Supply chain excellence
Identify your weakest link
Ivica Perica, DeloitteDirektor u Odjelu poslovnog
savjetovanja
Ivica PericaDirektor
Odjel poslovnog savjetovanja
Tel: +385 (1) 2351 900
Mob: +385 (91) 67 78 091
E-mail: [email protected]
Among top
operations
consulting provider
worldwide
Source:
“Kennedy Consulting
Research and
Advisory*”
*According to breadth and depth of capabilities
Agenda
2
2
1 Supply chain leaders and followers survey
Key steps for a resilient supply chain
Service qualityPercentage of deliveries
that are on time and in full
Inventory turns
How do you think the performance of
your company’s supply chain compares
to that of other firms in its industry?
Two main KPIs:
Deloitte Global Supply Chain Survey (2014)
12% Supply
Chain
leaders
88% Supply
Chain
followers
Service quality and low inventory turns
distinguish leaders from followers
3
Leaders
• SC Leaders also have a higher
financial performance. Measured
against other organizations in
their industry:
• 79% have revenue growth
significantly above average
• 69% have EBIT margin
significantly above average
margin
Followers
• SC Followers have a lower
financial performance. Measured
against other organizations in their
industry:
• Only 8% have revenue growth
significantly above average
• Only 9% have EBIT margin
significantly above average
margin
Supply chain excellence leads to better
financial performance
Of the 12% that were identified as SC Leaders, 98% were performing well above peers in
terms of both revenue growth and EBIT margin, whereas only 38% were of the Followers
4
Recognize the importance of innovation 96 percent identify innovation as "extremely important" to growth (vs. 65 percent of followers)
Be early adopters of disruptive technologies such as 3D-Printing48 percent of leaders use 3D-Printing "extensively" (vs. 13 percent of supply chain followers)
Use analytics extensively75 percent of leaders utilize optimization software (vs. 34 percent of followers), visualization software
(67 percent vs. 28 percent), mobile technologies (75 percent vs. 30 percent) and radio frequency
identification tags (65 percent vs. 27 percent)
Empower executive level leadership56 percent of supply chain leaders have a senior executive heading their supply chain function, compared to
just one–third of supply chain followers
Broader span of controlRoughly 50 percent of SC leaders own all of the six "links" frequently associated with supply chain
management – product development, demand planning, supply planning, sourcing and procurement,
manufacturing and logistics and distribution
Develop talent strategies88 percent are more likely to actively recruit supply chain professionals with analytics expertise and cross-functional
experience and 83 percent are more likely to recruit those with global experience
Supply chain Leaders are more likely to…
What do the leaders do differently?
5
• All the supply chain objectives listed were named by two-thirds or more of executives.
• The objectives cited most often were:
• Ensure reliable product quality and operations
• Meet customer service levels
• The gaps between Supply Chain Leaders and Followers were especially large for several objectives:
• Achieve global growth objectives
• Spur innovative approaches
• Integrate with other company functions, vendors, and customers
• Larger companies were more likely than smaller companies to cite many supply chain objectives as extremely or very important.
• The differences between larger and smaller companies were greatest for:
• Reduce delivered cost
• Minimize inventory investment
• Integrate with other company functions, vendors, and customers
All survey respondents Supply Chain Leaders Companies with annual revenues of < $1B
Companies with annual revenues of $1B or >Supply Chain Followers
Supply chain objectives
84%
80%
76%
75%
75%
72%
70%
69%
68%
Ensure reliable productquality and operations
Meet customer servicelevels
Achieve global growthobjectives
Reduce delivered cost
Increase flexibility torespond to erratic demand
Assure reliable supply ofraw materials
Minimize inventoryinvestment
Spur innovativeapproaches
Integrate with othercompany functions,
vendors, and customers
100%
98%
98%
94%
96%
96%
90%
96%
92%
81%
77%
73%
72%
72%
68%
67%
65%
64%
78%
73%
70%
67%
73%
67%
63%
64%
57%
88%
85%
81%
82%
77%
75%
76%
73%
76%
How important for your company are each of the following objectives for its supply chain?
6
80%
82%
73%
82%
64%
73%
71%
67%
62%
50%
47%
40%
65%
64%
52%
57%
39%
41%
78%
73%
73%
52%
57%
48%
73%
69%
63%
54%
50%
45%
Supply planning
Demand planning/forecasting
Procurement/ sourcing
Product development
Logistics & distribution
Manufacturing
• Supply planning, demand planning/forecasting, and procurement/sourcing were the activities most often listed as included in the supply chain function.
• Among companies with a supply chain function, only about half included product development or logistics & distribution.
