Building Supply Chains for Competing Against Uncertainty 

Rich Sherman, Director of North America Supply Chain Council www.supply‐chain.org 

2009 Was a Tough Year 

Companies Must Respond to the Challenge 

• Increased need to differentiate in a global market • Time compression – global sourcing & delivery • Customers expect perfect accuracy, information, and 

service (RFID, Customization, etc.) • Competition for capital is intense – pressure to 

optimize material flow and inventory increases • Companies will seek to leverage more outsourced 

business, manufacturing & logistics processes • Companies must be more agile responding to change 

faster and managing more inventory locations 

Companies Must Transform Their Operations to Meet Growing Business Challenges through New Process Improvement Initiatives!

SCM is Paramount in Times of Economic Uncertainty  

• In 2009, US business logistics costs fell to $1.1 trillion3 – good news? 

• Bad News – Orders for new goods dropped substantially and downturn in each sector translated to lower shipping volume 3 

• Supply‐chain generally accounts for between 60% and 90% of all company costs1 

• A 2% improvement in process efficiency for supply‐chain processes has 3000‐5000% the impact of a 2% improvement in efficiency for… IT… HR… Sales… & Finance1 

  1 Exclusive of Financial Services companies 2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006 SCM Benchmark data on SCM cost for discrete & process industries 3 CSCMP 21st Annual State of the Logistics Industry

Focused initiatives in Supply Chain Management can result in 30-35% cost reductions, liberation of working capital, and revenue increases of 3-5%!

And SCM Improvement Creates Shareholder Value 

• Improve customer service and response

• Optimize inventory flow, utilization & productivity

• Best-in-class customer relationships

• Differentiated service capabilities

• Best-in-class strategic supplier partnerships

• Leverage of outsourcing of business processes

• Unique supply chain models

The Supply Chain Impacts . . .

& Shareholder Value

Improve Capital

Efficiency

Increase Profit

Increase Shareholder

Value

All Financial Metrics . . .

Liberate Working Capital

Reduce Fixed

Capital

Increase Revenue

and Margin

Optimize Cost Model

Effective Supply Chain Management can increase a Return on Invested Capital (ROIC) by 30% and More!

5  AMR 2009 ‐ SCC & SCOR Executive Overview 

• Comparison of Fortune‐1000 Council  member company share price aggregate growth from 2003 – present to S&P 500 and DOW indices. 

• Growth inflected after 2 years, and the spread between SCOR index companies and other industrials has grown to almost 30 points. 

• Growth is increasing exponentially: Compound interest on SC performance. 

• Correlates SCC Membership/SCOR investments with Shareholder value. 

• Same pattern evident in FTSE‐100, DAX, NIKKEI and other indices. 

6 AMR 2009 ‐ SCC & SCOR Executive Overview 

Supply Chain Council Member Companies Outperform the Market – 14 of AMR Top 25 are Members 

Realtime: www.scorlabs.org/scor/scorindex

Enterprises are discovering new value

in operations management.

There is a GAP between traditional ERP and day to day operations decision

support!

Integrated Sales & Operations Planning,

Decision Support Tools & SC Collaboration are imperatives!

Enterprises Are Changing How They Plan, Source, Make and Deliver Product 

• Product Strategies • Customer

Strategies • Time Strategies • Visibility &

Collaboration

•New Channels • Transportation • Logistics Strategies

•Demand Management

• Supply Management • Performance

Management • Business Process

Outsourcing

Speed & Granularity

Reach & Execution

Integration to Ops

Planning

Companies Must Transform Their Operations to a Demand Responsive Supply Network to Meet Growing Business Challenges!

Companies Are Reinventing Their Supply Chains 

Manufacturers

Wholesale Distributors Suppliers

Customer Demand

Info Goods Contract

Manufacturers

Logistics Providers

Virtual Manufacturers

Retailers

Internet/

Portals

The Supply Chain is Evolving to a  Collaborative Demand Responsive Network 

Internet/

Portals Interne

t/ Portals

A Technological Infrastructure is Emerging to Enable Real Time Communication and Data for Integrated Demand – Supply

Planning, Execution, and Decision Support to Synchronize Supply in Response to Demand Change!

What’s The Next Big Thing? • Cloud Computing 

– Supply Chain Visibility – Software as a Service (SaaS)/On Demand – Location Based Technology/Mobility/Telematics – Business Intelligence/Decision Support 

• Auto Id/Info – Beyond RFID – Voice Recognition/Response – Intelligent Sensors, Monitors, Devices 

• Robotics – Picking, Packing, Putaway – Load, Unload 

• Internet Transparency &Social Media for Business – LinkedIn, Twitter, Blogging, Search – Offers, Location, Orders, Navigation, Behavior 

Vendor Crossdock & Outbound

Consolidation

Customer Distribution

Center Custom Pack

& Label

Smart Transactions

Technology Breakthrough:  The Smart Supply Network  

• Optimization for Visibility & Global Flow Control • Smart Transactions (Telematics/RFID) Convey Information in Real 

Time Across the Supply Network • Convergence of Planning & Execution ‐ Basis for Demand 

Planning/Crossdocking/Outbound Consolidation • Optimum Supply Network Material Flow through Collaborative, 

Synchronized Activity Planning & Scheduling 

Smart Transactions

A New Paradigm in Supply Chain Management is Emerging that is Opening a Window of Opportunity to Gain Market Leadership!

The SCOR® model – a cross‐industry open standard  

• The five integrated processes provide a boundary‐free view of the true end‐to‐end Extended Supply Chain 

• SCOR provides process definitions, metrics, benchmarks, best practices including environmental and risk management, and HR skills requirements 

• Utilized by members as an organizational engagement model for operations excellence supporting all methodologies such as Lean Six Sigma 

• An Unbiased foundation for Performance and Value Based Outsourcing 

AMR 2009 ‐ SCC & SCOR Executive Overview 

Supplier

Plan

Customer Customer’s Customer Suppliers’

Supplier

Make Deliver Source Make Deliver Make Source Deliver Source Deliver

Internal or External Internal or External

Your Company

Source

Return Return Return Return Return Return Return Return

12

Changing the Game! 

Supply Chain Long and slow Forecast‐based 

Manufacturer‐driven Internal focus 

Designed from product forward 

Cost‐reduction Linear, sequential Processes 

 

Supply Network Fast and flexible Demand responsive Customer‐driven External focus Designed from usage back  Value creation Dynamic, synchronized processes 

Transform From To

Welcome to Day Two! • Another Outstanding Line Up of Speakers • More Case Studies, Thought Provoking Panels – • Please Ask Questions, Ask Questions… • Text Me Your Questions – 512‐294‐6558  • Network, Introduce Yourself, Share Experience • Take Away New Ideas and Approaches • Share with your Colleagues when you return 

•Have a great Day 2 at the Conference!  

Thank You! 

www.supply-chain.org

Rich Sherman, Director of North America Email: rsherman@supply-chain.org

Direct: +1 512-266-9041 Mobile: +1 512-294-6558