Upload
rosalind-reynolds
View
219
Download
0
Tags:
Embed Size (px)
Citation preview
Supply Chain TransformationYesterday an Option, Today a Requirement for Survival
March 31, 2009
Copyright © 2009 Penske. All rights Reserved. Page 2
The Current Environment
The Necessity for Change
An Approach for Achieving Transformation
The Value Proposition
Continuous Improvement – The Journey Never Ends
The Current Environment
The Necessity for Change
An Approach for Achieving Transformation
The Value Proposition
Continuous Improvement – The Journey Never Ends
Agenda
Copyright © 2009 Penske. All rights Reserved. Page 3
The Global Meltdown
We’re in for a tough couple of years globally and cash is king.We’re in for a tough couple of years globally and cash is king.
Copyright © 2009 Penske. All rights Reserved. Page 4
Pharma Patent Expirations
So what? You will be asked to do more with So what? You will be asked to do more with less & to challenge the current status quo.less & to challenge the current status quo.
Copyright © 2009 Penske. All rights Reserved. Page 5
Acquisition & Merger Focus
Everyone is looking to put together the correct pieces to overcome the Everyone is looking to put together the correct pieces to overcome the future revenue shortfall & as a method to reduce costs!future revenue shortfall & as a method to reduce costs!
Pfizer + Wyeth?Or
Sanofi + Medley?Or
Roche + Genentech?or
King + Alpharma?Or
Lilly + ImClone?Or
Teva + Barr?
Copyright © 2009 Penske. All rights Reserved. Page 6
Increased Regulation
The new administration in Washington & the requirement for solutions like The new administration in Washington & the requirement for solutions like e-Pedigree will only heighten regulatory complexity in the future.e-Pedigree will only heighten regulatory complexity in the future.
Copyright © 2009 Penske. All rights Reserved. Page 7
Agenda
The Current Environment
The Necessity for Change
An Approach for Achieving Transformation
The Value Proposition
Continuous Improvement – The Journey Never Ends
Copyright © 2009 Penske. All rights Reserved. Page 8
The World is Flat and Much of Your Future Opportunity is in Emerging Markets
How will you get your products to these markets?How will you get your products to these markets?
Copyright © 2009 Penske. All rights Reserved. Page 9
The Extended Supply Chain
What are the specific requirements for the extended supply chain?What are the specific requirements for the extended supply chain?
Contract manufacturing, outsourced customer service, long lead-times, supply chain disruptions – all symptoms of of the extended supply chain. All requirements of the new paradigm in global trade.
Copyright © 2009 Penske. All rights Reserved. Page 10
The level of complexity is heading in one direction – UP! The level of complexity is heading in one direction – UP!
“10 +
2”
C-T
PA
T
NVOCC
TSA
Property Brokers LicenseImporter Self Assessment
American Society of In
dustrial S
ecurity
Harmonized Tariff Schedule
Certificate of Endorsement
Duty Rate
“24 Hour Rule”
Special Duty Programs
Ocean Transportation Intermediary
Customs House Broker PermitUnauthorized Shipper
INCO Terms
Ocean Forwarder License
Secure Freight Initiative
Automated Manifest System
The International Transportation Challenge
Copyright © 2009 Penske. All rights Reserved. Page 11
Local Conditions
The specific modes of transportation vary from geography to geography
• This only adds additional risk to the management of global supply chains
• Along with risk – complexity is again increased
• Service quality can be compromised if all activity is not closely managed
• Service Providers may also introduce risk by operating illegally in their local markets
• For international shipping, the number of options continues to dwindle due to high acquisition activity
Copyright © 2009 Penske. All rights Reserved. Page 12
Requirements for Developing a “world class” Supply Chain
• Necessary talent must be in place to establish and maintain activity
• Complex technology needs to be installed to ensure optimized operations
• Constant evaluation of regulatory requirements must be conducted
• Every element of the international supply chain must be monitored
• International supply chain management MUST be a core competency
The full requirements of establishing and maintaining a “world class supply chain” are complex:
Copyright © 2009 Penske. All rights Reserved. Page 13
The Task is Large – the Opportunity is Larger
Best in ClassBest in Class organizations have organizations have clear competitive clear competitive advantages over advantages over
Industry Average & Industry Average & Laggards.Laggards.
