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Solving Efeso © 2013
Professor Alan Waller OBE
Antwerp, Belgium
2 June 2015
Leveraging the Supply Chain for Competitive Advantage
SCL Antwerp - Embrace the Supply Chain of the Future
- 2 -Supply Chain and Logistics Summit Solving Efeso © 2013
Professor Alan Waller OBE
Vice President, SC Innovation, Solving Efeso
Visiting Professor,Cranfield School of Management
Immediate Past International President, CILT
Global Research Committee, APICS SCC
President, Leaders in Supply Chain Europe
Chairman, ELUPEG Europe
Director and Trustee, Transaid
- 3 -Supply Chain and Logistics Summit Solving Efeso © 2013
Ever more demanding
customers and consumers
Changing market boundaries and new channels
Aggressive global competition
Industry consolidation and
alliances
Sustainability/ Risk/
Environmental issues
Financial/Economic pressures
Speed of technology
change
Shortening product life
cycles Hypercompetition
+Globalisation
Competitive Pressures in the Supply Chain
Serving localised customer needs through longer, more complex supply lines
Supply Chain Management in a Global World
- 4 -Supply Chain and Logistics Summit Solving Efeso © 2013
Agenda
Global Developments
The Role of Supply Chain
Next Generation Supply Chains
The Challenges and Opportunities of Strategic Change
Making it Happen - Case Study in Indonesia
The Way Forward
- 5 -Supply Chain and Logistics Summit Solving Efeso © 2013
Agenda
Global Developments
The Role of Supply Chain
Next Generation Supply Chains
The Challenges and Opportunities of Strategic Change
Making it Happen - Case Study in Indonesia
The Way Forward
- 6 -Supply Chain and Logistics Summit Solving Efeso © 2013
The Emerging Value Chain- The Global Picture
VALUE CHAIN RESPONSE
Retailers Increased customer reach Enhanced propositions/choice Increased availability Increase SC control Responsible sourcing
Manufacturers Focus on core Network/outsource Agility Volume economics Supply Chain visibility Collaboration Sustainability Management of risk Process driven
Systems ERP Bolt-ons /APS Joining SC players Process driven
Technology New products New channels New customers Low cost
Consumers Ever more demanding -
collectively and individually Pro-active Interactive Multi-channel Omni-channel Responsible buying
Logistics Companies Dedicated solutions Value-Added solutions Collaborative solutions Break the vicious circle
- 7 -Supply Chain and Logistics Summit Solving Efeso © 2013
Agenda
Global Developments
The Role of Supply Chain
Next Generation Supply Chains
The Challenges and Opportunities of Strategic Change
Making it Happen - Case Study in Indonesia
The Way Forward
- 8 -Supply Chain and Logistics Summit Solving Efeso © 2013
Organisation of the Future:Supply Chain Management in the Boardroom
Supply Chain Management coordinates the internal and external networked resources to drive VALUE through the business
Ext.Finance IT HR Comm.
R & D
Supply Chain Sales
& Mktg.
Strat.Planning
Leading Processes
Value Adding Processes
Support Processes
Core Business Processes
VALUE CREATION
The Supply Chain strategy will complement and enable the overall business strategy for top line growth
Excellence in Supply Chain execution will deliver the bottom line results
The Supply Chain leader of the future will have to: Understand interfacing functions Make increasingly strategic decisions Move from "value delivery" to "value
creation" Manage risk in the extended enterprise Merit board level recognition
SUPPLY CHAIN AS A FUNCTION- AND AS A PROCESS!
- 9 -Supply Chain and Logistics Summit Solving Efeso © 2013
Supply Chain as a Function -AND as a Value Added Process in the Boardroom
Value
Revenue
Cost
Fixed Assets
WorkingCapital
Fiscal
VolumeChannel managementBrand buildPriceService bundleEmotional IntelligenceLoyaltyCustomer Intimacy
SCE excellence (warehousing / distribution)Waste reductionOperational effectivenessConversion to opportunity cost
UtilisationMarket capacityContract manufacturing (inc cost impact)Network strategy
Relationships / trust to build confidenceCycle time
Tax efficiencyTreasury planning / hedging
‘Handles’ for Agility
Source:Conference Board Europe:European Council on Global SC
- 10 -Supply Chain and Logistics Summit Solving Efeso © 2013
Agenda
Global Developments
The Role of Supply Chain
Next Generation Supply Chains
The Challenges and Opportunities of Strategic Change
Making it Happen - Case Study in Indonesia
The Way Forward
- 11 -Supply Chain and Logistics Summit Solving Efeso © 2013
Global Supply Chain - Where Will the Next Generation Innovation Come From?
