Strategic Supply Chain Management The five disciplines for top performance Food & Consumer Products of Canada Webinar Toronto, February 24, 2014
Strategic Supply Chain Management The five disciplines for top performance
Food & Consumer Products of Canada Webinar Toronto, February 24, 2014
PwC
Section 1 Why is strategic supply chain management important?
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About the book
Slide 3 Strategic Supply Chain Management • The Five Disciplines for Top Performance
All-in-one guidebook and reference targeted to: Senior executives seeking an understanding of the importance of the supply
chain for the management agenda Supply chain operations professionals seeking insights into practices that
can make a difference Executives interested in getting a better view of how their functions affect
supply chain performance Students of business eager to supplement their knowledge of how companies
operate
Section 1 Introduction
Supply chain knowledge that will help your company create value and achieve competitive advantage
In-depth profiles of six leading companies from the energy, healthcare, agricultural, consumer ,and high tech sectors
Numerous examples of how companies applied the techniques detailed in the book to achieve results
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Strategic supply chain management is more important than ever
Slide 4 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 1 Introduction
Increased competition
Shorter product life cycles
Multiplication of channels and segments
Greater focus on sustainability
Competition for talent
More frequent natural disasters
Rising costs in low-cost countries
Shorter economic cycles
Reduced access to working capital Strategic supply chain
management is more challenging — and much more
critical to the bottom line
Increased pressure on companies and their supply chains
1990’s Today
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Consumer goods CEOs are reshaping their organizations
Slide 5 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 1 Introduction
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While cost, profitability, and service remain critical, CPG executives see other trends growing in importance
Slide 6 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 1 Your supply chain as a strategic asset
3
7
4
8
11
9
9
5
7
11
15
6
66
78
79
86
Responding to changing regulatory requirements 32
Making the supply chain more sustainable 39
Managing supply chain security and risk 43
Supporting demand growth in emerging markets 51
54
Assuring supply and supplier performance 53
Responding to competitive pressures 62
Acquiring and developing supply chain talent and skills 60
Meeting increasing customer requirements
Reducing total supply chain cost
Managing profitability of total supply chain
Significant1) Supply Chain trends in 2013 [%]
% Increase by 2015 vs. 2013
(+4%)
(+9%)
(+6%)
(+12%)
(+18%)
(+16%)
(+15%)
(+10%)
(+13%)
(+26%)
(+38%)
(+19%)
Top 4 Supply Chain trends
Remaining Supply Chain trends
Importance increase by ≥ 20% 10% and < 20% ≤ 10%
Note 1) % participants who judged trend as critical or significant in 2013 2) % participants who think that trend is significant, critical or moderate in
2013 and who think that importance will increase by 2015 or who have indicated critical or significant for 2013 and indicate that it will stay same for the next 2 years
Implementing techniques to automate and increase transparency
In 2013-20152 [%]
Preparing supply chain for up/downwards volume flexibility
Consumer Goods
Cross Industry Average
Source: PwC Global Supply Chain Survey 2013, Next-Generation Supply Chains : Fast, Efficient and Tailored
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Leaders reap significant benefits from strategic supply chain management as …
Slide 7 Strategic Supply Chain Management • The Five Disciplines for Top Performance
… it improves the top line Best-in-class companies’ (BICC) sales growth is almost 50% higher than non-BICC
… it improves the bottom line Best-in-class companies have 20% higher profitability than non-BICC
50 60 70 80 90 100 110 120 130 140 150
Sales growth
Percentage of industry average
BICCs Non-BICCs
Profitability
50 60 70 80 90 100 110 120 130 140 150
Percentage of industry average
Section 1 Your supply chain as a strategic asset
BICCs Non-BICCs
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Section 2 Strategic supply chain management’s five core disciplines
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First—what is the Supply Chain?
Slide 9 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 2 The five core disciplines of Strategic Supply Chain Management
Suppliers Customers Customer’s Customer
Supplier’s Supplier
Source Make Deliver Source Make Deliver Source Make Deliver
Plan Plan
Plan
Return Return Return Return
Company A
• End to end—not just sourcing and suppliers
• Not just physical goods – services have a supply chain
• The ideal: seamless, integrated flow of materials and information
• The value chain includes supply chain, but is much broader!