Source: Aberdeen Group, March 2007
Laggards Industry Average Best in Class
Organization
Silo-based supply chain operations with little synchronization and collaboration across departments; moving toward more business unit or regional oversight
Moving toward a more centralized supply chain management organization but most activity is still decentralized into business units and regions
Central supply chain management organization established with executive who has end-to-end supply chain responsibility; strong cross-functional metrics in place
Knowledge
No budgeted projects for visibility improvement
Actively working to improve end-to-end and plant floor to top floor visibility
End-toend supply chain visibility in place with strong strides being made toward plant floor to top floor visibility
Technology
Spreadsheets and home grown Access database solutions are common for supply chain planning; legacy or heavily customized supply chain execution applications
Advanced supply chain technology solutions deployed for a handful of key supply chain management functions; lack closed-looped integration between planning and execution
Extensive use of advanced supply chain technology with closed-loop integration between planning and execution
Performance Metrics
Forecast accuracy at the family product level is below 61%; Perfect Order percentage is 85% or less; Logistics costs as a percent of sales is greater than 10%
Forecast accuracy at the product family level is 61% to 71%; Perfect order percentage is 86%-90%; Logistics costs as a percent of sales is 7%-10%
Forecast accuracy in the product family level is 71% or better; Perfect order percentage is 91% or better; Logistics costs as a percentage of sales 6% or less
Competitive Framework for Process Industries
LaggardsLaggards Industry AverageIndustry Average Best in ClassBest in Class
OrganizationOrganization
KnowledgeKnowledge
TechnologyTechnology
Performance Metrics
Performance Metrics
Copyright © 2009 Penske. All rights Reserved. Page 14
Your Supply Chain Can be a Competitive Differentiator
Source: Supply Chain Cost Cutting Strategies – How Top Process Industry Performers Take Radically Different Actions Aberdeen Group, March 2007
Market strategy competitive differentiator
27%
Cost center necessary to conduct business
25%
Cost savings opportunity area to helpfund R&D or business expansion
18%
Customer servicecompetitive differentiator
30%
How do you view your supply chain?How do you view your supply chain?
Lower performing companies are 3 times more likely to view their supply chains as cost centers.
Copyright © 2009 Penske. All rights Reserved. Page 15
Agenda
The Current Environment
The Necessity for Change
An Approach for Achieving Transformation
The Value Proposition
Continuous Improvement – The Journey Never Ends
Copyright © 2009 Penske. All rights Reserved. Page 16
The Lead Logistics Provider EvolutionAn LLP is a business partner who assists in the development and implementation of strategies that drive improvement throughout a customer’s supply chain.
It is not just about obtaining the lowest rate, it is about developing solutions It is not just about obtaining the lowest rate, it is about developing solutions & operating more efficiently. & operating more efficiently.
Copyright © 2009 Penske. All rights Reserved. Page 17
TechnologyThird Party Logistics providers have developed technology that enables optimization, supports consistent process management, and provides transparency for all modes of shipping.
The use of the appropriate technology is critical to the LLP model & the The use of the appropriate technology is critical to the LLP model & the ability to deliver value!ability to deliver value!
Copyright © 2009 Penske. All rights Reserved. Page 18
The Global LLP Service
Global visibilitySingle point of contactDirect the activity
Transportation services Warehouse servicesTransportation services
Warehouse servicesTransportation services
Manage the networkRe-engineer the networkDevelop “baseline”
Measure the performanceOptimize outcomesProvide the technology
• Drive out cost• Support future growth• Streamline activities• Manage complexity• Standardize activities• Reduce inventory
requirements• Improve flexibility• Ensure compliance
(All parties digitally connected to the chosen management technology )
LLPLLP
People, processes, technology & continuous improvement make the difference. People, processes, technology & continuous improvement make the difference.