New Thinking Of Old Practices
Old Practices / Old Thinking
New Practices and New Thinking
New Practices Designed On Old Thinking
New
Old
Old New
Su
pp
ly C
hai
n T
hin
kin
g
Supply Chain Practice
• Collaboration across supply chain creating value added economics
• Control towers for collaboration• Responsible sourcing• Sustainability - social/, economic &
environment• Focus on skills and leadership• Align supply chain strategy with business
strategy
• Retail focus on On-Shelf-Availability and In-store logistics
• Supply Chain design with risk management principles
• Extended Supply Chain Network Review• Managing Complexity
• Retail focus on total Supply Chain cost – not just pushing cost upstream
• Focus on Product/Channel/Customer Profitability - Cost-to-serve
• Collaboration along Supply Chains to create visibility/synchronisation
• Supplier Development for Supply Chain performance
• Manufacturing for Supply Chain performance
Source: Alan Waller 2013
- 12 -Supply Chain and Logistics Summit Solving Efeso © 2013
Key takeaways from the report........
Next Generation
Supply Chains
Moving towards Next Generation Supply Chains - The Chief Supply Chain Officer Report 2013 (SCM World)
Business
• Integration of Supply Chain Leadership into Business Leadership
• Alignment of Supply Chain Strategy and Business Strategy
• Larger investment in Direct to Customer Channels
Customer
• Tangible performance is expected from Social & Environmental factors, not just a positive image
• Consumers are segmenting faster than business can respond - variety and channel
• Move to Omni-Channel models pushing complexity further upstream in terms of:
• Packaging• Pricing• SKU Count• Networks• Fulfilment Channels
Supply Chain
• Focus on integrated operations & cost reduction
• Skills in supply chain are considered to have parity with sales and R&D
• Complex risk management strategies being expanded from supply side to the entire supply chain
Value Generation
• Recognition that Supply Chain enables value creation in:
• Customer service• Customer loyalty• Strengthening supplier relationships • Acceleration of new product introduction • Business expansion in existing and new
markets • Expansion of value-added services • Facilitation of premium pricing • Leveraging opportunities created by external
supply chain disruptions
- 13 -Supply Chain and Logistics Summit Solving Efeso © 2013
Key takeaways from the report........
Next Generation
Supply Chains
Moving towards Next Generation Supply Chains - The Chief Supply Chain Officer Report 2014 (SCM World)
Business
• CEO's delegating less Supply Chain strategic decision making
• Visible link between Supply Chain capability and margin growth
• Route to market is a "2 way street" with pressure coming from more integrated manufacturing and consolidated supplier bases
Customer
• Growing volatility and more complexity in customer demand
• Use of social media for real time demand sensing and customer feedback
• Digital demand growth is increasing # of SKUs
• New generation of tools & skills required to capture and process "big data" customer demand
Supply Chain
• Deeper operational integration in value chains
• True cost to serve capability for each and every order
• Digital demand fulfilment is fragmenting fulfilment modes and shortening cycle times
• Trend towards Agility more important than traditional Lean practice
Value Generation
• Traditional cost cutting and process standardisation will become less important in terms of value generation as digital technologies become more accessible
• Too much demand noise in "big data", is not focusing enterprise resources on the real value creation opportunities
• Uncertainty was previously risk.....is now considered a value driver with "Agile" companies able to fulfill profitable orders in time gaining competitive advantage
- 14 -Supply Chain and Logistics Summit Solving Efeso © 2013
Agenda
Global Developments
The Role of Supply Chain
Next Generation Supply Chains
The Challenges and Opportunities of Strategic Change
Making it Happen - Case Study in Indonesia
The Way Forward
- 15 -Supply Chain and Logistics Summit Solving Efeso © 2013
M4SC (Management 4 Supply Chain) Approach: Value Chains - so much more than trucks and sheds...
