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10/22/2012
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Leading Collaborative Supply Chain Transformations
William B. Lee, Ph.D., CFPIMPresident, William B. Lee International
Tish PatelSenior Consultant, SAPPresident, Houston APICS Chapter
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William B. Lee, Ph.D., CFPIM
Current: Educator, Consultant, and Board Member• Books: Creating Entrepreneurial Supply Chains: A Guide
for Innovation and Growth, 2012; Leading Effective Supply Chain Transformations: A Guide to Sustainable World-Class Capability and Results, 2010; (both with J. Ross Publishing)y ( g)
• Articles: “Creating Entrepreneurial Supply Chains,” Supply Chain Management Review, May/June 2012.
• APICS E&R Foundation: Board of Directors• APICS Body of Knowledge Committee: Member
Previous• Rice University: Professor, Director of Energy Programs, and Dean of Executive
Education
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• APICS International Board of Directors and Member of Leadership Team• Freeman Companies: Board of Directors and Chair, Compensation Committee• Deloitte: Senior Partner, Director of Supply Chain Consulting, Director of Change
Management Consulting, and National Partner for Education and Research• Oliver Wight Management Consulting: President and Board member
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Tish PatelCurrent• President, Houston APICS Chapter
(A Platinum Chapter)• SAP, Senior Consultant, Manages Global PMO Office• Six Sigma Black BeltPrevious• Over Twenty Years of Broad Experience in Global Supply Chain and
IT Integration Projects• HP, Set Up Large Control Tower Operations in China; Compaq
Computers and AT&T Mobility, Created and Led Large Supply Chain and Logistics Projects; Also Worked in Oil and Gas, Life Sciences, and Consumer Products
• Education: BBA, University of Houston, International Marketing, Organizational Behavior and Management
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Transformative Ideas Are Not Always Obvious!
“Duh, what do we need
“I have an idea!” do we need
that for?”an idea!
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One Company That Needs a Transformation!
“By next Friday, December 31, we’ll have almost 10,000 units on the back lot!
I thought we were in amake-to-order business?”
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C ll b ti ? T f ti ?
What Do We Mean By …
Collaboration? Transformation?
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Some Best Practices for You to Think About from this Presentation
1. Be on the lookout for collaborative transformationalcollaborative transformationalneeds and opportunities.
2. Stimulate innovation.
INNOVATION
Gro
wth
Emerging Technology
3. Use collaborative transformations and innovation to foster profitable growth.
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Time
Learning Objectives
COLLABORATIVE and INNOVATIVE TRANSFORMATIONS
How to recognize and assess opportunities and needs:– In the existing situation.– For collaborative transformation.– For enhanced innovations.
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Agenda
1. Introduction to supply chain transformations2. Why are we interested in transformation?3. How do we know that we have needs and opportunities?4. How can we convince the organization?5. How can we develop transformative ideas?6. How can we manage the risks?7. How can we reap the payoff?8. A final word
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1. Introduction to Supply Chain Transformations
“It is not the biggest, nor the strongest, nor the most intelligent that will survive. It is the
species most adaptable to change.”‐‐ Charles Darwin ‐‐
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Earlier Supply Chain Transformative Innovations
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CEMEX: Innovation, Growth, and Transformation in a Fragmented Industry
• CEMEX – founded in 1906 in Mexico• Now one of the world’s largest building
materials companies• 2011 sales = US$15.1B• Entrepreneurial supply chains• Innovative culture and practices, particularly information technology
CEMEX is engaged in a rigorous transformation … 1. Flattening the organization … decentralizing authority … and nurturing
world‐class human resources …2. Building a solid balance sheet3. Reshaping product/market portfolios …
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SOURCE: CEMEX 2011 Annual Report
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CEMEX Information Technology Example
• Different types of customers have different requirements for on‐time, reliable delivery– External– Internal– Internal– Contractual
• Transformative collaboration among plants, logistics, and customers– Satisfy individual customers instead of general customers– Use one‐on‐one, team‐based, collaborative approach– Commit to deliver a customer’s concrete pipe on Monday, aggregate
on Tuesday, concrete block on Wednesday, concrete on Thursday, and decorative concrete on Friday
– Help customers better serve their customers in both time and cost
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CEMEX Information Technology Example
… my aggregate on Tuesday, … my concrete
I want my concrete pipe on Monday,
on Tuesday,
Wednesday,
… my concrete block on
Wednesday,
… my concrete on Thursday, and
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… my decorative concrete on Friday.
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Who Wudda Thunk It?
• Can an industry such as cement and its derivative products (ready‐mix concrete, concrete blocks, concrete pipe, etc.) be th tti f i ti ?the setting for innovation?
• Who would have suspected that a basic industry such as this could be the focus of significant collaborative supply chain transformations.
• Look at CEMEX’s Web site: www.cemex.com to get more information on the company. It’s really informative.
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2. Why Are We Interested In Transformation?