• Supply Chain Leaders were more likely to report a greater span of control over select activities.
• Roughly one-third of Supply Chain Leaders did not include Logistics & distribution or Manufacturing in their supply chain function.
• Larger companies included a wider range of activities within their supply chain function.
All survey respondents Supply Chain Leaders Companies with annual revenues of < $1B
Companies with annual revenues of $1B or >Supply Chain Followers
Activities Included in Supply Chain
Function Which of the following steps has your company taken to increase the flexibility and resiliency of
its supply chain to respond to disruptions or unexpected changes in demand?
7
48%
47%
45%
43%
42%
39%
38%
36%
36%
36%
35%
35%
34%
Collaboration with keysuppliers
Increase speed-to-market
Reduce cycle times
More flexible transportationpolicies
Increase visibility
Source from multiple vendors
Production facilities/vendors inmultiple locations
Build spare capacity
Reserve capacity for make-to-order products
Locate production closer tocustomers
Higher inventory levels
Interchangeability of parts
Locate production closer tosuppliers
76%
75%
69%
75%
76%
59%
75%
71%
61%
63%
61%
55%
65%
44%
43%
41%
39%
38%
36%
33%
32%
33%
32%
32%
32%
30%
Which of the following are included within your company’s Supply Chain function?
• Less than half of surveyed companies reported taking any of 13 actions to increase the resilience of their supply chain to respond to disruptions or unexpected changes in demand.
• The most common steps taken were:
• Collaboration with key suppliers
• Increase speed to market
• Reduce cycle times
• Supply Chain Leaders were much more likely to report having taken steps to increase resilience (roughly 30% more for most actions).
• However, even among Supply Chain Leaders, one-third or more had not taken any of the actions listed.
• Larger companies were more likely than smaller companies to have taken steps to increase resilience.
40%
39%
36%
32%
31%
28%
30%
27%
26%
55%
54%
49%
51%
45%
43%
40%
41%
41%
All survey respondents
Supply Chain Leaders
Companies with annual revenues of < $1B
Companies with annual revenues of $1B or more
Supply Chain Followers
Steps to Increase Resilience of
Supply Chain
8
39%
33%
35%
32%
17%
57%
59%
55%
57%
58%
Optimization software
Supply chain visualization software
Mobile technologies
RFID tags
3D printing
Extensively Somewhat / A Little
Technologies Used in Supply Chain
To what extent does your company use each of the following technologies in its supply chain
operations?
9
75%
75%
67%
65%
48%
30%
34%
28%
27%
13%
Mobile technologies
Optimization software
Supply chain visualization software
RFID tags
3D printing
Supply Chain Leaders
Supply Chain Followers
Industrial
Products/
Auto
Diversified
Man
Consumer
Products
High
Tech
Chemicals
/EnergyRetail Overall
Meet customer service levels 84% 83% 83% 79% 54% 84% 78%
Achieve global growth objectives 77% 76% 71% 70% 88% 77% 77%
Assure reliable supply of raw
materials82% 82% 73% 64% 50% 82% 72%
Minimize inventory investment 69% 73% 68% 64% 85% 69% 71%
Spur innovative approaches 74% 69% 79% 68% 48% 66% 67%
Integrate with other company
functions, vendors, and customers67% 72% 60% 60% 85% 69% 69%
• Chemicals/energy companies were most likely to cite: Achieve global growth objectives, Minimize inventory investment, and Integrate with other functions, vendors, and customers.
Supply Chain Objectives
How important for your company are each of the following objectives for its supply chain?
10
Industrial
Products/
Auto
Diversified
Man
Consumer
Products
High
Tech
Chemicals
/EnergyRetail Overall
Attracting and retaining talent 59% 45% 59% 52% 75% 59% 58%
Keeping up with product
introductions56% 42% 62% 52% 69% 65% 58%
Minimizing expenses while
supporting growth55% 42% 51% 55% 71% 65% 57%
Responding to demand uncertainty 57% 42% 59% 40% 79% 56% 56%
Ability to maintain operations
during disruptions52% 46% 49% 53% 77% 60% 56%
Responding to supply volatility 52% 41% 51% 52% 79% 54% 55%
Coordinating with Sales and
Marketing47% 38% 41% 40% 69% 61% 49%
Coordinating with vendors 45% 40% 42% 45% 67% 56% 49%
• Chemicals/energy companies more often rated several issues as very challenging: Attracting and retaining talent, Minimizing expenses while supporting growth, Responding to demand uncertainty, Responding to supply volatility, supporting global growth, and Keeping up with product introductions.