According to the Harvard Business Review, 40% of
all investments are wasted due to a lack of
alignment with business strategy
Source: Supply Chain Council 2013
- 16 -Supply Chain and Logistics Summit Solving Efeso © 2013
Alignment with Business Strategy and Flawless Execution are Keys to a High Performing Supply Chain
Most companies choose a working business strategy and fail to execute it functionally, alignment and flawless execution of supply chain strategies yields a competitive advantage over many competitors.
Companies with a highly efficient structure are twice as successful as those with operational failings
- 17 -Supply Chain and Logistics Summit Solving Efeso © 2013
Top 5 Concerns Amongst Executives Worldwide
Implementation is a key concern...."Excellence in Execution" and "Consistent Execution of the Strategy"
Financial risk, volitility and credit risk
Global economic performance
Speed, flexibility, adaptability to change
Consistent execution of Strategy by Top Management
Excellence in Execution
0.00% 10.00% 20.00% 30.00% 40.00% 50.00% 60.00%
43.80%
44.60%
46.60%
47.00%
55.00%
Cite challenge as being of 'Greatest Concern'
Source: The Conference Board 2010Note: The global top 5 list is weighted by regional representation in global GDP as established by the International Monetary Fund
- 18 -Supply Chain and Logistics Summit Solving Efeso © 2013
Bridging the Implementation Gap
Pan-regional supply chain integration across Europe
There are major challenges in translating vision into reality
‘86 ‘88 ‘90 ‘92 ‘94 ‘96
‘98 ‘00 ‘02
% of Companies
0%
75%
50%
25%
100%Opportunity Awareness
Effective Implementation
Active Implementation
Strategy Planning
‘04 ‘06 ‘08 ‘10
Source: A Waller Surveys 1992, 1994 , 1996, 2002, 2004 and 2010
- 19 -Supply Chain and Logistics Summit Solving Efeso © 2013
Change from vertical Supply Chains to Demand Webs -Supply Chain Implementation becomes also a key external issue
Vertical integration Network organisation
Businesses are responding by focusing on core competencies and outsourcing non-core activity creating networked organisations
Source: Chatham House Forum
“From 2005, over half of SCM functionality is provided from outside the enterprise ” (Gartner Group)
Supply Chain is an External Agenda
Businesses must work in real partnership with the other businesses in the Extended Supply Chain key to this success
This redefines the role of Supply Chain Management as a Board Process
- 20 -Supply Chain and Logistics Summit Solving Efeso © 2013
Supply Chain Strategy in the Boardroom Survey 2009-2012Cranfield School of Management / Solving Efeso - Key Survey Results
What is Supply Chain functionally responsibility for?
Is the senior supply chain person on the Board?
Over 50% of companies have the Supply Chain Leader on the Executive Board of their Business Unit
For manufacturers, nearly 40% of supply chain leaders are responsible for Source, Make and Deliver
- 21 -Supply Chain and Logistics Summit Solving Efeso © 2013
Implementation Challenges – The Business Opportunity
50% chance of successful implementation of Strategic Change Barriers to change Variable CEO/Board involvement in Supply Chain Strategic Change Company Culture Skills and Leadership Disciplines of Performance Behaviour Engaging the Leadership Team in driving Change Management Aligning Supply Chain and Business Strategy Adopting the Key Get-rights for successful change:
– High Performing Organisation Model - aligning the organisation to succeed
– Performance behaviours - willingness to change and responsibility for performance
– Kotter Steps - "Get the Vision Right"
Excellent and Successful Implementation is a Key Competitive Advantage
What issues do companies need to look at to deliver competitive advantage?
Source: Solving Efeso/ Cranfield School of Management Research 2009-2012
- 22 -Supply Chain and Logistics Summit Solving Efeso © 2013
Solving Efeso/Cranfield School of Management Supply Chain Strategy in the Boardroom Survey 2009/2012
N= 181
Success of Supply Chain Strategies
This is a 50% chance of success or failure!