Copyright © 2009 Penske. All rights Reserved. Page 19
Creating A Shared NeedCreating A Shared Need
Shaping A VisionShaping A Vision
Mobilizing CommitmentMobilizing Commitment
Monitoring ProgressMonitoring Progress
Making Change LastMaking Change Last
TransitionState
CurrentState
ImprovedState
Leading Change
Changing Systems & Structures
How to Make Transformation Happen
There is no improvement without sustained change.There is no improvement without sustained change.
Change Management through Change Acceleration Process (CAP)
A key component of any LLP activity should be focused on assisting the organizations ability to change.
Leadership Plan• Define behaviors of the Leadership
that will be critical to the success of the change initiative
Leadership PlanLeadership Plan• Define behaviors of the leadership
that will be critical to the success of the change initiative
Communication Plan• Comprehensive Communication Plan
to effectively communicate the necessary messages to all Merck associates impacted by the changes
Communication PlanCommunication Plan• Comprehensive communication plan
to effectively communicate the necessary messages to allassociates impacted by the changes
Systems and Structures Action Plan• Assessment of Organizational
Systems & Structures to determine which could help or hurt the project, and actions needed for each of the Systems or Structures
Systems and Structures Action PlanSystems and Structures Action Plan• Assessment of organizational
systems & structures to determine which could help or hurt the project, and actions needed for each of the systems or structures
Stakeholder Analysis• Understand the influence Key
Stakeholders have in decision making and determine their level of support or resistance
Stakeholder AnalysisStakeholder Analysis• Understand the influence key
stakeholders have in decision making and determine their level of support or resistance
Copyright © 2009 Penske. All rights Reserved. Page 20
Agenda
The Current Environment
The Necessity for Change
An Approach for Achieving Transformation
The Value Proposition
Continuous Improvement – The Journey Never Ends
Copyright © 2009 Penske. All rights Reserved. Page 21
Pharma Industry Benchmarking
% Total Logistics Spend
18%
26%
25%
23%
5% 3%
Inbound Transportation
Outbound Transportation
Warehousing
Inventory Carrying Cost
Administration
Customer Service
Source: Herbert W. Davis, “Logistics Cost & Service - 2005”
% of Revenue Pharmaceuticals
0
1
2
3
4
5
6
7
8
9
10
Best in Class Average
Source: PRTG, “Integrated Supply Chain Benchmarking Study”
3.87%3.87%
8.63%8.63%Opportu
nity
It is critical to know & manage these costs because savings here will It is critical to know & manage these costs because savings here will contribute directly to the bottom line!contribute directly to the bottom line!
The best pharmaceutical companies spend approximately 4% of revenue on supply chain – the average company spends over 8%!
Copyright © 2009 Penske. All rights Reserved. Page 22
Source: Accenture
Revenue Lift• Customer service enhancements• Product quality improvements• Increased quality availability
Reduced Supply Chain Costs by 10 to 15%• Operational efficiencies• Process enhancements• Procurement savings
Reduced Working Capital Requirements by 20 to 30%• Inventory reductions• Reduced cycle times
Reduced Supply Chain-Related Capital• Capital asset transfer• Enhanced asset utilization• Capital procurement savings
Revenue Revenue EnhancementEnhancement
Operating Operating Cost Cost
ReductionReduction
Working Working Capital Capital
ReductionReduction
Fixed Capital Fixed Capital ReductionReduction
Invested Invested Capital Capital
ReductionReduction
Profit Profit EnhancementEnhancement
Shareholder Shareholder Value Value
EnhancementEnhancement
Shareholder Shareholder Value Value
EnhancementEnhancement
The Benefit Equation for LLP Services
Copyright © 2009 Penske. All rights Reserved. Page 23
Year 1Year 16-12% Savings6-12% Savings
