Supply Chain Insights Webinar on Supply Chain Excellence in the Process Industries

Supply Chain IndexTwenty Years in the Making:

A Focus on Process Industries

Webinar: September 24, 2012

Supply Chain Insights LLC Copyright © 2012, p. 2

Our Presenters Today

Lora Cecere Founder Supply Chain Insights

Abby Mayer Research Associate Supply Chain Insights

BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation

LORA M. CECERE CHARLES W. CHASE JR.

BookPublishes December

2012


Agenda

Background

What is Supply Chain Excellence?

A Look at Leaders

Wrap-up


Evolving Practices


• Self-reported data• Peer group relevance• Congruency:

– Point in time– Similar data models– Holistic Views. Metric

understanding

Problems in Benchmarking


Our Process

Initial Data CollectionFebruary – May 2012

Located annual reports back to 1990

Built spreadsheet comparisons by industry

Examined industry averages for:

-Inventory

-Year-over-Year Growth

-Revenue per Employee

Evaluating the MetricsMay – August 2012

Identified the metrics that matter

Analyzed by ratios to enable meaningful comparison in light of size and currency differences

Characterized the ratios by the drivers on the Effective Frontier

Charted the intersections by 4 categories of metrics

Determining Industry PotentialAugust 2012 - present

Charting industry trade-offs and evaluating the impact and industry potential

Personalized charts offered as a free service in the SCI Community to accelerate learning

Augment quantitative surveys and maturity models with the data from the Effective Frontier

Building the IndexAugust 2012 - present

Build an equation by industry peer group to understand industry potential

Examine the relationship between supply chain maturity and balance sheet financials