- 23 -Supply Chain and Logistics Summit Solving Efeso © 2013
0.0 2.0 4.0 6.0
1- Not at all
2
3
4
5- Fully
There is clear and strong correlation between the extent of Board involvement and success
Source: Solving Efeso/Cranfield : Supply Chain Strategy in the Boardroom Survey 2009/2012
Board involvement in SC strategy
N= 56
Incr
easi
ng
bo
ard
in
volv
em
ent
Increasing success
Success of implementation
- 24 -Supply Chain and Logistics Summit Solving Efeso © 2013
The SC strategy process is highly cross-functional with several functions at least consulted
•There is clear and strong correlation between the involvement of other functions and success N= 181
Source: Solving Efeso/Cranfield : Supply Chain Strategy in the Boardroom Survey 2009/2012
- 25 -Supply Chain and Logistics Summit Solving Efeso © 2013
Other ingredients of success
Success is higher when:-• Sales & Marketing, Finance and IT functions are held
accountable• The process is vision led• SC strategy review happens frequently• Quantitative modelling techniques are used• A high level of adaptation takes place• Risk management is an integrated part of the strategy
and implementation process• There is a focus on benefit tracking
Success is higher when:-• Sales & Marketing, Finance and IT functions are held
accountable• The process is vision led• SC strategy review happens frequently• Quantitative modelling techniques are used• A high level of adaptation takes place• Risk management is an integrated part of the strategy
and implementation process• There is a focus on benefit tracking
Source: Solving Efeso/Cranfield : Supply Chain Strategy in the Boardroom Survey 2009/2012
- 26 -Supply Chain and Logistics Summit Solving Efeso © 2013
Customer and business focused mindsets and management behaviours are required to succeed
This is a major shift away from today’s functional ways of working
Key Management Behaviours
End-to-End SupplyChain Mentality
Switch from a Stock Push to a
Demand Pull Philosophy
TotalCommitment to
Customer Service
Anticipate End Customer and
Manage DemandProactively
Focus on Performance of
Extended Enterprise
Management of Partnerships
- 27 -Supply Chain and Logistics Summit Solving Efeso © 2013
Solving Efeso/Cranfield School of Management Supply Chain Strategy in the Boardroom Survey 2009/2012
Company culture, lack of senior management leadership and lack of information are the top 3 barriers to overcome
N= 181
Rank Barrier to success
1 Company culture2 Senior management lack of leadership3 Lack of information along the Supply Chain4 CEO lack of support5 Management skills inadequate6 Lack of clear goals7 Lack of IT systems8 Inertia/Lack of urgency9 Lack of resources
10 Lack of KPIs and tracking11 Fear of change
12 Too many conflicting priorities
13 Over ambitious timeline
14 Change overload
15 Lack of IT skills
16 Inappropriate performance mechanisms
- 28 -Supply Chain and Logistics Summit Solving Efeso © 2013
Solving Efeso/Cranfield School of Management Supply Chain Strategy in the Boardroom Survey 2009/2012
Respondents rate People barriers much higher than technical barriers
N= 181
Sum of scores for people related vs technical related barriers
‘No technical barriers or restraints, the issues are around change management. The situation is improving with implementation successes which feed to accelerate the implementation process.’
‘The main constraint is the speed of change. We reckon that we are not very good at change management - the culture doesn’t let us be fast enough.’
‘No technical barriers or restraints, the issues are around change management. The situation is improving with implementation successes which feed to accelerate the implementation process.’
‘The main constraint is the speed of change. We reckon that we are not very good at change management - the culture doesn’t let us be fast enough.’
Technical 20%
Type of barrier
"...Survey Quotes..."
- 29 -Supply Chain and Logistics Summit Solving Efeso © 2013
The key “get rights” for Supply Chain Strategies and Initiatives
Supply Chain Strategyin the Boardroom..
