Imperatives for Executing the Global Supply Chain … presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the

This presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the intended Gartner audience or other intended recipients. This presentation may contain information that is confidential, proprietary or otherwise legally protected, and it may not be further copied, distributed or publicly displayed without the express written permission of Gartner, Inc. or its affiliates. © 2015 Gartner, Inc. and/or its affiliates. All rights reserved.

Imperatives for Executing the Global Supply Chain Strategy

Michael Uskert

Managing Vice President

Gartner

1 © 2015 Gartner, Inc. and/or its affiliates. All rights reserved.


Market disruptions will accelerate

Every company will become a technology company

Leaders re-imagine Supply Chain

Leaders rewrite the rules

The New Realities

DIGITAL BUSINESS

New business designs merging the virtual and

physical worlds

“If the rate of change on the outside

exceeds the rate of change on the inside,

the end is near.”JACK WELCH

Former CEO, GE

1 in 3 jobs will be

converted

Gartner

Predicts

By 2018, digital businesses will require 50% less business

process workers

Gartner

Predicts


Customer ValueBased SC Strategy

Cascaded Goals and Metrics

Bimodal Investments

Talent, organization, governance framework

Designing for innovation

Imperatives for Successful Global Execution of Your Strategy




Bimodal Investments




Top Chief SC Officer Business Priorities

Quality mgmt

Improving customer service

Performance optimization

Alignment of SC and bus. strategies

Cost reduction


Top CEO Strategic Business Priorities

1%

1%

1%

4%

2%

1%

4%

5%

2%

5%

6%

8%

38%

5%

3%

4%

4%

3%

7%

3%

4%

2%

8%

10%

11%

15%

1%

4%

3%

2%

5%

3%

5%

4%

10%

9%

7%

6%

10%

Quality Improvement

Culture Change

Governance, risk & compliance (all)

Innovation, R&D

Financial (all)

Efficiency and productivity

Customer (all)

Product improvements

Workforce (all)

Profit improvement

IT Related (all)

Cost management

Growth (all)

Top priority 2nd 3rd

13%

12%

11%

10%

10%

8%

7%

8%

n=168 CEOs and Sr. Business Executives

Sum = 63%

25%

23%

14%

22%

Investments Priorities toAchieve Growth Goals

No.1 Product Enhancements

No.2 Sales

No.5 Supply Chain


Cost

Efficiency

Scale

Growth

Agility

Differentiation

Customer Value Is Your Strategy …


We are All Multichannel


Differentiated Supply Chains

CustomerValue

Agile

Responsive Efficient

One size does not fit all … differentiate your response




Bimodal Investments




"The Murky Middle" DeliverMakeSourcePlan

Corporate Goals

Individual Initiatives


Three Levels of Metrics

End-to-End Supply Chain

Executive Dashboards

ForecastAccuracy

PerfectOrder

SCMCost

AP Inventory Total AR

SupplierQuality

SupplierOn-Time

PurchaseCosts

Dir. Mtl.Costs

CostDetail

ProductionScheduleVariance

PlantUtilization

WIP and FG Inventory

OrderCycleTime

PerfectOrderDetail

RMInv.

Cash-to-Cash

Functions

Alig

nm

en

t

Manufacturing LogisticsPurchasing


The Hierarchy of Supply Chain Metrics

APInventory

TotalAR

Cash-to-CashDiagnose

SupplierQuality

SupplierOn-Time

PurchaseCosts

Dir. Mtl. Costs

CostDetail

ProductionScheduleVariance

PlantUtilization

WIP + FGInventory

OrderCycleTime

PerfectOrderDetail

RMInv.

Correct

ForecastAccuracy

PerfectOrder

SCMCost

Assess


What Does Good Look Like?