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The book details the five core disciplines that drive performance
Slide 10 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 2 The five core disciplines of Strategic Supply Chain Management
Design the supply chain around a defined basis of competition to enable the overall business strategy
Develop integrated supply chain processes and systems that interface efficiently with
the rest of the enterprise
Develop and maintain organizational structure and skills to define and
manage the supply chain of the future
Understand core competencies and choose partners to maximize
focus and profitability
Use metrics to measure the health of each core supply chain process and
identify problem areas
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Retail & Consumer challenges and the five core disciplines
Slide 11 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 2 The five core disciplines of Strategic Supply Chain Management
Retailer expectations for efficiency + greater end-to-end management
Simultaneous retail consolidation and fragmentation
Consumer demand for multi-channel capability
Increased pace of innovation in retail supply chains
Challenges
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Core Discipline 1: View your supply chain as a strategic asset
Slide 12 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Align your supply chain with your business strategy and your primary basis of competition
Consider customer service proposition, sales channels, value system, operating model and asset footprint in your supply chain strategy
Re-evaluate the supply chain strategy regularly
Section 2 The five core disciplines of Strategic Supply Chain Management
Four primary bases of competition
Innovation time to market and time to volume
Quality procurement and production excellence and quality control
Customer experience interactions designed from the customer’s perspective
Cost efficient, low cost supply chain configurations and processes
Supply chain
strategy
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Core Discipline 1: View your supply chain as a strategic asset
Slide 13 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Case in point: Luxury menswear company
• Custom orders in US, fabrics designed in Italy and garments made in China
• Operates with the philosophy that “custom-fitted clothes can be provided at the cost of off-the-shelf garments”
Launch production
Style consultant meets customer
Style consultant meets customer
Customer on-line order
Make Ordering Delivery
Delivery to customer
Section 2 The five core disciplines of Strategic Supply Chain Management
Source: Strategic Supply Chain Management: The 5 Disciplines for Top Performance, second ed., McGraw-Hill, 2013, p.6
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Core Discipline 2: Develop an end-to-end process architecture
Slide 14 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Products, services, and technology development
Customer service and support
Marketing and sales
Supply chain (Plan, Source, Make, Deliver, Return, Enable)
Leadership and strategy
Support
Cor
e
Business planning Objectives deployment
Governance Legal Finance IT HR
Enterprise process model
Section 2 The five core disciplines of Strategic Supply Chain Management
Ensure the supply chain process architecture encompasses Plan, Source, Make, Deliver, Return, and Enable processes
Integrate the supply chain with the other core enterprise processes
Use your basis of competition to choose and prioritize specific activities and practices
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Core Discipline 2: Develop an end-to-end process architecture
Slide 15 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Case in point: Global on-line retailer
Offers “the Earth's Biggest Selection”
Seeks to be world's most customer-centric company, where customers can find and discover anything they may want to buy online
Section 2 The five core disciplines of Strategic Supply Chain Management
Source: Strategic Supply Chain Management: The 5 Disciplines for Top Performance, second ed., McGraw-Hill, 2013, pp.63-64
Items available in millions
Partner companies
Distributors
Stocked by on-line retailer Exact delivery date
Estimated delivery date • Common, robust processes
• Proactive shipping notification • 24x7 order status • Link to carrier’s web site
Best Practice
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Core Discipline 3: Design your organization for performance
Slide 16 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Designing a Supply Chain Organization
Ensure the talent mix and pipeline cover execution, planning and enabling activities
Consider context, culture and complexity when designing your supply chain structure (centralized, decentralized and hybrid)
Insist on clarity in accountabilities, with a priority on cross-functional roles & activities
Roles and responsibilities
Organizational structure
Skills and talent
Section 2 The five core disciplines of Strategic Supply Chain Management
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Core Discipline 3: Design your organization for performance
Slide 17 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Case in point: Multinational consumer goods company
• More than 400 brands focused on health and wellbeing
• Global scale, local agility seen as a key source of competitive advantage
Category Vice Presidents
Corporate Supply Chain team
• Product Innovation • Brand building
Cluster Operations