Year-over-Year Sales Growth


Free Cash Flow Ratio


Source: Supply Chain Insights 2012

Average Days of Inventory by Year

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Consumer Packaged Goods

59 57 62 64 67 67 68 70 70 64 64 67

Chemical

71.5 71.9 78.2 75.1 62 70.3 68.1 64.3 64.3 78.6 72.9 72.8

Pharma

122.236691097869

133.699100562175

190.147616165968

170.986522478989

184.342617399859

175.550260476877

167.799951139247

149.815153981283

154.915781882591

198.663134119976

154.313480863244

131.819794240294

High Tech

93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4

Average

86.4591727744674

80.0497751405437

94.2119040414919

89.6466306197472

87.3106543499647

87.5375651192192

86.9249877848117

80.2287884953207

80.9539454706477

95.6407835299941

81.503370215811

75.5049485600736

25.0

75.0

125.0

175.0

225.0

Da

ys

of In

ve

nto

ry


Source: Supply Chain Insights 2012

Average Days of Working Capital by Industry

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Consumer Packaged Goods

-20 -8 -12 -2 -21 -23 -8 -18 -11 -10 -12 -13

Chemical

37.3 44.7 61.7 71.9 64.8 64.1 63.8 57 51.7 74.8 85.6 77

Pharma

64.1312232310575

56.4017153199571

48.4177907877281

56.1915353741853

71.8377359146444

94.0630645718506

92.6081805769852

88.054253352194

87.1105878511032

111.040082720036

115.985297910064

113.223926160093

High Tech

231.5 290.3 283.5 243.5 173.5 138.9 109.4 103 92.4 131.9 138.9 140.9

Average

78.2328058077644

95.8504288299893

95.404447696932

92.3978838435463

72.2844339786611

68.5157661429627

64.4520451442463

57.5135633380485

55.0526469627758

76.9350206800089

82.1213244775161

79.5309815400233

Series6

0 0 0 0 0 0 0 0 0 0 0 0

-25.0

25.0

75.0

125.0

175.0

225.0

275.0

325.0

Days o

f W

orkin

g C

ap

ital


Agenda

Background


A Look at Leaders

Wrap-up


Supply Chain Management: Top 3 Elements of Pain for Respondent


Evolution of Supply Chain Process Excellence

Align:MarketDriven

Resilient

Efficient

Cost

Procure to pay/order to

cash



Align:MarketDriven

Reliable

Adapt: Demand Driven

EfficientRight Product

Right Place

Right Time

Right Cost

Cost


cash



Align:MarketDriven

Resilient Reliable


EfficientAbsorb

DemandVolatility

AbsorbSupply

Volatility

Right Product

Right Place

Right Time

Right Cost

Cost


cash



Align:MarketDriven

Resilient Reliable


EfficientSense

Demandand Supply

Shape Demand andSupply based

on Market

Absorb DemandVolatility

AbsorbSupply

Volatility

Right Product

Right Place

Right Time

Right Cost

Cost


cash



Align:MarketDriven

Resilient Reliable


Efficient

Building Horizontal Process Connectors

ContinuousTesting

LearningImprovingIn Market

OrchestrateDemand and Supply

Sense Demand

and Supply

Shape Demand andSupply based

on Market

Absorb DemandVolatility

AbsorbSupply

Volatility

Right Product

Right Place

Right Time

Right Cost

Cost


cash


Supply Chain Excellence


A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity

What is a Supply Chain?


Typical Organization


Looking at Supply Chain as a Complex System


Metrics


• Performance better than peer group

• Year-over-year improvements

• Consistency in results

• Leadership in managing trade-offs and expanding the limits of the Effective Frontier

What is Best in Class?


Agenda

Background


A Look at Leaders

Wrap-up


Corporate Summary


Metrics Included for Comparison


Cash-to-Cash Cycle vs. Gross Margin (2000-2003)






Cash-to-Cash Cycle vs. Gross Margin (2000-2011) SUMMARY SLIDE


Inventory Turns vs. Revenue per Employee (2002-2003)






Inventory Turns vs. Revenue per Employee (2002-2011) SUMMARY SLIDE


Who is the supply chain leader? Colgate Kimberly Clark Kraft Foods Procter & Gamble Unilever Cannot tell. No leader.

Audience Poll


Corporate Summary










Cash-to-Cash Cycle vs. Gross Margin (2000-2011) SUMMARY SLIDE








Inventory Turns vs. Revenue per Employee (2002-2011) SUMMARY SLIDE


Who is the supply chain leader? BASF

E I Du Pont

Dow Chemical

Cannot tell. No leader.

Audience Poll


Corporate Summary










Cash-to-Cash Cycle vs. Gross Margin 2000-2011SUMMARY SLIDE








Inventory Turns vs. Revenue per Employee (2002-2011)SUMMARY SLIDE


Who is the supply chain leader? Abbott Laboratories Merck Pfizer Cannot tell. No leader.

Audience Poll


Join Us!

www.scicommunity.com


Agenda

Background


A Look at Leaders

Wrap-up


• Supply chain management is thirty years old

• The definition of supply chain excellence is evolving

• Delivery can best be measured through the analysis of financial metrics and the balance sheet

Wrap-up


Questions?


• Thank you so much for joining us today and we look forward to continuing the conversation on Twitter. Follow along and participate with hashtag #SCIWebinar.

• Be sure to view the full research report, Conquering the Supply Chain Effective Frontier by Lora and Abby on our website under research at www.supplychaininsights.com

• Also check out Lora's blog Supplychainshaman.com and Abby's blog SupplyChainIndex.com

• I invite you to friend me as well as Lora and Abby in the community at SCIcommunity.com. Lets continue this conversation there. I look forward to meeting you.

• See you on October 26th for the next installment of our webinar series. Supply Chain Index: a Focus on Discrete Industries.

http://www.supplychaininsights.com/


Who is Supply Chain Insights?

Supply Chain Insights is focused on delivering actionable advice for supply chain leaders. A company dedicated to research, turn to us when you want the latest insights on supply chain trends, technologies to know and metrics that matter.


Metric Equations

Supply Chain Insights Webinar on Supply Chain Excellence in the Process Industries

Business

supply chain management

supply chainas

supply chain indextwenty

industry matteraugust

indexexamined industry

average days of inventory

industry tradeaverages

equation bypotentialyear