Greg Aimi from AMR Research on ‘Achieving a Demand-Driven Supply Chain: Redesigning your supply chain to meet customer and business needs in a changing economic environment’

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6/29/2010

Greg Aimi Supply Chain Research Director

Demand Driven Value Networks

Redesigning the Supply Chain for the 21st Century

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Gartner delivers the supply chain and

technology-related insight necessary to

help clients make the right decisions,

every day.

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Quick Overview of a Complex Topic

• Legacy of evolution – critical change agents

• The new approach – how DDVN is different

• Why change?

• A Framework for the model

• Top things to consider

• Challenges from the field

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Industrial Revolution

• Asset heavy

• Efficiency focus

• Make it, Sell it

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Major changes in the last 10-15 years

• Asset heavy

• Efficiency focus

• Make it, Sell it

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Customer Profile Changes

• Consumer buying patterns have changed, increasing

demand volatility

• More options and variants to choose from

• Web based research has become the norm

• Online buying will increase

• Green starting to have an impact

• Services become more important

• Emerging market trends create a shift in volume

• The channel model must change accordingly, improving

the overall experience

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Traditional SC operates in silos

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Demand Attract, Sell, Service

Supply Plan, Source,

Make, Deliver

Product Define, Design,

Promote, Supply,

Support

“I Think I Can Sell…”

“Here It Is, Sell It”

“Here’s a New

Product – Figure Out

How to Make It”

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Product

Demand Supply

Insights Capability

& Risk

Opportunities

Demand-driven Value Network (DDVN)

Sense Shape Profitable

Response

Innovation

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Why Does It Matter? Cause the Leaders:

Deliver 20% More

Perfect Orders…

68%

90%

Laggards

Leaders

…while holding a third less inventory…

Laggards

Leaders

72 Days

54 Days

…with lower SCM costs equal to 5% of revenue

26%

21%

Laggards

Leaders

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Demand Translation for balanced

Push/Pull Matching

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Product & Service Innovation

Seg

men

ted

Cu

sto

mers

, B

uyers

,

Users

, &

Co

nsu

mers

Pull

Channel

Demand

&

Demand

Management

User/

Consumer/

Demand

Insights

Su

pp

liers

& P

artn

ers

Push

Reliable,

Profitable

Response from

Supply Based on

Demand

Demand Visibility Supply Visibility

decoupling

Demand

Translation

Integrated Strategy,

Business & Planning

w/ Trade-offs

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Product

Demand Supply

Shape Profitable

Response Sense

The transformation to DDVN

New revenue streams

Segmentation

Multi-Channel Management

Demand Management

The Digital Customer

Mobility and connectivity

Premium service and aftermarket

Warranty/Recalls

Product Lifecycle – Design for Supply

Platform Management and Reuse

Voice of the Customer

Supplier Innovation

Remote diagnostics

Network design

Agile Manufacturing

Manufacturing Intelligence

Supplier Integration

Quality / Risk

Visibility

Materials Management

Compliance

Logistics Effectiveness

Cost Management / Efficiency

Demand Mgmt & Translation

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2009

1. Apple

2. Dell

3. Procter & Gamble

4. IBM

5. Cisco Systems

6. Nokia

7. Wal-Mart Stores

8. Samsung Electronics

9. PepsiCo

10. Toyota Motor

11. Schlumberger

12. Johnson & Johnson

13. The Coca-Cola Company

14. Nike

15. Tesco

16. Walt Disney

17. Hewlett-Packard

18. Texas Instruments

19. Lockheed Martin

20. Colgate Palmolive

21. Best Buy

22. Unilever

23. Publix Super Markets

24. SonyEricsson

25. Intel

• Outside-in focus

• Embedded innovation

• Extended supply chains

• Balanced excellence

• Attitude

• Metrics

• Supply chain talent

Supply chains that are…

• Predictable and reliable

• Flexible

…and have:

• Profitable demand response

• Sustainable growth

• Satisfied customers

Outcome

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The Future of Value Network Management

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Personalized interaction with customers across multiple channels

The power of the “digital customer”

Growth in expectations for green, mobile, connected solutions

Innovation to achieve a new price point for new markets

Service as a differentiator

Better alignment and visibility from customer through to supplier

Demand-driven planning and translation of demand (pull vs push)

Standardized business processes to improve costs, quality and agility

Supply chain velocity improve in core products and parts

Redesigned sourcing and logistics networks – integrating LSPs

Value talent and supply chain as enabler and differentiator

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Getting out of Neutral – Why is it so hard?

Barriers to Value Chain Excellence

Lack of goal clarity

Little alignment to business strategy

Poor connection of planning to execution

Misaligned metrics and reward systems

Confusion over what is a good decision

Not all constituents participate / buy-in

Reactive, do not value demand management

60% Change Management

30% Process

10% Technology

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Demand Driven Value Networks Redesigning the Supply Chain for the 21st Century

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Greg Aimi

Director of Supply Chain Research

125 Summer Street

Boston, MA 02110

USA

617 542 6600

[email protected]