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Copyright © 2008 Accenture All Rights Reserved.
Changing the Game with Your Customers – A Supply Chain Strategy in Action
ECR Asia Pacific Conference 2008, Thailand
Jeffrey Russell, Accenture / Metta Siramongkholkarn, L’Oreal
2Copyright © 2008 Accenture All Rights Reserved.
- Every Day Great Execution - Getting the basics right in terms of people process, systems, organisation and data. Cost optimisation through rationalisation of the cost base
- Performance Optimization - Focus on service levels by raising the performance bar, fine-tuning the overall model and collaboration with the extended supply chain.
- Game Changing Supply Chain -
Supply chain differentiation based on customer / consumer behaviour and value to drive top-line growth
Supply Chain Performance Journey
Val
ue
In order to drive Consumer Products companies performance to the next level, many are adopting a ‘Game Changing Supply Chain’ strategy
3Copyright © 2008 Accenture All Rights Reserved.
Effective supply chain strategies form the basis of competitive advantage and increase shareholder value
Developing differentiated channel value propositions
Improving the ability to meet customer needs and buying behaviour
Reducing total cost to serve as the level of service provided is varied between channel segments
Aligning operations and sales and marketing in the way they treat customers
Enabling the organisation to structure resources around segments, e.g. options to outsource customer service activities for selected segments vs retain in-house
4Copyright © 2008 Accenture All Rights Reserved.
Typical benefits achieved in FMCG companies through customer aligned supply chains
5Copyright © 2008 Accenture All Rights Reserved.
Historically, FMCG companies have developed a ‘one size fits all’ supply chain that is designed to achieve cost efficiency
Market Segmentation
Su
pp
ly C
hai
n 1
.0
Supply Replenishment
Strategies
SupplySourcingOptions
NetworkOptimisation
Product Segmentation
& PortfolioManagement
FulfilmentOperations
CustomerSegmentation
Demand Profiling& Forecasting
Strategy Supply Chain Strategy
SupplyAlignment
DemandGeneration
FoundationCost to serve
Sales & Operations Planning
PerformanceMetrics
LeadershipBehavioursCulture
Capabilities- Process- Organisation- Talent- Technology
PLMRisk Management
-- Accenture’s SC Customer Alignment Framework --
6Copyright © 2008 Accenture All Rights Reserved.
Accenture’s Customer Alignment Framework provides the structure and rigor to design ‘fit for purpose’ supply chains for differentiated customer/product segments
Sup
ply
Cha
in 2
.0 Supply Chain 3
ProductSegmentation
+ PortfolioManagement
MarketSegmentation
CustomerSegmentation
Demand Profiling
& Forecasting
SupplyReplenishment
Strategies
SupplySourcingOptions
NetworkOptimisation
FulfilmentOperations
Supply Chain 2
ProductSegmentation
+ PortfolioManagement
MarketSegmentation
CustomerSegmentation
Demand Profiling
& Forecasting
SupplyReplenishment
Strategies
SupplySourcingOptions
NetworkOptimisation
FulfilmentOperations
Strategy
Foundation
Supply Chain Strategy
SupplyAlignment
DemandGeneration
Business Strategy
Supply Chain 1
Market Segmentation
ProductSegmentation
& PortfolioManagement
CustomerSegmentation
Demand Profiling
& Forecasting
SupplyReplenishment
Strategies
SupplySourcingOptions
NetworkOptimisation
FulfilmentOperations
Cost to serve
Sales & Operations Planning
PerformanceMetrics
LeadershipBehavioursCulture
Capabilities- Process- Organisation- Talent- Technology
PLMRisk Management
Su
pp
ly C
hai
n 1
.0
7
Example Supply Chain Re-design “fit for purpose”
Copyright © 2008 Accenture All Rights Reserved.