Year 1Year 16-12% Savings6-12% Savings
Year 2Year 24-6% Savings4-6% Savings
Year 2Year 24-6% Savings4-6% Savings
Year 3Year 34-6% Savings4-6% Savings
Year 3Year 34-6% Savings4-6% Savings
• Mode ShiftMode Shift• Shipment ConsolidationShipment Consolidation• Shipping Window FlexibilityShipping Window Flexibility• SourcingSourcing
• Mode ShiftMode Shift• Shipment ConsolidationShipment Consolidation• Shipping Window FlexibilityShipping Window Flexibility• SourcingSourcing
• Network Re-engineeringNetwork Re-engineering• Continuous MovementContinuous Movement• Route DevelopmentRoute Development• Envirotainer ManagementEnvirotainer Management
• Network Re-engineeringNetwork Re-engineering• Continuous MovementContinuous Movement• Route DevelopmentRoute Development• Envirotainer ManagementEnvirotainer Management
• Freight PaymentFreight Payment• Expedite ManagementExpedite Management• Returns Process ManagementReturns Process Management• Inventory/Demand PlanningInventory/Demand Planning
• Freight PaymentFreight Payment• Expedite ManagementExpedite Management• Returns Process ManagementReturns Process Management• Inventory/Demand PlanningInventory/Demand Planning
Historical Opportunity – Third Party Transportation Management
Copyright © 2009 Penske. All rights Reserved. Page 24
The Unseen Value Proposition
VisibilityVisibilityVisibilityVisibility
AccountabilityAccountabilityAccountabilityAccountability
TransparencyTransparencyTransparencyTransparency
FlexibilityFlexibilityFlexibilityFlexibility
ConfidenceConfidenceConfidenceConfidence
Web-based, real-time information provided on an as needed basis with an open book policy to ensure value is being delivered.
Utilize a non-asset approach to support customer agility and adaptability in a rapidly changing world.
The concept of global supply chain management enables you to rely on this single point of contact for all international shipping requirements.
Providing seamless shipment availability information and supply chain metrics-globally, utilizing proven technical solution.
Having a trusted partner who will stay abreast of changing regulations, supply chain trends, and your requirements – at all times.
Copyright © 2009 Penske. All rights Reserved. Page 25
Agenda
The Current Environment
The Necessity for Change
An Approach for Achieving Transformation
The Value Proposition
Continuous Improvement – The Journey Never Ends
Copyright © 2009 Penske. All rights Reserved. Page 26
Continuous Improvement – The Journey Never Ends
Supply Chains change daily
• How quickly they are adjusted to this change can impact the overall cost
• Comprehensive measurement is a necessity
• Current technology is necessary in order to monitor the various nodes within a given supply chain
Continuous measurement & adjustment will lead to cost improvement.Continuous measurement & adjustment will lead to cost improvement.
Copyright © 2009 Penske. All rights Reserved. Page 27
Comprehensive Measurement Leads to Improvement
Process Improvement
Lean & Productivity Improvement
Billing
Statistical Analysis
Forecasting
Multivariate analysisModel week selectionSensitivity analysis
Time series analysisSimple linear Regression Logistics regression
Billing
Reporting
Automated weekly MIS reportDevelopment of repetitive standard operating procedure
Pre Sales Support
Network Optimization
Development of Tools
R & D
Data cleaningData validationData analysis & summarization
0Subgroup 10 20 30 40 50 60 70 80
30
40
50
60
70
80
90
Indi
vidu
al V
alue
9/28/03 12/7/03 2/15/04 4/25/04 7/4/04 9/12/04 11/21/04WeekStart
11
1151111
5222222
222
2
122222
2 66
222222222222
112222
1212111
11
1
1
111
X=54.46
3.0SL=65.11
-3.0SL=43.81
0
10
20
Mov
ing
Ran
ge
1
1
22 22222
22
1
R=4.004
3.0SL=13.08
-3.0SL=0.00E+00
I and MR Chart for RSD
Data analysis and summary toolDepot MilerData cleansing tool
Dynamic Network Design – a tool to monitor structural and operational change of logistics network
Routing Resource schedulingDepot analysis
Freight Dollars By Company