“Investment must be rational. If you can’t understand it, don’t do it ” (Warren Buffet)
Transformation
don’t do it.” (Warren Buffet)
BNSF
NetJets
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“Breakout” Example from Transformation Project
XBakersfield
San Francisco RDC
Las Vegas RDCX
XCoverage
Areas Coverage Areas BeforeBakersfield “Transformation”
XBakersfield
Los Angeles RDC
X
XSan Francisco RDC
X
Coverage Areas
XNew Bakersfield “Breakout”
RDC
Los Angeles RDC
Las Vegas RDC
X
X
Coverage Areas AfterBakersfield
“Transformation”
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What Is a Control Tower?Provides a centralized and standardized control mechanism for proactively managing, executing, and reporting “events” in the supply chain.Decisions and actions are real-time driven, based on an end-to-end view of what should happen what is happening and whatend view of what should happen, what is happening, and what will happen.
Simplify Operations
Leverage Processes
Manage Events with Real-Time Visibility
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Optimize Costs
Provide Supply Chain Data
Report and Analyze with Standard Metrics
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Example Capability with Control Towers
“We need 10 containers from Chi Shi
CHINA
TRANSPORTATION MANAGEMENT
SOFTWARE
CO
NTR
OL
TOW
ER
China. Ship through Long
Beach.”
X
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No, wait! Divert No, wait! Divert shipment to Seattle.
X
Scope and Functions of a Control Tower….
Strategicg
Tactical
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Operational
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Important Control Tower Elements
OPPORTUNITIES AND NEEDS
CUSTOMERSSUPPLIERS
PROCESSES
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TECHNOLOGIES PEOPLE
3. How Do We Know We Have Needs and/or Opportunities?
“If all you have is a hammer, everything looks like a nail.” (Anonymous)
PLAN
MAKE DELIVER SOURCE MAKE DELIVER SOURCEDELIVER SOURCE MAKE DELIVER SOURCE
OURCOMPANY
CUSTOMERSSUPPLIERS
ValueCash
Information
ADAPTED FROM: www.supply-chain.org
Product and Process Development
“Competition is no longercompany to company
but supply chain to supply chain”
Return
Information
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4. How Can We Convince the Organization?
“Give me a place to stand and with a lever I will move the whole world ” (Archimedes)n
ConsequencesInformation About
“Give me a place to stand, and with a lever I will move the whole world.” (Archimedes)
the whole world. (Archimedes)
My
Org
aniz
atio
n
My Behavioral
Performanceon the Job
My Beliefs About ConsequencesOf My Behavior
The Value of the Consequences
to Me
My ConfidenceThat I Can
Perform the
My DecisionsAbout How to
Behave+ =+
Information About the Consequences of my Behavior
The Environment Within Which I Exist
Of My Behavior to MeBehavior
Behave
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Why We Fail at Transformative Projects
Many Companies Have Rationalized Their Supply Chains
Supply Chains Have Operated Neither More
Efficiently nor ff l
Focus Has Been on Pressuring Suppliers, not on the Supply h
ACTIONS …ACTIONS … BUT …BUT … BECAUSE …BECAUSE …
Supply Chains Effectively Chain Processes
Hundreds Have Restructured Their Supply
Chains
Supply Chain Restructuring Efforts Have not Met Original
Targets
Focus Has Been on the Supply Chain
Organization, not on the Supply Chain Processes
Billions Have Been Spent to Automate Inefficient
Supply Chains
Information Systems Have Proven to Be Less Than Totally Effective
Focus Has Been on the Information Technology, not on the Supply Chain
Supply Chains Initiatives Processes
And we could go on and on and on …
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Neil Armstrong lands on the moon, July 20, 1969
Kennedy’s “Man‐on‐the‐Moon” Speech Convinces a Nation of a Transformative Idea
< 7 years later
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President Kennedy makes his “man-on-the-moon” speech at Rice University, Houston, September 20, 1962.
“That’s one small step for a man, one giant leap for
mankind.”1. Current situation2. Vision3. Path forward
5. How Can We Develop Transformative Ideas?
“Where there is no vision, the people perish.”(Proverbs 29:18, King James Version of the Bible)
Visioning will provide an opportunity to:g p pp y
• Think “outside the box” and view the company’s supply chains differently.
• Standardize the supply chain processes and practices whenever possible.
• Improve work flows and methods.• Identify radical new supply chain designs.
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• Look for opportunities to improve customer service.
• Consider new technologies and practices.