React Anticipate Integrate Collaborate Orchestrate

Unconsciously Incompetent

Consciously Competent

Consciously Excellent

Consciously Incompetent


On par

Below par

Above par

Key:

Example Company A: "Unconsciously Incompetent"

Supplier Quality

Supplier On-Time

Purch. Costs Dir. Mtl. Costs

Cost Detail

Production Sched. Variance

Plant Utilization

Order Cycle Time

AP ARInventory Total

Cash-to-Cash

Perfect Order SCM Cost

Demand Forecast

Assess

Diagnose

Correct

New Product Time to Market

Perfect Order Detail


On par

Below par

Above par

Key:

Example Company B: "Consciously Competent"

Supplier Quality

Supplier On-Time


Cost Detail


Plant Utilization

Order Cycle Time


Cash-to-Cash


Demand Forecast

Assess

Diagnose

Correct




On par

Below par

Above par

Key:

Example Company C: "Consciously Excellent"

Supplier Quality

Supplier On-Time


Cost Detail


Plant Utilization

Order Cycle Time


Cash-to-Cash


Demand Forecast

Assess

Diagnose

Correct




Balance in the Details

Company A

Company B

Company C

Company D

SCM Costs

The company that is "best overall" is not "best" on each component


"End-to-End"

Voice of the Customer

Corporate Measures

Supply Chain Targets

Supply Chain Measures

20XX Incentives

DeliverMakeSourcePlan

Corporate Goals

Individual Initiatives




Bimodal Investments




Top 25 Company Analysis – All IndustriesFrom 40 companies where we asked for 3 completed and 3 planned initiatives

0 5 10 15 20 25 30 35 40 45

Perf Measurement

Risk

Sustainability

Org & Talent

Business Growth

Customer Sat

Cost

Perf Optimization

By Goal

Planned Completed

0 5 10 15 20 25

Sustainability

Regulatory/Quality

Logistics maturity

Manufacturing maturity

Talent

Org & Gov

Cost/Margin Imp

Network Design

Planning maturity

Working Capital

Sourcing

Technology

Customer Service

E2E

By Initiative/Project

Planned Completed

BIMODAL BUSINESS


The Bimodal Reality

Quality of product supply

Inventory optimization

Planning

Customer collaboration

Manufacturing operations

Growth

Transformation

Strategy alignment

New business models

Leadership and change

Talent


Cost Savings and Revenue Growth

Versus

Continuous

Improvement

Innovation and

Transformation …

Big Step Change

AND


Bimodal Refers To Two Modes of Working


Bimodal Has Two Methodologies


Bimodal Must be Measured Appropriately


Bimodal = Understanding Style/Motivation, not Just Skills




Bimodal Investments




The Best Internal Governance Process: Still IBP/S&OP

Lower Inventories

Higher Service Levels and Lower Cost

Increased Forecast Accuracy

Better Predictability of Financial Results

Reduced Cycle Times and Improved Agility

Reported IBP/S&OP Benefits*:

• Consistent and repeatable performance

• 2-5% improvement in revenue

• 10-15% improvement in working capital

• 15-20% increase in forecast accuracy

• 10-50% increase in on-time delivery

• 20% improvement in new product launch commercialization

*Assembled through qualitative interviews

Maximization of Opportunities / Minimization

of Risk


2%

5%

5%

5%

7%

10%

11%

13%

13%

17%

12%

0%

6%

6%

10%

6%

8%

12%

11%

11%

13%

16%

0%

6%

8%

7%

11%

9%

8%

11%

12%

11%

13%

Other

Cost mitigation and control

Supplier performance, “supply variability"

Inability to effectively exploit our growing volumes of data to makemore informed and predictive decisions

Developing, retaining and managing supply chain talent

Supply chain network complexity

Insufficient management/leadership engagement with SCM, corporateculture

Lack of visibility across supply chain

Lack of cross-functional collaboration

Forecast accuracy and demand variability

Difficulty or inability to coordinate and synchronize end-to-end supplychain processes

