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SUPERIOR SUPPLY CHAINSLEAD TO BUSINESS

IMPROVEMENT

GRA Supply Chain Presentation

How your supply chain can be a source of competitive advantage

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18 year history

35 supply chain

professionals

Australia & Asia

Turn Supply Chains into a Competitive Advantage

ConsultingProfessional

ServicesSystems

Training & Education

Benchmarking

• Supply chain strategy, planning & execution specialists

• Australia’s premier specialist supply chain firm

• Work at strategic, operational & implementation levels

• Sophisticated yet practical

• Consistent track record of delivering sustainable capital, cost & service results

GRA Overview…

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Supply Chains Today…

Evolution of Supply Chain over the last two decades…

• Over the last 10-15 years the view of supply chain has matured from a necessary evil to a strategic function.

– Even the role of the supply chain manager has evolved from back-room cost centre manager to boardroom executive. We are even seeing a higher proportion of CEO’s from supply chain roots - Tim Cook, CEO Apple being a great example.

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The opportunity and the resultant substantial improvements in working capital, cost and service levels, improved profitability, asset turnover and key financial ratios, already exist in the company; the key is to

release what is already yours.

The reason for this evolution from cost centre to competitive advantage is because driving performance out of an organisation’s

supply chain remains one of the most significant and accessible step-change opportunities that a company can undertake.

The opportunity in Supply Chain - from cost centre to competitive advantage.

Supply chains look to balance storage

& flows

Asset utilisation (Trucks/DC’s) vs.

Inventory holdings/cost

What do we mean when we talk about ‘Supply Chains’?

• Not just…

• But also…

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Warehouses Trucks

Demand Planning

ReplenishmentInventory

Optimisation

We see supply chains as the storage and flow of inventory from source through to destination.

Operations

Strategy

Supply Chain Excellence…

Supply chains are a highly interdependent system responsible for delivering a company’s customer value proposition in alignment with the Business Strategy.

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Business Strategy

Supply Chain Strategy Customer Value Proposition

ProcessPeople DataSystems

Organisational Capability

Informed Supply Chain

Decisions

Results Delivery

Warehouse & Logistics

Sales & Operations Planning (S&OP) or (IBP)

Demand Planning

Supply Planning

Inventory Optimisation

KPIs, Policies & Structures

Australian Supply Chain Challenges

Australian Supply Chain Challenges

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PopulationEurope = 743m

PopulationAustralia = 23m

Large Country. Low Population Density.

GER

How are Supply Chains Changing?

11

The emergence of the internet, low cost communications and ‘big data’ is rapidly increasing customer expectations – for supply chains this is being manifested in the desire for greater agility

Customer expectations

increasing……driving supply chain design

considerations…

…mostly to balance

agility/responsiveness with

cost

Internet

Low Cost

Communicatio

ns

Information

Processing

Expectations

Price

sensitivity in

supply chain

Product

proliferation

Shorter lead

times

Balance will be dependant on

industry and company value

proposition

Cost

Sensitivit

y

Availabilit

y of

range

Responsi

ve-ness

Consumer Led Industry Led

EG. Grocery,

electronics, whitegoods,

furniture

E.G. Auto, Auto Aftermarket,

components etc

HIGH

HIGH HIGH

HIGH

LOW

LOW

EFFECIENT RESPONSIVEBUSINESS

MODEL

Efficiency

Responsiven

ess

Costs

High

Low

Short Long

Current

Strategy

Source: GRA (2015)

When it goes wrong…

When it goes well…

Some key attributes of what works and what can go wrong online …

OrderStock Out

Partial Pick

Shipment

Incorrect

Shipment

Contact

Customer

Partial Pick

Delayed

Shipment

Return

Logistics

Re-stock

Unsatisfie

d

Customer

Re-pick

Re-ship

OrderStock

Available

Single Pick

and Pack

Speedy

Shipment

Happy

Customer

The difference in number of transactions involved, cost and ultimately customer satisfaction can be significant…

The Opportunity Today…

Global Entrants

Rise of Private Label

Increasing Product Range & Discounting. Shift to EDLP

Online Transformatio

n

Pressure on

profitability

How are Supply Chains Changing? – Macro view

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Costco Wholesale

Australia's revenue

surged in 2015 to

$878.5 million.

Private label groceries now

account for 23 % of packaged

grocery sales in Australia and

household penetration has

reached 98 %.

As consumer expectation are increasing,

price strategies are becoming more

strategic and frequent. Every Day Low

Price is similarly becoming increasingly

common on the staple items to get

consumers in the door’.

Online is a game-changer - with multiple channels to interact & service

consumers, mobile technologies and a massive data opportunity – this is one

to watch closely! Already we are seeing click & collect via Woolworths as well

as Kogan pantry and Amazon fresh looking to disrupt supply chain norms.

Aldi has approximately

370 stores and could

reach 15 % market

share nationwide as it

opens in WA and SA

and adds approximately

20 stores a year in

eastern Australia.

What impact will a

new entrant have

on the market?

Macro Forces

Networks are being re-designed to provide competitive lead-

time responsiveness, primarily driven by online competition

Imports are becoming more prominent to reduce costs by

increasing margins via sourcing low cost goods and labour

overseas

Balancing Responsiveness and Cost

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Cost Efficiency

Lead-time Responsiveness

High

Low

Short Long

Current

Strategy

A step change is occurring in the supply chain for all industries to reduce costs and increase responsiveness.

