edit Master title style

The RoleClick
oftoFinance

BRICKS
Matter

Book
Publishe
s in
August
2012

The Role of Supply Chains

in Building Market-Driven
Differentiation

LORA M. CECERE
CHARLES W. CHASE
JR.

Whats in
a name?

A rose by any other

name would smell as
sweet.
William Shakespeare
3

Agenda

Current State
Alignment and Measurement
Process Maturity
Agility
Governance
Wrap-up

S&OP Challenge

Impact of Supply Chain Challenges

(among those without S&OP Experience)

Agenda

Current State
Alignment and Measurement
Process Maturity
Agility
Governance
Wrap-up

Typical Organization

A Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity

Looking at Supply Chain

as a Complex System
Profitable Growth
Revenue
Corporate
Trade-offs

Cost of Goods

Working Capital
Corporate Social Responsibility

Investment
Trade-offs

Supply Chain
Trade-offs

Supply Chain
Waste

R&D Strategy and Investment

Asset Strategy and Investment

Forecast Accuracy

Customer Service

Inventory

Channel Strategy

Product and
Service Portfolio

Supplier Strategy

Sales
Policies

Distribution
Policies

Manufacturing
Policies

Logistics
Policies

Procurement
Policies

Returns

Backorders

First Pass Yield

Empty Miles

Material Yield

Useful Ratios
Growth

Profitability

R&D Margin

Cash on Hand
Free Cash Flow
R&D to COGS Ratio
Ratio
SGA Margin
Gross Margin
SGA/COGS

Net Profit

COGS as Percent of
Operating Margin
Net Sales
Pretax Margin
(EBIT)
YoY Sales Growth
Operating Margin

Cycle
C2C Cycle
Days of Finished
Goods
Days of Inventory
Days of Payables
Outstanding
Days of Raw
Materials
Days of Sales
Outstanding
Days of Work in
Progress

Complexity
Altman Z
Capital Turnover
Current Ratio
Quick Ratio
Return on Assets
Return on Equity

Inventory Turns

Return on Invested
Capital
Return on Net
Assets
Revenue/Employee

Receivables Turns

Cost of Sales

DPO/DSO

Evolution of Supply Chain Process Excellence

Align

Building
Building Horizontal
Horizontal
Process
Connectors
Process Connectors

Adapt

Sense
Sense
Demand
Demand
and
and Supply
Supply
Shape
Shape
Demand
Demand and
and
Supply
based
Supply based
on
on Market
Market

Resilient

Continuous
Continuous
Testing
Testing
Learning
Learning
Improving
Improving
In
In Market
Market

Reliable
Right
Right Product
Product

Demand
Demand
Volatility
Volatility

Right
Right Place
Place
Right
Right Time
Time

Supply
Supply
Volatility
Volatility

Orchestrate
Orchestrate
Demand
Demand and
and Supply
Supply

Right
Right Cost
Cost

Efficient
Cost
Cost
Procure
Procure to
to
pay/order
pay/order to
to
cash
cash

Supply Chain Excellence Definition

Most Mature

Agenda

15

Current State
Alignment and Measurement
Process Maturity
Agility
Wrap-up

Developing the Supply Chain Strategy

Business Process
How do I do the right things right?

Rethinking Planning
Strategic
Planning

Network Design

Product
Planning

Product Platforms
New Product Launch

Tactical
Planning:
Horizontal
Processes
Tactical
Planning:
Vertical
Processes

Revenue
Management

Sales
Forecasting

Sales and
Operations
Planning
Global
Demand
Planning

Supplier
Development

Tactical
Supply
Planning

Distribution
Requiremen
ts

Operational
Planning

Region
Regiona
al
l Sales Deman
Executi
d
Transportati
on
Plannin
on
g
Requiremen
ts

Manufacturi
ng Planning

Procurement
Planning
Material
Requiremen
ts
Contract
Manufacturi
ng Planning

Scenario Planning

What-if Analysis

Getting to Letter Perfect

Common Practice

Market-driven Focus

Ask sales

Focus on market drivers:

How do we best shape demand?

&

Direct integration to
supply

Design of the value chain to

optimize trade-offs, minimize risk,
balance cycles, and orchestrate
demand

OP

Manufacturing plan

Trade-offs between make, source

and deliver

20

S&OP Evolution
Sales
Sales Driven
Driven
Match
Match Demand
Demand
with
with Supply
Supply

ManufacturingManufacturingDriven
Driven
Deliver
Deliver aa Feasible
Feasible
Plan
Plan for
for Operations
Operations
Match
Match Demand
Demand
with
with Supply
Supply

Greater
Greater Benefit
Benefit
Growth
Growth
Resilience
Resilience
Efficiency
Efficiency

BusinessBusinessplanning
planning Driven
Driven
Maximize
Maximize
Profitability
Profitability

Demand
Demand Driven
Driven
Maximize
Maximize
Opportunity
Opportunity
Sense
Sense and
and
Shape
Shape
Demand
Demand

Market
Market Driven
Driven
Maximize
Maximize
Opportunity
Opportunity and
and
Mitigate
Mitigate Risk.
Risk.
Orchestrate
Orchestrate
Demand
Demand
Market
Market to
to Market
Market

Technology

Modeling Challenges

Volume to mix to revenue/profitability

Equivalent units
Reward systems
Alignment on What good looks like

S&OP Process
Plan Execution

Agenda

25

Current State
Alignment and Measurement
Process Maturity
Agility
Governance
Wrap-up

An Athlete Needs:

What is Agility?

S&OP Balance

The Need for Balance

Agility Importance vs. Performance

Agenda

31

Current State
Alignment and Measurement
Process Maturity
Agility
Governance
Wrap-up

S&OP Process
Existence, Goals & Processes

Supply Chain Organization

Multiple S&OP Processes

Regional
S&OP
Processes

S&OP
Processes
With Key
Customers

Executi
ve
S&OP

Supply
Chain
Planning
Processes
with Key
Suppliers

Supply Chain Center of Excellence

(among those with S&OP Experience)

Center of Excellence
Importance vs. Performance

S&OP Process Operations

(among those with S&OP Experience)

Integration of S&OP with Financial Planning

(among those with S&OP Experience)

Historically, we have

Tried to get precise on inaccurate data.

Believed that the most efficient supply chain is
the most effective supply chain.
Built efficient chains, but not effective networks.
Focused inside-out, not outside-in.
Rewarded the urgent, not the important.

39

Wrap-up

Start with strategy and a clear definition of

supply chain excellence
Build metrics to drive balance in a complex
system
Improve agility through what-if capability
Focus on a multi-year road map
Fuel the energy through a guiding coalition
and continuous improvement initiatives