SCL Antwerp - Alan Waller, Solving Efeso, Embrace the Supply Chain of the Future

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


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


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


Agenda

Global Developments





The Way Forward


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


Agenda

Global Developments





The Way Forward


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!


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


Agenda

Global Developments





The Way Forward


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


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


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


Agenda

Global Developments





The Way Forward


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


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


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


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


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


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


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

http://www.google.co.uk/url?sa=i&rct=j&q=&esrc=s&frm=1&source=images&cd=&cad=rja&docid=fm3yPgUPGOeQuM&tbnid=F7TYg2SAfP_WSM:&ved=0CAUQjRw&url=http://www.shoemoney.com/2013/03/14/sustaining-a-competitive-advantage-is-harder-then-ever&ei=yYqUUbzaBdSZ0QWr2IHoDg&bvm=bv.46471029,d.d2k&psig=AFQjCNHNo6mr9lFtwfu59PSGHG-a8ripBg&ust=1368775724369009


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!


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


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



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



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



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



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..."


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:


Agenda

Global Developments





The Way Forward


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


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


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)


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


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


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


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


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


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:


Agenda

Global Developments





The Way Forward


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


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


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: [email protected] Business: +44(0)1933 403712Mobile:+44(0)7802 170507