SC Manager
Customer Care
Sourcing / Procurement
Physical distribution
Segment 1
Segment 2
Segment 3
Segment 1
Segment 2
Segment 3
Segment 1
Segment 2
Segment 3
SC Manager
Segment 1
SC Manager
Segment 2
SC Manager
Segment 3
Customer Care
Sourcing / Procurement
Physical distribution
Customer Care
Sourcing / Procurement
Physical distribution
Customer Care
Sourcing / Procurement
Physical distribution
Challenges : - multi-skills Supply Chain Managers
- Limit increase of headcounts
6 – 12 Months
8
Benefits after 1 Year
Copyright © 2008 Accenture All Rights Reserved.
• Privileged Relation 1 Point of contact between Supply Chain manager (supplier / retailer)
• 100% focus on Service level : Gain 10% in average over 12 months
• Tailor-made Service (especially for Mass Market retailers)
• Team/talent development : Create succession Plan
9Copyright © 2008 Accenture All Rights Reserved.
Different supply chain models are more appropriate depending on the demand predictability and the nature of the customer relationship
Tight
Loose
Cu
sto
mer
Re
lati
on
sh
ip
High LowDemand Predictability
Segment 1
Segment 2
Segment 3
Segment 4
Lean Agile
Transactional‘Base Model’
Flex
ible
Collaborative
Agile
JointPlanning
10Copyright © 2008 Accenture All Rights Reserved.
Potential service offerings for strategic customer group
Potential service offerings to Customer Group: Tier 1 strategic importance Low relative demand variability Demanding behaviour
Trade termsTrade termsEfficient Assortment / RangingGrowth IncentivesProduct Discount - case dealsCheckout DisplayPromotional Display
FulfilmentFulfilmentWeekend deliveriesAdvance shipment notificationBackhaulEx factory gate / NDCCross dockingDirect store deliveryDrop trailer
Operational IntegrationOperational IntegrationCategory Management
Cash ManagementCash ManagementStandard (prompt) paymentAccelerated paymentElectronic payment
Order to CashOrder to CashWeb orderingField sales callPhone / faxEDIWeekend orderingShort lead timeEDI invoiceEFTe-POD
CRMCRMNominated logistics contact
11Copyright © 2008 Accenture All Rights Reserved.
Differentiation between the stable and variable components of demand is a key step to determine fulfillment setup – managing volumes differently balances service levels and cost to serve
Fulfil through a ‘lean’ supply chain configuration:
• Maximum capacity• Lowest cost• Long lead time
Identify what parts of the business are variable and truly complex:
• Variable demand• Promotions• Premium products• Low visibility customers
Fulfil through a more flexible supply chain:
• Local sourcing and / or finishing• Short lead times• Variable configurations
- Demand Types - - Fulfilment setup -
Identify what parts of the business can be treated as fundamentally stable:
• Stable, predictable demand• Commoditised or mass market products• Collaborative customers
Stable= 59%
= 41%
Stable orders Variable orders
Dem
andi
ng
/ E
ffici
ent
Cus
tom
ers
Col
labo
rativ
e C
usto
mer
sCollaborative = 53%
Lean = 27% Agile = 20%
Thailand indicative SC alignment
Stable orders Variable orders
Dem
andi
ng
/ E
ffici
ent
Cus
tom
ers
Col
labo
rativ
e C
usto
mer
sCollaborative = 53%
Lean = 27% Agile = 20%
Thailand indicative SC alignmentThailand 2006 - indicative stable / variable split
Stable (58%)
Variable (42%)
-
50,000
100,000
150,000
200,000
250,000
300,000
350,000
400,000
450,000
500,000
Ca
se
s
ord
ere
d
Stable (60%)
Variable (40%)
Customer C1 Indicative stable / variable splitCustomer C1 Indicative SC alignment
12Copyright © 2008 Accenture All Rights Reserved.
- Every Day Great Execution - Getting the basics right in terms of people process, systems, organisation and data. Cost optimisation through rationalisation of the cost base
- Performance Optimization - Focus on service levels by raising the performance bar, fine-tuning the overall model and collaboration with the extended supply chain.
- Game Changing Supply Chain -
Supply chain differentiation based on customer / consumer behaviour and value to drive top-line growth
Supply Chain Performance Journey
Val
ue
So in summary, consumer goods companies need to change the game while continuing to deliver everyday execution