Top Obstacle 2nd 3rd

SUM

Top Obstacles to Supply Chain Initiatives

42%

42%

36%

35%

31%

27%

25%

23%

18%

17%

2%


44%

35%

32%

36%

34%

29%

35%

25%

27%

24%

21%

19%

21%

17%

31%

39%

40%

36%

38%

43%

35%

38%

33%

34%

36%

38%

35%

35%

25%

26%

28%

28%

28%

28%

30%

37%

40%

42%

43%

43%

44%

48%

Visibility or event management

Analytics or performance management

Sales and Operations planning, Integrated business…

External collaboration (supplier, customer)

Internal cross functional collaboration

Workforce/labor management

New product introduction/Product lifecycle…

Customer service/Service lifecycle management

Core supply chain planning

Transportation management

Sourcing and Procurement

Manufacturing operations

Warehouse management

Order management/fulfillment

Weak/Very Weak (Bottom 2 Box-Net) Middle of the scale (3 rating) Strong/Very Strong (Top 2 Box Net)2

Quality Rating of Key Supply Chain Processes


Why S&OP Fails/Doesn’t Add Desired Business Value

• Inconsistent process over time

• More supply side operations focused than service or business goals focused

• The act of getting to a consensus is skipped for both demand and supply

• The Executive S&OP is more of a report-out meeting than a business management/decision making meeting

• Too much detailed data and charts are shared at the Executive S&OP

Process

• Lack of cross-functional engagement to transition ownership the business teams and executives

• Lack of executive involvement, sponsorship and ownership and haven’t managed from the top

• Organizational behaviors go right into ‘reaction’ mode

• Roles and responsibilities for participants are not clearly defined

Participation

• Lack of ownership and accountability to the steps of the process and the resulting plan and decisions

• Don’t have good numbers that people believe in

• Lack of assumptions for the inputs, the decisions and the resulting plan

• Blame and lack of trust are prevalent

Transparency & Ownership

• Lack of ‘rules of engagement’

• No common objective(s)for the outcome

• Metrics are not aligned end-to-end

• Relevant discussions and decisions are made outside of S&OP

• Not good at keeping up with documenting assumptions for the plan

• Get caught up in focusing on current month or quarter issue resolution

Governance

Now 2017 2020Sales &

Operations Planning

Supply Chain Strategy

Analytics

Orchestrating the Customer Experience

Digital Business Integration

Innovation Through Partnering

Supply Chain Cyber & Physical Risk, Security & Compliance

Data Science

Global Anthropology / Sociology


Consciously Design the Organization

Decentralized Center-LedDistributed

MatrixCentralized

Governance

Innovation and Design

Orchestration

Execution

Horiz

on

Short Term

Long Term


Talent Development

Workforce Overhaul:

• Masters of Orchestration and Discipline

• Data Scientists and Analytics

• Diversity Beyond the Obvious

• Extreme Retention Approach

Reframe Your Approach




Bimodal Investments




No SC COE

SC COE

Fully Deployed

0% 10% 20% 30% 40% 50% 60%

Sense Demand Across MultipleTime Horizons

Segmented Supply Networks

E2E Business Planning

Deliver Differentiated CustomerExperience

Manage Product & ServicePortfolios

Gap

6%

18%

14%

28%

16%

0% 10% 20% 30%

No Plans to Deploy

5%

8%

9%

17%

14%

Gap

Deploying Advanced Practices: Varies with COE


Consciously Design for Innovation

ContinuousImprovement

Focus onExploitation …

… andProvenResults

BreakthroughInnovations

Focus onExploration …

… Allow Risksand Failures

Center ofExcellence

Center ofInnovation


Essentials for Successful Global Execution of Your Strategy



Bimodal Investments



“If the rate of change on the outside

exceeds the rate of change on the inside,

the end is near.”JACK WELCH

Former CEO, GE

YOUCAN DO

IT

Documents

Imperatives for Executing the Global Supply Chain … presentation, including any supporting materials, is owned by Gartner, Inc. and/or its affiliates and is for the sole use of the