89.1%
1.2%1.3%
7.1%
1.0% 0.2%0.1%
HON/ASE HHT Paoli Gunlocke Maxon Holga Edward George
Digitization
Productivity improvement through lean and digitization
Once the data is prepared, choose the option “Generate TSP”
Once the data is prepared, choose the option “Generate TSP”
StopStop
Pull down the menu bar TSP on top of the screen and choose the
option “Prepare data for TSP”
Pull down the menu bar TSP on top of the screen and choose the
option “Prepare data for TSP”
Review the output report consolidated automatically in a
new excel workbook
Review the output report consolidated automatically in a
new excel workbook
Start
Time Taken
Prepare data for TSP miles calculation
Prepare data for TSP miles calculation
3 Min
Process Improvement
Lean & Productivity Improvement
Billing
Statistical Analysis
Forecasting
Multivariate analysisModel week selectionSensitivity analysis
Time series analysisSimple linear Regression Logistics regression
Billing
Reporting
Automated weekly MIS reportDevelopment of repetitive standard operating procedure
Pre Sales Support
Network Optimization
Development of Tools
R & D
Data cleaningData validationData analysis & summarization
0Subgroup 10 20 30 40 50 60 70 80
30
40
50
60
70
80
90
Indi
vidu
al V
alue
9/28/03 12/7/03 2/15/04 4/25/04 7/4/04 9/12/04 11/21/04WeekStart
11
1151111
5222222
222
2
122222
2 66
222222222222
112222
1212111
11
1
1
111
X=54.46
3.0SL=65.11
-3.0SL=43.81
0
10
20
Mov
ing
Ran
ge
1
1
22 22222
22
1
R=4.004
3.0SL=13.08
-3.0SL=0.00E+00
I and MR Chart for RSD
Data analysis and summary toolDepot MilerData cleansing tool
Dynamic Network Design – a tool to monitor structural and operational change of logistics network
Routing Resource schedulingDepot analysis
Freight Dollars By Company
89.1%
1.2%1.3%
7.1%
1.0% 0.2%0.1%
HON/ASE HHT Paoli Gunlocke Maxon Holga Edward George
Pre Sales Support
Network Optimization
Development of Tools
R & D
Data cleaningData validationData analysis & summarization
0Subgroup 10 20 30 40 50 60 70 80
30
40
50
60
70
80
90
Indi
vidu
al V
alue
9/28/03 12/7/03 2/15/04 4/25/04 7/4/04 9/12/04 11/21/04WeekStart
11
1151111
5222222
222
2
122222
2 66
222222222222
112222
1212111
11
1
1
111
X=54.46
3.0SL=65.11
-3.0SL=43.81
0
10
20
Mov
ing
Ran
ge
1
1
22 22222
22
1
R=4.004
3.0SL=13.08
-3.0SL=0.00E+00
I and MR Chart for RSD
Data analysis and summary toolDepot MilerData cleansing tool
Dynamic Network Design – a tool to monitor structural and operational change of logistics network
Routing Resource schedulingDepot analysis
Freight Dollars By Company
89.1%
1.2%1.3%
7.1%
1.0% 0.2%0.1%
HON/ASE HHT Paoli Gunlocke Maxon Holga Edward George
Digitization
Productivity improvement through lean and digitization
Once the data is prepared, choose the option “Generate TSP”
Once the data is prepared, choose the option “Generate TSP”
StopStop
Pull down the menu bar TSP on top of the screen and choose the
option “Prepare data for TSP”
Pull down the menu bar TSP on top of the screen and choose the
option “Prepare data for TSP”
Review the output report consolidated automatically in a
new excel workbook
Review the output report consolidated automatically in a
new excel workbook
Start
Time Taken
Prepare data for TSP miles calculation
Prepare data for TSP miles calculation
3 Min
Once the data is prepared, choose the option “Generate TSP”
Once the data is prepared, choose the option “Generate TSP”
StopStop
Pull down the menu bar TSP on top of the screen and choose the
option “Prepare data for TSP”
Pull down the menu bar TSP on top of the screen and choose the
option “Prepare data for TSP”
Review the output report consolidated automatically in a
new excel workbook
Review the output report consolidated automatically in a
new excel workbook
Start
Time Taken
Prepare data for TSP miles calculation
Prepare data for TSP miles calculation
3 Min
Measure early and often - what you do not measure will likely not improve!Measure early and often - what you do not measure will likely not improve!