Top level support
Benefit Tracking
Active involvement of other functions
Change Management dealing with cultural and
people issues
Frequent / continuous
review
Continuous adaptation
Share learning Vision led
Quantitative Modelling
Risk Management
Source: Solving Efeso/Cranfield School of Management:: Supply Chain Strategy in the Boardroom Survey 2009/2012:
- 30 -Supply Chain and Logistics Summit Solving Efeso © 2013
Agenda
Global Developments
The Role of Supply Chain
Next Generation Supply Chains
The Challenges and Opportunities of Strategic Change
Making it Happen - Case Study in Indonesia
The Way Forward
- 31 -Supply Chain and Logistics Summit Solving Efeso © 2013
1,811,569 sq km land 251,160,124 inhabitants GDP / Capita (ppp): $5,000 (2012 est.)
Making it Happen- A Case Study in Indonesia-Leveraging Supply Chain to Realise the Market Opportunity
SEA is a massive and growing market place
Urban GDP per capita in Indonesia is 10 times the average
Within ‘Urban’, analysis showed over 5 million ‘New Consumers’ (‘A’ Socio-Economic class), growing at over 30% per annum
The ‘Traditional Market’ (necessity purchases of small quantities),is served by a diverse and highly fragmented retail structure supported by an inefficient complex trade channel
The ‘New Consumer’ market (regular purchases of bulk quantity), is served by a developing self-service trade that demands a new level of supply performance
Failure to support the ‘New Consumer’ is a lost opportunity and will lead to a decrease in market share
- 32 -Supply Chain and Logistics Summit Solving Efeso © 2013
Indonesia - Major Multinational FMCG ManufacturerTraditional Trade Channels
2 Factories plus third party
suppliers
2 Central Warehouses
Harbour Warehouses
20 Regional Depots
300 Primary Distributors
3000 Secondary Distributors
> 200,000 Retailers
- 33 -Supply Chain and Logistics Summit Solving Efeso © 2013
Indonesia - Major Multinational FMCG Manufacture - over 7 weeks of finished goods inventory
Ware-house
stock
(11 days)
Transit stock
(1 day)
Depot stock
(7 days)
Transit stock
(3 days)
Transit
stock
(3 days)
Factory
stock
(3 days)
Retail
stock
Distributor stock
(21 days)
Transit stock
(1 day)
- 34 -Supply Chain and Logistics Summit Solving Efeso © 2013
Indonesia - Major Multinational FMCG Manufacturer - evolution of Trade Channels
Retail Outlets
– Traditional Shop/Toko
– Self-Service Outlet
– Small Family Chain
Regional/National/International Chains
– Wholesale Supply
– Dedicated Distributor
– Non-dedicated/Full-line Wholesaler
– Cash ‘n’ Carry
Over 50% will still be through the traditional route
The New Retailers will drive overall Market Growth of 30% pa
- 35 -Supply Chain and Logistics Summit Solving Efeso © 2013
Indonesia - Major Multinational FMCG Manufacturer - Servicing the Trade Channels
Traditional Trade operations
Full Loads of allocated stock collected by Distributors
Small vans sell weekly to Traditional Retailers/Tokos
Traditional Products typically in small single-use packs
The Self-Service Trade will not thrive with existing Trade Channels
Self-Service Trade needs and wants
Large Volume deliveries to individual stores/(RDCs)
Frequent daily delivery
Central ordering
Specified lead-times / demanding service levels
New products / Large pack sizes / case picking
- 36 -Supply Chain and Logistics Summit Solving Efeso © 2013
Indonesia - Major Multinational FMCG ManufacturerInnovation and The Strategic Vision
An Integrated Supply Chain to meet all customer needs at lowest total cost
Development of a new trade channel to meet the rapidly developing self-service market
Maintain and improve the traditional route to market
Introduce Flexible Manufacturing Processes to create an agile supply chain response
Develop Existing Key Suppliers Through Partnerships
Develop Partnerships with the New Retailers
Develop LSP Partnerships
Introduce new systems to support the Supply Chain Vision
A Vision to benefit all Supply Chain Players and grow market share
- 37 -Supply Chain and Logistics Summit Solving Efeso © 2013
Indonesia - Major Multinational FMCG ManufacturerBusiness Benefits
Protect and Grow Market Share
Align the business to address the new market requirements
Provide reliable service to the self-service sector through a shorter less complex and more responsive supply chain
Improve but not disrupt the traditional trade channel
Improve supply and manufacturing to benefit both trade channels
Reduce inventory
Reduce costs
Improved overall customer service
A Supply Chain Vision creating value, growth, and competitive edge in a rapidly changing environment and market place
