Pmac Innovation 2008

Supply Chain Innovation

OIPMAC Annual Conference, 24 October 2008.OIPMAC Annual Conference, 24 October 2008.

Nicholas SeiersenNicholas Seiersen

KPMGKPMG

[email protected]

O:416777 8391c:647 299 8360O:416777 8391c:647 299 8360

mailto:[email protected]

2OIPMAC Annual Conference, 24 October 2008.OIPMAC Annual Conference, 24 October 2008.

Today’s SessionToday’s Session

About KPMG

Recent Trends and Events in the Supply Chain

Defining Supply Chain and Innovation

What it Takes to Innovate in Your Supply Chain


What Is Happening In The Supply Chain WorldWhat Is Happening In The Supply Chain World

Pressure for Predictability

Security & Legislation

Sustainability

Critical Infrastructure & Systems

Increasing Volatility

Price & Demand Volatility

Longer and More Complex Supply Chains

Cash-to-Cash Cycles Lengthening

Politically Motivated Fiscal Changes

Supply Chain Disruptions

Low Cost and Premium Polarization

Talent Crunch


What is the Supply Chain?What is the Supply Chain?

“Long viewed as an operational function, supply chain management has become more strategic to

companies along with the trend of globalisation and the growth of information technology. During the 90’s, it moved from a logistics-focus dealing with primarily

warehousing, inventory, and transportation management to an integrated approach that considers the management of goods flows and conversions from raw material suppliers to consumer and product users”

Source: Linking Supply Chain Practices to Operational and Financial Performance. MIT Supply Chain 2020 Project working Paper. August 2005


Order Processing and Order Processing and FulfillmentFulfillment

Inventory Inventory ReplenishmentReplenishment

Purchasing, Purchasing, Freight, Duties & Freight, Duties & Security, Contract Security, Contract

& Supplier & Supplier ManagementManagement

The Supply ChainThe Supply Chain

Materials & Components Materials & Components ProcurementProcurement

ManufacturingManufacturing Warehousing & DeliveryWarehousing & Delivery ConsumersConsumers

IdeationIdeation

DevelopmentDevelopment

IntroductionIntroduction

IdeationIdeation

DevelopmentDevelopment

IntroductionIntroduction

Inbound Inbound LogisticsLogistics

Distribution & Distribution & Network DesignNetwork DesignManufacturing Planning & Manufacturing Planning &

Control Systems, Overall Control Systems, Overall Equipment EffectivenessEquipment Effectiveness

Procurement & Procurement & Strategic Strategic SourcingSourcing

Plant SchedulingPlant Scheduling

Inventory Inventory ManagementManagement

ForecastingForecasting

Sales & Operations PlanningSales & Operations Planning

Trade Spend Trade Spend ManagementManagement

PromotionPromotionss

OutsourcingOutsourcing:: Selection, Implementation, Management, Governance, Renewal,…

New Products & ServicesNew Products & Services


InnovationInnovation

“The creation, development, and implementation of a new product, process, or service with the goal of improving efficiency, effectiveness, or competitive advantage.

Innovation may apply to products, services, manufacturing processes, managerial processes, or the design of an organization.

It is most often viewed at a product or process level, where product innovation satisfies a customer’s needs, and process innovation improves efficiency and effectiveness.

Innovation is linked with creativity, and involves taking new ideas and turning them into reality through invention, research, and new product development.”Source: BNET online dictionary


What is Innovation?Ideation, New Product/Process Development, Introduction, LaunchWhat is Innovation?Ideation, New Product/Process Development, Introduction, Launch

DetailedBusiness Case

Develop & Test

Launch

Gate

Develop Concept

Evaluate Opportunity

Gate

Gate

Triage

Ideation:Get more ideas

Feedback

Manage Portfolio of Qualified Opportunities

Store for

potential future use

Core Engineering develops new

processes

Application Engineering develops industrial

processes

Production Engineering establishes “Capability”

range

Production Engineering extends “Capability”

range, improves manufacturing processes and

economics

Gate

There is a market

The market size and price/functionality is

known

Channels are being readied

Sales, channel & support training,

collateral, advertising, initial and

replenishment inventory,…

Operations Marketing


So, What is Supply Chain Innovation?So, What is Supply Chain Innovation?

To do something new that brings new capabilities, services, or cost structures to your supply chain

Cardinal & Credit Valley Hospital: 30 - 40% reduction in supply chain costs

“Just for you” computers from Dell

“Power by the hour” aircraft engines from GE

“Just-in-Time” deliveries to the OEM auto assembly line

ZipCar rentals by the hour


AidmatrixAidmatrix

45% US residents do not have health care – ER congestion

2,000 free clinics – volunteer health care professionals

Spend $170m/year on medication, yet

Over $6.25B medical equipment and supplies to landfill

PAP paperwork nightmare

$500K savings through consolidation and EDI buying

$50m donated equipment & supplies


MinuteClinicMinuteClinic

Minor Health problems difficult to treat – Congested ERs, expensive MDs

Mall outlets, open 7 days, minimum 72 hours

Posted list of verifiable, quickly identifiable ailments

Nurse administered cures

500,000 customers


FlowerBuyerFlowerBuyer

Dutch auctions for imported flowers

Qualify good growers, buy on the stem

Online QA

Forward sale until reserve price is reached – guaranteed supply at a known price

“Everything must go” sales of product in the warehouse

Consolidated delivery


On demand eProcurementOn demand eProcurement

Companies that use eProcurement save 4.8%

…but, too expensive, tough to enable suppliers, hassle to implement system,…

Coupa Freeware and hosted ePO

2,300 suppliers enabled

3 releases and 6 updates/year

Spend doubling every 25 days

Why Abe Free RFx, Reverse auctions, contract management, …

Omprompt Systems connectivity – anything to anything


Approaches to Implementing InnovationApproaches to Implementing Innovation

IntegratorDo everything inhouse

Highest Risk

Work well together internally

Strong talent across organization

Speed to market non-critical

Proven technology

Stable customer requirements

Incremental innovation

OrchestratorFocus on key steps, link with partners for the rest

Lower capital risk, lower returns

Collaborate with many

Complex Project Management

Customer insight

Brand power

Defined core competencies

Agility/nimbleness

Mature partner base

Intense competition

Strong substitutes

Early stage technology

LicensorLicense to another company to take to market

Lowest risk and returns

Manage Intellectual Property

Basic Research

Contracting

Influence standards

Strong IP protection exists

Low brand importance

New market for innovation

Infrastructure not developed


What do they have in common?What do they have in common?

A problem that was a hassle for others

Broke the bubble – found a better way to get the job done

A genuine desire to make their customers’ lives better

A tireless search for operational improvement


What Does it Take?What Does it Take?

Learn to innovate

Learn from others’ mistakes

Know and enhance your core capabilities

Recognize non-core, develop partner base, learn to work with them

Get out and meet others


Supply Chain Innovation

KPMG’s Operations Cost Management helps clients align the right goods and services in the right place at the right time, at the

right terms- at every stage of the supply chain.

Learn how to innovate

Find a problem worth solving

Devise a better way

Engage the right team

Execute ruthlessly

Documents

Pmac Innovation 2008