Supply Chain Investments Today…

• Today, we are seeing a considerable amount of investment in new supply chain systems, better collaboration (with customers & suppliers) and new infrastructure (warehousing, rail, etc.). We have also seen the rise of optimisation, just in time, lean and agile supply chains.

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Organisation (e.g. Retailer, Manufacturer,

FMCG, etc.)Supplier Customer

Supply Chains are expanding

This missing link in Supply Chains…

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Despite the rise of investment in supply chains only a handful of organisations have experienced astep-change improvement in business performance.

In our experience we have noted three key attributes of company’s who hold their supply chain as asource of competitive advantage:

Business Strategy

Supply Chain Strategy Customer Value Proposition

Demand Planning

Supply Planning

Inventory Optimisation

1

2

3

• A clearly defined supply chain strategy that is linked to the business strategy and responsible for delivery of the customer value proposition.

• Framework such as S&OP or IBP to bridge the strategic and operational ends of the business – effectively operationalising the strategy.

• Effective Planning capability as the core foundation, ensuring visibility and forward looking decision-making. This planning capability is driven by the people, process, systems & data.

• This is often what we find to be the missing link.

OperationsStrategy S&OP

Po

rtfo

lio

Re

vie

w

Opportunities & Threats (Market/Portfolio)

New Product Development

De-Ranging Products

De

ma

nd

Re

vie

w

Identify Unconstrained Demand

Measure Sales Forecast vs. Actual

Identify activities to close gaps

Su

pp

ly R

evie

w

Identify Constrained Response to Unconstrained Demand

Measure Operational, Plant & Supply Performance

Identify activities to close gaps

Inte

rgra

ted

R

evie

w

Resolve Imbalances between Supply and Demand

Determine agenda items for Executive S&OP

Ex

ecu

tive

S&

OP

Review & Approve Demand and Supply plans, Financial plans, Strategic Business goals and any unresolved issues

Set Strategic Direction and filter to functional groups

ProcessPeople DataSystems

The Opportunity Tomorrow…

Amazon – Anticipatory Shipping

Amazon Wants to Ship Your Package Before You Buy It.

1. Today, Amazon receives an order, then labels packages with addresses at its warehouses and loads them onto waiting UPS, USPS or other trucks, which may take them directly to customers’ homes or load them onto other trucks for final delivery.

2. Amazon are looking to box and ship products it expects customers in a specific area will want – based on previous orders and other factors — but haven’t yet ordered.

3. The key is predictive analytics. Leveraging browsing and transactional information captured during online interactions, Amazon can model likely customer behaviour and send products to the customer before the order.

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Click and Collect

• Companies are forming partnerships to enable “Click and Collect”

– And the “collect” location is changing…

• Today = Your local Woolworths

• Tomorrow = The boot of your car? Mobile technology can enable this. Or your local train station?

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Last Mile Fulfilment

• Can we leverage a sharing economy to connect consumer and build a distribution network?

– Today Uber Black has transition into Uber X – where random people, drive random people around….

– So what about… random people driving random packages around? This would solve many online last mile fulfilment challenges – significantly reducing costs… Say you put into Google maps you want to travel from A to B.

• A package needs to be delivered by A to B…

– You are then prompted and given the incentivised option to deliver this package

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Agile Supply Chains: Additive Manufacturing – 3D Printing

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Cash

Generation

Market

Position

Now

• Production Prototypes • Small MFG runs of High Value/High Complexity products • Dental/Aural healthcare forms/aids

Soon

• Almost all service parts • Complex high volume/high value forms • Products related to fashion/trends that have a high volume/short lifespan profile

Later

• Mass produced fast moving consumer goods

3D Printing is likely to have the following impact on the supply chain:• Realise lower component costs by eliminating supplier margins• Reduce cost of carry by holding more optimal levels of inventory• Improve assembly cycle times, and reduce risk and impact of part/component stock outs• Reduced transport/logistics costs by sourcing components/parts locally & assembling finished goods locally

What's the key message…?

It is an exciting time in Supply Chain …

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• We need to drive improvements within our business to harness the opportunities within our control

– Strategy, Customer Value Proposition and Supply Chain Strategy

– Supply chain planning and execution

• New technologies continue to provide new business opportunities and ways to engage with our customers …

• There is potential for disruption … do we ignore, engage or lead?

Video Presentation

You can view James Allt-Graham deliver this presentation at the Supply Chain Forum 2015 in Sydney at the following link:

http://www.gra.net.au/resources/insights-and-publications/2015/08/97-video-

superior-supply-chains-lead-to-business-improvement

Or click Supply Chain Forum presentation.

Take action

GRA is Australia’s premier, expert consulting firm specialising in supply chain & logistics strategy, planning and

execution. We offer consulting, professional services, supply chain systems, training & education and

benchmarking across a broad range of industries.

At GRA we understand the complexity of Supply Chain Management

We are Australia’s premier expert consulting firm specialising in supply chain and

logistics strategy, planning and execution.

We offer Consulting, Professional Services, Systems, Training & Education and Benc

hmarking across a broad range of industries.

To find out more, call (03) 9421 4611 or visit www.gra.net.au