Copyright © 2009 Penske. All rights Reserved. Page 28
Dynamic and Adaptive Network DesignThe continuous assessment, analysis and improvement of supply chain and logistics networks to adapt to an increasingly dynamic and global business environment
Advanced optimization approaches can also have significant impact on Advanced optimization approaches can also have significant impact on today’s complex & global supply chains.today’s complex & global supply chains.
Supply Chain Design & Re-Design
Supply Chain Design & Re-Design Implement &
Deploy the Design
Implement & Deploy the Design
Execute & Measure
Execute & Measure
Statistical Analysis & Trends
CustomerValue
Sourcing Alternatives - Global Sourcing (Low Cost Countries) - e-Auctions Measuring the
Performance of Current Design
Identify Opportunities
for Re-Design
Identify Opportunities
for Re-Design
Manufacturing Alternatives - Contract Manufacturing - Plant Re-utilization
Demand Variability - New product introductions - Seasonality - New Markets/Changing Demand Patterns
Copyright © 2009 Penske. All rights Reserved. Page 29
Relentless focus on value adding activities & eliminating activities that Relentless focus on value adding activities & eliminating activities that do not add value.do not add value.
Cost
Defects
Lead time
Inventory
Space
Waste!
Productivity
Customer satisfaction
Profit
Customer responsiveness
Capacity
Quality
Cash flow
On time delivery
Work Time (value add)
Cycle Time
Before
AfterWait Time (non-value add)
Same Same work work
completed completed in less in less timetime
Same Same work work
completed completed in less in less timetime
LEAN Benefits
What is Lean?
Copyright © 2009 Penske. All rights Reserved. Page 30
Focus Efforts on the Seven Wastes
7 WastesKnowledge Flow Knowledge Flow
Office EnvironmentOffice Environment
Product Flow
Manufacturing Environment
Overproduction• Processing before next operation is ready
• Making decisions too early
• Sub assemblies and components between feeder and main lines
Inventory• Multiple applications awaiting approval
• Unnecessary document/data storage
• Material between operations and process steps
• Inventory stored in warehouses
• Buffer & safety stock inventory
Extra Processing
• Navigating multiple screens to input data
• Multiple ways to do the same task
• Duplicate entries
• Planned/Un-planned Rework
• Handwork—polishing, deburring
Motion• Navigating multiple screens to input data
• Looking for data/information
• Operators bending, turning, twisting, reaching, walking
• Robotic motion—”getting back to home”
Defects
• Rework
• Missed customer due dates
• Data entry errors
• Poor Quality
• Equipment failures
• Missing customer due dates
Waiting
• System downtime/response time
• Manual decisions
• Documents awaiting signoff/approval
• Operators, machines, or customers waiting
Transportation• Delivering reports/hardcopies
• Shipping hardcopies requiring signature• Conveyance of materials, tooling
Copyright © 2009 Penske. All rights Reserved. Page 31
Utilize Lean & Six Sigma to Identify & Quantify Opportunities
Different tools applied in different circumstances or combined for Different tools applied in different circumstances or combined for greater effect!greater effect!
Six Sigma
Eliminate waste in/around Process LEAN
Eliminate defects in Process Business
Improvement
X X
LEANImprove steps that add value
Six SigmaImproves the capability of steps that add value
LEANHelps identify steps that don’t add value and provides tools to eliminate them
Six Sigma/LEANImproving the capability can eliminate additional steps
LEAN vs. Six Sigma
Copyright © 2009 Penske. All rights Reserved. Page 32
Outputs from Measurement, Dynamic Network Design, LEAN & Six Sigma Thinking
Business Case
Business Case
=Project Plans
Project Plans
Approved Projects
Approved Projects
SavingsDeliveredSavings
Delivered
ContinuousContinuous
ImprovementImprovement
MindsetMindset
Thank youThank you