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A Capital Equipment Company’s Transformative Stage‐Gate Process
Gate 1
Gate 2
Gate 3
Gate 4
MARKETINGION
Y
Stage I:B ild
Stage II:D t i
Stage III:T t
MARKETING
TECHNOLOGY
MANUFACTURING
Stage IV:P
Stage V:M
TRAN
SFO
RM
ATI
OPP
OR
TUN
ITY
VISI
ON
ING
BuildKnowledge
Ideas
DetermineFeasibility
Experiments
TestPracticality
Projects
ProveProfitability
Production
ManageLife Cycle
Profits
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Collaborative Transformation:Link Product Development with S&OP
Concept & MarketAnalysis
StrategyAlignment
& Feasibility
ProgramDevelopment
Product& Process
Development
Product& ProcessValidation
Stable Production& CustomerAcceptance
STRATEGY ALIGNMENT & FEASIBILITYSTRATEGY ALIGNMENT & FEASIBILITY
1. Establish Bases of Differentiation2. Confirm Concept with Prospective Customers3. Identify Operating and Option Requirements4. Develop Make / Buy / Reuse Strategy5. Determine Design and Manufacturing Feasibility6. Develop Early Supplier Involvement, Sourcing,
and Cost of Operations Strategy7. Develop a Maintainability Strategy
8. Perform Rough Assessment of Organizational Development, Training, and Manpower Issues
9. Draft Critical Path Plan with Multiple Scenarios10. Develop Market Launch Plan11. Develop Plan to Incorporate Lessons Learned12. Make Program Leader Recommendation13. Assess Market Forecast14. Develop Business Case15. Develop Program Proposal16. Execute Gate Review Process
Responsible: Advanced Design
JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN
Monthly S&OP and Product Development Stage/Gate Process
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p gApprove: Senior Leadership Team
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6. How Can We Manage the Risks?
“You’ve got to be careful if you don’t know where you’re going, because you might not get there.” (Yogi Berra)
CONSIDERCONSIDERTo make it easier to manage fast-moving consumer demand,
ZARA created an extremely fast global
supply chain.
Your suppliers are your suppliers because they have capabilities that
you do not have – treat them accordingly and not as adversaries to
be exploited.CONSIDER
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Boeing 787 example. Very late deliveries because of supply chain difficulties.
One Company’s Transformation Risk Management
OBJECTIVE: SUCCESSFUL SUPPLY CHAIN TRANSFORMATIONTRANSFORMATIONELEMENTS RISK ISSUES RISK MITIGATION PLAN
Implement commodity team concept Limited acceptance for commodity teams
Create three cross-disciplinecommodity teams to see how they teams work
Link supply chain objectives tobusiness objectives No unified vision between groups Create line-of-sight linkage from
supply chain to business objectives
Create sense of urgency for the speed of change
Need for cultural shift from firefighting to strategic focus for supply chains
Conduct education and training programs on need for strategic view
Ensure that supply chain metrics drive enterprise-wide behavior
Lack of linked and consistent metrics
Standardize enterprise metrics and link to supply chain metrics
Implement optimal organizationstructure
Current structure supports silo mentality
Create total enterprise supply chain organization
Implement early supplier involvement (ESI) Current ESI is limited Create incentives for Engineering to
actively implement
Upgrade demand management capability
Too much forecasting and lack of connectivity with customers
Enhance forecast accuracy metrics and use to drive connectivity efforts
Improve make-or-buy decisionprocess
Process is inconsistent and lacks reliability
Implement strategic sourcing process
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Supplier Quality Risk Assessment FrameworkConfidence in Management LOWHIGH
Moderate Risk High Risk!
Low Risk Medium Risk
RISKYSUPPLIERS
HIGH RISKSUPPLIERSal
ity N
otifi
catio
ns HIG
H
Company is notified
of a specific quality
problem in time to do something
Looking Back
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SUPPLIERSQu
Quality Escapes
LOW
LOW HIGH
gabout it
Company is not notified of a specific quality problem in time to do something about it (i.e., the item “escapes” from the supplier)
8. How Can We Reap the Payoff?Interviewer: “Tell me, Mr. Sutton, why do you rob banks?”
Willie Sutton: “Because, that’s where the money is.” (Anonymous)
Increased Revenue
Enhanced Service
Improved Quality TRANSFORMATION
Reduced Costs
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So, What Happens with the Payoff?
After SomeWork and
With Some PER
FOR
MAN
CE
Beginning Transformation
Without Any Improvement
With SomeImprovement
P
After MuchWork and With Much
Improvement
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Keeping the Improvements Going
Developing Setting
Crafting a Strategy to Implementing
andMonitoring
Developments,
Phase 1 Phase 2 Phase 3 Phase 4 Phase 5
a Strategic Vision
Setting Objectives Achieve the
Objectives and Vision
and Executing the
StrategyEvaluating
Performance, and Making Corrective
Adjustments
Revise as Needed in Light of Actual Performance, Changing Conditions,
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New Opportunities, and New Ideas
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9. A Final Word“I really didn’t say everything I said.”
(Yogi Berra)
Now, what do you think???
Collaboration? Transformation?
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Thank You for ComingThank You for Coming
l k Q i dPlease Ask Your Questions and Make Your Comments
We Have All Sorts of Ways to DealWe Have All Sorts of Ways to Deal with Them!
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Contact Information
• William B. Lee, Ph.D., CFPIM– Corresponding author– [email protected]– 713‐963‐8339– 5555 Del Monte Drive, Suite 1606– Houston, TX 77056‐4119
• Tish Patel• Tish Patel– [email protected]
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