• Diversified manufacturing companies were least likely to consider Keeping up with product introductions as very challenging.
Challenges in Supply Chain
How challenging are each of the following for your company’s supply chain?
11
Industrial
Products/
Auto
Diversified
Man
Consumer
Products
High
Tech
Chemicals
/EnergyRetail Overall
Collaboration with key suppliers 56% 47% 54% 47% 38% 46% 48%
Increase speed-to-market 45% 54% 54% 48% 35% 48% 47%
Reduce internal cycle times 52% 37% 48% 41% 56% 42% 46%
More flexible transportation
policies49% 32% 44% 42% 48% 42% 43%
Build spare capacity 44% 38% 25% 34% 38% 38% 36%
Reserve capacity for make-to-
order products45% 42% 33% 28% 33% 33% 36%
Maintain higher inventory levels 44% 36% 27% 38% 23% 40% 35%
Interchangeability of parts 36% 36% 41% 41% 35% 13% 34%
• To increase resilience, industrial products/auto companies more often cited Collaboration with key suppliers, Build
spare capacity, Reserve capacity for make-to-order products, and Maintain higher inventory levels.
• Diversified manufacturing and consumer products companies were more likely than those in other industries to
cite Increase speed-to-market.
Steps to Increase Resilience of
Supply Chain
Which of the following steps has your company taken to increase the flexibility and resiliency of its supply chain to
respond to disruptions or unexpected changes in demand?
12
Supply chain disruptions have become common
and costly….
…yet most companies are inadequately focused in
managing supply chain risks
…through neglected key organizational and risk managementenablers…
People
LL
LL
050 Technology
& Analytics
Process
Impact on SC Performance
(-$) (+$)0
True distribution Normal distribution
…and through unpreparedness for
high-impact, low-probability, “Black
Swan” events
…through unclear cross-functional ownership of supply chain risk…
?
Global supply chains,
finds a recent survey,
experienced at least
one disruption in the
last 12 months1
85%COMMON
OCCURRENCE OF
SUPPLY CHAIN
DISRUPTIONS
30%
Firms have 30% lower
shareholder returns
following a publicly-
announced disruption
compared to peers3
NEGATIVE IMPACTS
ON SHAREHOLDER
RETURN
Sources: 1) “Supply Chain Resilience 2011,” November 2011, Business Continuity Institute; 2) “An Empirical Analysis of
the Effect of Supply Chain Disruptions on Long-Run Stock Price Performance and Equity Risk of the Firm,” Spring 2005,
Production and Operations Management Journal; note: value reflects median results against several benchmarks during
disruption year
Companies under invest in proactive
supply chain risk management
Internal supply chain practices, focused on efficiencies
and cost, have increased and shifted risk exposure
CENTRALIZATION FOR
ECONOMIES OF SCALE
INCREASED OUTSOURCING
OF CORE ACTIVITIES
SUPPLIER CONSOLIDATION
STRATEGIES
RISE OF JUST-IN-TIME AND
LEAN PRACTICES
GLOBALIZATION OF
SUPPLY CHAINS
Customer, macroeconomic, and societal trends have
also increased pressure on supply chain operations
SHORTENED PRODUCT
LIFECYCLES
NEED FOR ENVIRONMENTAL
& SOCIAL RESPONSIBILITY
£$
¥
€SHIFTING ECONOMIC
LANDSCAPE
HEIGHTENED REGULATORY
ENFORCEMENT
WORSENED IMPACT OF
NATURAL DISASTERS
SOCIAL MEDIA & INCREASING
TRANSPARENCY
Recent supply chain practices have
increased risk exposure to supply chainsIn many cases, internal practices have limited companies’ ability to respond to increasingly
complex risks posed by external forces
14
Resilient supply chain methodology
Supply Chain
Resilience
Assess SC Resilience
Determine Risk Exposure
5
Evaluate and
Prioritize
Resilience
Strategies
Address SC Resilience Opportunities
Monitor SC
Resilience
2
1
3
4
Step 1:
Goal: Assess overall supply
chain resilience and pinpoint
critical vulnerabilities
Step 4:
Goal: Address supply chain
resilience opportunities using a
defined roadmap
Step 2:
Goal: Prioritize risks based
on intensity, vulnerability,
and node criticality
Step 3:
Goal: Quantify priority risks,
define the costs and benefits of
potential resilience strategies
and develop a business case
and roadmap for the best
course of action
Step 5:
Goal: Develop a means to
monitor supply chain
resilience and manage
emerging vulnerabilities
Five-step methodology helps build and
improve supply chain resilienceEach of the five steps has defined goals to support on-going resilience efforts
15
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