management Software

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Supplier Quality Management Software

• Traditionally functionality includes:

� Supplier scorecard/rating

� Finished goods testing/inspection

� Certificates of Analysis

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Supplier Quality Management Software

• Next Generation functionality includes:

� Web based supplier portals

� Real time visibility into supplier operations

� Collaborative design for quality environments (APQP/FMEA)

Key Recommendations

• Accept supply-chain complexity is a reality that must be dealt with

• Understand the competitive advantages of your supply-chain (design, manufacturing, logistics)

• Evaluate the areas where quality issues impact

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Key Recommendations

• Build a model of operational excellence to address supply-chain complexity and quality

• Identify the right metrics and business capabilities

• As maturity allows, adopt EQMS and supplier quality management solutions in support of supply-chain goals

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Thank You!!For More Information:

Contact:Matthew LittlefieldPresident and Principal Analystmatthew.littlefield@lnsresearch.com