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Grab ‘n Go: Session 14Agilitet i Supply chainHvad driver omkostningerne?12. Oktober 2016 #deloittegng
About Deloitte Supply Chain Management
© 2016 Deloitte 2
Asia Pacific
260
MEA
100
North America
1.200
Latin America
120
Europe
750
XX Number of local Deloitte SCM professionals
Deloitte SCM functions*
Supply chain strategy
Product development
Supply Chain planning
Sourcing & Procurement
Manufacturing Strategy &
Operations
Logistics & Distribution
Sustainability
Supply Chain Analytics
Note: Deloitte’s definition of Supply Chain covers the full range of operations from product idea to delivery and returns management
The Deloitte Supply Chain network consists of a large group of professionals and
focuses on multiple service offerings
Supply Chain Management
challenges
3© 2016 Deloitte
Any successful supply chain reaches its target on one of the four key factors,
without making compromises on any of the others
Main objectives of Supply Chains
© 2016 Deloitte 4
At a reasonable price
With limited supply
chain risk
And in compliance with
regulations
Customer satisfaction Customer satisfaction is, or should be, at the core of each organisation’s focus. It is defined as:
• Timely delivery according to lead-time request,
• at a quality rate that’s within the requirements
• And with a service level at par
The cost of the Supply Chain network forms a major part of the organisation’s spend. Cost
components include inbound logistics, production, warehouse operations (e.g. pick/pack and
storage activities), intercompany freight, outbound freight and returns handling
Supply chain risk expresses itself as a result of demand and supply volatility. It exposes
organisations to increased financial risks and potential loss of revenue
Compliancy with environmental, tax and customs regulations is a firm requirement of authorities.
Supply chains needs to be compliant with the local and global regulations.
Expectations for more on-time deliveries and shorter lead-times increase the need
for a responsive supply chain
Customer satisfaction
© 2016 Deloitte 5
2012
97%
2010
93%
95%
2008
95%
1999
90%
79%
85%
93%
2005
91%
2002
90%
On time delivery to warehouse On-time delivery to buyer
2011
68%
33%
6%
2013
7%
42%
72%
2012
5%
34%
2010
26%
0%
24%
4%
59%56%
2008
55%
61%
2009
25%
0%
Offering same
day delivery
Offering Saturday
delivery
Offering next
day delivery
On time delivery percentages Offered and expected lead- times
Up to 10% of the sales revenue of organisations represents the spend on
outbound logistics and distribution activities
Margin pressure on logistics and distribution
© 2016 Deloitte 6
0,5%
1,3%
1,0%
0,9%
1,0%
0,4%
Process /
Chemicals
High Tech /
Telecom
3,0%
Life sciences 2,1%
3,2%
2,9%
1,9%
3,0%
Discrete
manufacturing
Consumer
products
Automotive
25th percentile median 75th percentile
1,8%
1,0%
2,0%
High Tech /
Telecom
0,5%
Process /
Chemicals
5,0%
Life sciences
6,5%
2,4%
4,0%Discrete
manufacturing
0,5%
0,6%
2,1%
Consumer
products
Automotive 2,5%
Warehousing cost (incl. pick/pack): percentage of total sales revenue (%) Outbound freight logistics cost (freight, duties and customs): percentage
of total sales revenue (%)
1,0%
0,7%
0,8%
0,5%
0,6%
1,0%
1,0%
1,2%
1,3%
0,5%
0,7%
1,9%
25th percentile median 75th percentile
Source: Deloitte benchmarking database
Both executive surveys and empirical evidence show that risk management is a
key topic as it brings major performance impacts and opportunities
Impact of Supply Chain Risks
© 2016 Deloitte 7
85%... of companies had experienced at least one supply chain
disruption in the last 12 months 1
In the year of a supply chain disruption announcement, a
firm’s operating income declines 39% relative to its peer
group 339%
Supply chain risk is top of mind in the boardroom …
… as it has a significant impact on business performance
Due to product recalls associated with a manufacturing
quality failure, a major global CPG company lost 27% of its
brand value in 6 months in 2010427%
81% ... of companies explicitly manage strategic risks 2
94%... recently changed their approach to strategic risk
management 2
To comply with new labelling requirements flexibility in distribution setup can be
utilised
Compliancy with regulations
© 2016 Deloitte 8
As-is
To-be
Produce StockLabel Ship
Produce Stock Label Ship
Requirement on labelling of goods
• A regulatory framework for the classification and labelling of substances and mixtures in the EU is
being implemented progressively
• Main Logistics & Distribution consequence: Hazard warning sentences need to be in the language of
final customer and warehousing intermediaries
What is driving the need for
adaptive supply chains?