• Demand and Supply Balancing • Customer order management • Manufacturing and logistics
• Global Sourcing and Procurement
• Logistics Hubs
Section 2 The five core disciplines of Strategic Supply Chain Management
Source: Strategic Supply Chain Management: The 5 Disciplines for Top Performance, second ed., McGraw-Hill, 2013, pp.100-102
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Core Discipline 4: Build the right collaborative model
Slide 18 Strategic Supply Chain Management • The Five Disciplines for Top Performance
The Collaboration Spectrum
Master internal collaboration as an enabler for collaboration with external partners
Segment supply chain partners to determine the needed type of relationship
Trust your partners while ensuring that you manage your interests
Too many best friends Synchronized
Coordinated
Cooperative
Transactional Little pain, little gain
Extensive
Limited
Many Few Number of relationships
Deg
ree
of c
olla
bora
tion
Section 2 The five core disciplines of Strategic Supply Chain Management
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Core Discipline 4: Build the right collaborative model Case in point: Retail delivery specialist
• Company orchestrating a network of collaborative relationships with independent couriers and high street retailers
• An option at checkout that offers a rapid, point-to-point delivery service in the one-hour window chosen by the consumer
• Company’s aim is to be “the world's fastest, most convenient and best-loved delivery option enabling you to get what you want, when you want it”
Local network of same day couriers
Retailers in a given area
• Higher online conversion • Positive brand promotion • Higher loyalty for retailer
• Higher utilization rate • Higher recurring volume
Customer
Real-time allocation of an order to a courier Real time visibility on arrival GPS-enabled map Integrated with retailers e-commerce platform
• Quick delivery • Control over timeslot
Slide 19 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 2 The five core disciplines of Strategic Supply Chain Management
Linking customer, retailer and courier
Source: Strategic Supply Chain Management: The 5 Disciplines for Top Performance, second ed., McGraw-Hill, 2013, pp.151-152
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Measure from your customer’s perspective
Choose the metrics that will drive your supply chain strategy forward
Ensure your metrics are balanced and comprehensive
Benchmark to understand potential performance levels
Performance attributes
Focused on the customer
Internally focused
Level 1 metrics
Rel
iabi
lity
Res
pon
sive
nes
s
Ag
ilit
y
cost
Ass
ets
Perfect order fulfillment
Order-fulfillment cycle time
Upside supply chain flexibility
Upside supply chain adaptability
Downside supply chain adaptability
Total cost to serve
Overall value at risk
Cash-to-cash cycle time
Return on supply chain fixed assets
Return on working capital
Core Discipline 5: Use metrics to drive supply chain performance
Slide 20 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 2 The five core disciplines of Strategic Supply Chain Management
Level 1 Metrics
Source: Supply Chain Operations Reference Model, Supply Chain Council
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Section 3 Transforming the supply chain
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Transformation starts with executives who understand how to use the supply chain
Slide 22 Strategic Supply Chain Management • The Five Disciplines for Top Performance
CEO “SC is a source of innovation and differentiation”
COO “SC performance helps us attract top talent and partners”
CMO “SC enables our customer value proposition”
CIO “SC data is secure, robust and available”
CSO “SC strategy is aligned to the overall business strategy”
CFO “SC performance drives overall business outcomes”
“SC supports time-to-market and time-to-volume” CTO
CXO-level stakeholders in the Supply Chain
Section 3 Your supply chain as a strategic asset
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Leaders begin with a clear understanding of the type of change needed
Slide 23 Strategic Supply Chain Management • The Five Disciplines for Top Performance
Section 3 Transforming the supply chain
Supply chain excellence
Supply chain innovation
Supply chain improvement
Introducing new ways of competing in your industry or changing your basis of competition—typically part of a broader operational transformation
Achieving industry-leading performance in service, cost, or quality
Making incremental year-on-year performance improvements
Types of Supply Chain Change
Imp
act
on
Bu
sin
ess
Per
form
an
ce
Effort / investment required
Strategic supply chain management – a different mindset and a focus on making change happen – can enable superior performance and industry leadership
This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PricewaterhouseCoopers LLP, its members, employees and agents do not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.
© 2013 PricewaterhouseCoopers LLP. All rights reserved. In this document, “PwC” refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) which is a member firm of PricewaterhouseCoopers International Limited, each member firm of which is a separate legal entity.
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Thank you
Using Strategic Supply Chain Management to move up the Value Chain
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T: +1 416 815 5014 www.pwc.com/ca/retail [email protected]
Ilya Bahar National Leader, Retail & Consumer Consulting