- 38 -Supply Chain and Logistics Summit Solving Efeso © 2013
Indonesia - Major Multinational FMCG Manufacturer Key elements driving successful implementation
Communicate and get buy-in to the Vision
Commit the CEO and set up a Supply Chain Executive in the Board Room
Establish the overall project on the Board Agenda as a key priority
Appoint an Internal Champion – the very best the business has
Define, schedule and prioritise the change projects (41 projects)
Appoint internal project leaders and cross-functional project teams
Set up a communication plan and communication programme
Set up Supply Chain Master Classes (Locally and in the UK)
Work with suppliers/outsourcing partners and customers
Audit changes in the business culture and performance:
– Assess: Innocence/Awareness/Understanding/Action/Results
– All Board members, internal management and external partners
Integrate the change programme with systems implementation programme
Strategic Modelling for options and risk analysis, and monitoring progress
- 39 -Supply Chain and Logistics Summit Solving Efeso © 2013
The key “get rights” for Supply Chain Strategies and Initiatives -- the key essentials for the Indonesian success
Supply Chain Strategyin the Boardroom..
Top level support
Benefit Tracking
Active involvement of other functions
Change Management dealing with cultural and
people issues
Frequent / continuous
review
Continuous adaptation
Share learning Vision led
Quantitative Modelling
Risk Management
Source: Solving Efeso/Cranfield School of Management:: Supply Chain Strategy in the Boardroom Survey 2009/2012:
- 40 -Supply Chain and Logistics Summit Solving Efeso © 2013
Agenda
Global Developments
The Role of Supply Chain
Next Generation Supply Chains
The Challenges and Opportunities of Strategic Change
Making it Happen - Case Study in Indonesia
The Way Forward
- 41 -Supply Chain and Logistics Summit Solving Efeso © 2013
Conclusions and Way Forward
The practice of good supply chain varies hugely across different businesses
There is a clear link between supply chain excellence and business success
There are identifiable businesses where rapid implementation of a new supply chain strategy has positively impacted business performance, and also where failure in implementation has significantly damaged the business.
Experience of undertaking over 55 Supply Chain Strategic projects in all sectors and geographies has identified wide-spread implementation difficulties.
The 2009/2012 research has quantified the impact of these difficulties, and has identified and prioritised the key barriers to success, together with identifying key ‘get-rights’ that provide a positive link to success
Businesses that want to embrace the opportunities presented by Next Generation Supply Chains need to proactively put in place the building blocks, and follow the key ‘get-rights’, that will guarantee success
The most challenging areas relate to culture and management performance
Excellent and Successful Implementation is a Competitive Advantage
- 42 -Supply Chain and Logistics Summit Solving Efeso © 2013
Closing comments: 5 Key Messages for the CEO
How well is Supply Chain represented in the Leadership team, and how does this reflect the correct scope of responsibility?
How well is Supply Chain supporting the Corporate and Customer service strategies? Ensure SC is not solely a cost issue
Encourage cross-functional participation in the development of the SC strategy – it helps success
Accept that SC strategy implementation is not straightforward – so build risk management into the process
Two main barriers to successful implementation of SC strategy are internal issues – Culture and Leadership
- 43 -Supply Chain and Logistics Summit Solving Efeso © 2013
More Information?
The Stage One Survey Report is available to download free of charge
Workshops to discuss the findings and understand the implications for businesses are being run across Europe and in other Regions of the World according to demand
A White Paper has been published that is available without charge to all survey participants
We are embarking on a next phase of research to establish precisely what characterises High Performance Organisations and High Performance Supply Chains, together with identifying the leadership qualities and the performance behaviours that need to be put in place to ensure business success
For further information and participation in the next stage of research please contact:- Professor Alan Waller OBEemail: alan.waller@solvingefeso.comHome Business: +44(0)1933 403712Mobile:+44(0)7802 170507
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