9© 2016 Deloitte
Proper alignment of the supply chain network to the product life cycle is required in
order to continue to have a cost-effective supply chain
Aligning supply with demand
© 2016 Deloitte 10
Network capacity
Development &
Introduction
Growth Maturity Declining Commoditized
Sales
Time
Regular product cycle
Successful product
Product failure
Translating the various influences on your supply chain into pragmatic tasks for
your organisation
Main objectives of Supply Chains
© 2016 Deloitte 11
At a reasonable price
With limited supply
chain risk
And in compliance with
regulations
Customer satisfactionWe need to be able to adapt to whatever
our customers want
However, we should utilise our assets to
the best extend
Without exposing ourselves to too much
risk
And we should be complying with changing
regulations
• Prioritize: Predict what is upcoming and
act on the right things
• Scale: Set capacity utilisation targets
and find the right mix of cost vs. stock-
out risk
• Prepare: Manage resilience and
contingency planning
• Comply: Being able to adapt if needed
How to apply agile management
12© 2016 Deloitte
Three interesting questions arise when thinking about Agile management of
Supply Chains based on its definition
Agile
© 2016 Deloitte 13
“Agile management, or agile process management, or
simply agile refers to an iterative, incremental method of
managing the design and build activities of engineering,
information technology and other business areas that aim
to provide new product or service development in a highly
flexible and interactive manner”
Iterative: Is Supply Chain design an iterative process? Incremental: So each time we do something, it has to be
better than the previous time?
Flexible and interactive: How can a network setup be
flexible and interactive if I am working with large (CAPEX)
investments?
1 2
3
Multiple aspects in the overall strategy as well as external factors can lead to the
need for continuous network setup review
1. Iterative Supply Chain design
© 2016 Deloitte 14
Business model changes
Erosion
Mergers & Acquisitions
Expansion and increased complexity
Introduction of 3PL / outsourcing opportunities
Changes in technology or organization
Direct store delivery to customer central warehouse or
door-to-door delivery
Sustainability and Corporate Social Responsibility
Mergers and acquisitions (e.g. integrating new
companies)
Partly rationalization of supply chain networks
New plants, new warehouses, new customers
Shifts in customer base
Competition / delivery standards
Changes in customer expectations
Shift in costs (e.g. fuel cost)
(De)centralisation of operations planning
New products and new markets
New geographies
Supplier changes
Change in packaging mix
Competitive dynamics change
The traditional way of network redesign is event driven and results in a reactive
network setup linked market demand
1. Iterative Supply Chain design
© 2016 Deloitte 15
Market demand
Reactive design
We have overcapacity
We can’t deliver!Network adjustment
Network adjustment
Deloitte recognizes that Supply Chain Design and Optimisation is becoming the
R&D division of the logistics function and needs more continuous focus
1. Iterative Supply Chain design
© 2016 Deloitte 16
Past Present Future
Centre of Excellence
Supply Chain Network Design
One-off projects
Supply Chain Network Redesign
• Exception-based monitoring of current network and identification of possible
challenges
• Continuous focus on network fit for purpose with a view on the short / medium / long
term
• Fuels strategic decision making whilst maintaining tactical optimums
• Develops a deep understanding of supply chain network dynamics
• Bends on a pragmatic and proven approach leveraging developed models
• Network redesign executed to investigate whether the current supply chain network is still fit
to serve the business
• Often done as a one-off exercise each 3-5 years (depending on the definition of mid-term per
industry)
• Requires starting from scratch and significant effort to ensure a qualitative project is delivered.
Imp
orta
nce / v
alu
e
Making incremental steps, will need a continuous monitoring of network
performance both in operational and financial aspects
2. Incremental: Having the right view on data
© 2016 Deloitte 17
Operational
monitoring
Financial budgeting
and cost controlling
• Extensive KPI dashboards
• Lean performance boards
• Balanced score cards
• Personal performance targets
Traditional way of monitoring incremental change
• Monthly reports
• Ad-hoc analysis
• Budgeting and budget meetings
• Activity based costing
In a cost-controlling way, a high-level comparison between budget and actuals can
be made, but no fact-based explanation of operational variances is available
2. Incremental: Having the right view on data
© 2016 Deloitte 18
Actual cost
Overhead
Sales volume
increase
Budget in
absolute
amount
Scrap rateCurrency impactTransport distance intercompany
DC efficiencyFuel price
Volume
corrected
budget
WH efficiency
Transport distance to customer
Unexplained variance
© 2016 Deloitte
The common approach works from creating the right set of data which supports in
process assessment and relates to cost impact
2. Incremental: Having the right view on data
A B C D EMap the process
Allocate P&L cost
items€ € € € €
Analyse operational
performance
xx per
hourYy km zz …. ….
© 2016 Deloitte
Continuous measurement of operational performance, linked with financial
accounts opens up for analysing the root causes…
2. Incremental: Having the right view on data
Operational
performance
measurements
Monthly financial
statements
Operational metrics that
are true cost drivers. E.g.:
• Transport distance
• Fuel price
• Warehouse pick rate
• Production performance
• Scrap rate
Comparison of activity
performance and cost
Profit and loss statements
used in periodical
budgeting process in the
finance department
Linking operational performance to
the financial accounts on a process
group level opens up the
opportunity for root-cause analysis
of financial performance
This is real business intelligence,
as here your data will teach you
something about your company
… which might reveal the specific areas in your business that have been over or
underperforming and will enable you to focus on making incremental steps
2. Incremental: Having the right view on data
© 2016 Deloitte 21
Actual cost
Overhead
Sales volume
increase
Budget in
absolute
amount
Scrap rateCurrency impactTransport distance intercompany
DC efficiencyFuel price
Volume
corrected
budget
WH efficiency
Transport distance to customer
The common data foundation is a key element in all levels of decision making and
should drive which initiatives to be picked up in what priority
2. Incremental: Having the right view on data
© 2016 Deloitte 22
Common data
foundation
Strategic
(6+ months)
Operational
(1 week to 1 month)
Tactical
(1-6 months)
• ‘Where to be located’
• ‘Where to invest in capacity’
• ‘Where to rationalise’
• ‘How to utilise capacity the best’
• ‘Which order to fulfil from where’
• ‘What is the optimal batch size’
• ‘Which product should we
produce next’
The rise of exponential technologies has created the foundation of the fourth
industrial revolution – Industry 4.0
3. Flexible and interactive
Exponential technology change… …disrupting supply chains across all industries
Power Generation
Industrialization
Electric Automation
Late 18th century
Start of the 20th century
1970s to 2000s
Steam engines and hydraulic
power drive improved
productivity and enabled
industrialization
Advances in computing and
the internet allow for information
to be captured and transferred
more quickly than ever before
Electricity and assembly lines
paved the way for mass
manufacturing, improved
infrastructure, and advances in
financing and credit markets
Execution of
connected products,
customers, and
supply chain and
operations - driven by
a vast network of cyber-
physical systems
4th Industrial Revolution
Digital Supply Networks
With the increased availability of data, we need to be even more conscious of what
data to use and which type of analytics to apply
3. Flexible and interactive: From reactive to pro-active
© 2016 Deloitte 24
Analytical Sophistication
Added V
alu
e
Visual data exploration
PredictiveModelling
Simulation &Optimization
Segmentation
KPI reporting
Operationalreporting
Business User Statistical Expert
The question: Can we use visual data
exploration and segmentation flexibly and
interactively to support us in management
decisions?
An organisation that excels in anticipating and managing exceptions with full focus
will succeed in delivering highest service at lowest cost
3. Flexible and interactive: Exception based management
© 2016 Deloitte 25
Focus on all cases Sort out the extra-ordinary Full-focus on exceptions
Focus on business-as-usual
Business-as-usual
Exception
Today’s reality The task at hand The future potential
Summary
26© 2016 Deloitte
Iterative: Supply chain design should be a continuous business
consideration
Incremental: Monitoring the incremental improvements in
your supply chain is ideally done by linking operational and
financial performance
Flexible and interactive: Working increasingly exception
based will enable to focus you on what matters and where
most adaptivity is needed
1 2
3