12 days of Bricks Matter

Plan4Demand presents

12 Days of
Bricks Matter

Panelists

Charlie Chase Lora Cecere Jim Heatherington

Supply Chain Insights LLC Copyright © 2012, p. 2

BRICKS Book
Publishes

Matter
December
2012

The Role of Supply Chains
in Building Market-Driven
Differentiation

LORA M. CECERE
CHARLES W. CHASE JR.

Bricks Matter
ISBN: 978-1-1182-1831-0
By the Numbers.
290
1
98,000
75
36
18

About Bricks Matter

Supply chain management processes have gradually shifted from a supply-driven focus
to a demand-driven one in order to better synchronize demand and supply signals.
Bricks Matter shows you how you can identify market risks and opportunities and
translate these into winning tactics. Business case studies from 36 companies highlight
how business leaders are winning through market-driven approaches. The no-nonsense
approach in Bricks Matter, helps you understand how to apply the emerging world of
predictive analytics for the better management of value networks.

As companies transition from a demand-driven to a market-driven approach, the focus in
organizational shift needs to happen. It is a move from outside-in to inside one. It is a
transition from vertical excellence to building strong market-to-market horizontal
processes. This includes improving revenue by increasing market share, delivering high
and reliable profit margins, meeting corporate social responsibility goals and maintaining
high levels of customer service with the indispensable guidance found in Bricks Matter.


Why did I Write this Book?

• Third decade of Supply Chain Management.
Passing of the baton by Supply Chain Pioneers.
Talent shortage and the need to train the next
generation.
• Excellence in Supply Chain is Driven by
Leadership. 36 case studies that tell the story.
• Void in the Market. Supply chain matters. Need
for clarity on the impact of two decades of
spending to true business results.
• Shift in technology capabilities that too few
understand. The power of analytics allows
companies to tackle new opportunities, but only if
they learn, to unlearn, to relearn.


Why Should you Care?

• Supply chain is a powerful road forward for your
career. By better understanding the past, you
can be a better leader for the future.
• Supply chain can save the world. Materials are
tight, and social responsibility pressures are
high. You can be a leader to make a change in
making the world a better place.
• Value is driven by those that make things. Supply
Chain leaders help to orchestrate value in
economies, in companies and in communities.
The shift from digital marketing to digital
business redefines value.
• Clicks and digital marketing are sexy; but in the
end, Bricks Matter.

What Other’s are Saying

This is the new bible for all supply chain executives. It provides an insider’s
perspective that will prove incredibly valuable to even the most grizzled supply chain
veteran. This is the next must-have business book.
--Bruce Richardson, Chief Enterprise Strategist, Salesforce.com

The journey to build the outside-in end-to-end value network happens in stages and
can only be led from the top based on value-based outcomes. This is a guidebook for
leaders driving the transformation.
--Roddy Martin, Senior Vice President, CCI Best Practice Research and Consulting

This book is like no other that has been written about supply chain management. It is a
must read for the supply chain leadership team.
--Marty Kisliuk, Global Operations Director, Agricultural Products Group, FMC Corporation

Lora Cecere has been a key driver of supply chain strategies that force companies to
think differently about how they work with their customers, partners, and cross-
functionally within their own organizations. Here she teaches us to take a bold step to
change our thinking and turn the supply chain around to focus on the consumer.
--Ann Dozier, Vice-President, Fresh Dairy Direct IT, Dean Foods Company

Today, the worlds of social business and supply chain management have many
degrees of separation. I enjoyed working with Lora to understand what the future
transformation of digital marketing to digital business could look like.
--Jeremiah Owyang, Research Director, Altimeter
•
•


Bricks Matter

• Chapter 1: Meet the Pioneers
• Chapter 2: Creating Value Networks
• Chapter 3: The World of Demand
• Chapter 4: Redesigning Supply
• Chapter 5: Building Horizontal Connectors
• Chapter 6: Race for Supply Chain 2020


Right Use Expansion into Supply Chain
of Assets BRIC Countries Process
(Brazil, Russia, Knowledge
India and China)

At a High Level

• Technologies were over-hyped and largely under-
delivered.
• We stumbled forward. The greatest advancements came
through failure.
• The supply chain organization is both an accelerator and
an inhibitor.
• No real change in the supply chain happens in less than
three years. It takes hard work, and leadership to guide
operations to navigate the trade-offs and make a
conscious choice.


Supply Chain Tipping Points

1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999

JIT Supply Chain Internet/Email
RFID
Organization
Evolution of eProcurement
the PC

Re-Engineering the Total Quality
S&OP Organization Management
Theory of
Constraints (Michael Hammer)

Supply Chain Excellence = Supply Chain Excellence =
Islands of Manufacturing Vertical Silo Efficient Order to
+ +
Excellence Excellence Excellence Cash Processes

Inside-Out Inside-Out


Supply Chain Tipping Points

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

.com Social
Responsibility
Y2K
Demand Driven
Concepts CSCO
Lean Six Sigma
Market-Driven
Value Networks

Supply Chain Excellence = Supply Chain Excellence =
Vertical Silo Outsourcing Value-Based Outcomes
+
Excellence Effectiveness Delivered by Horizontal Processes

Inside-Out Outside-In


Evolution of Supply Chain Process
Excellence
Align: Continuous
Building Horizontal Testing Orchestrate
Market Process Connectors Learning
Improving Demand and Supply
Driven In Market

Adapt:
Demand Resilient
Reliable
Driven
Right Product Efficient
Absorb
Sense Demand
Demand Volatility Right Place Cost
and Supply

Right Time
Procure to
Shape Absorb Supply pay/order to
Demand and Volatility cash
Supply based Right Cost
on Market


What is a Market-driven Value Network?

An adaptive network focused on a value-
based outcome that senses and translates
market changes (buy and sell-side markets)
bi-directionally with near-real time data
latency to align sell, deliver, make and
sourcing operations.


Definitions

Supply Network: When the supply chain is extended to a
network of trading partners, it is termed a supply network.

Value Chain: When the emphasis of this extended supply
chain shifts from cost to value, it is called a value chain.

Value Network: When it becomes more strategic to the
company, focused outside-in to drive value-based outcomes, it
is termed a value network.


Leaders sensed Market Changes 5x
Faster


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


Looking at the Supply Chain
as a Complex System

Profitable Growth

Revenue Cost of Goods
Corporate
Trade-offs Working Capital

Corporate Social Responsibility
Investment
Trade-offs R&D Strategy and Investment Asset Strategy and Investment

Forecast Accuracy Customer Service Inventory
Supply Chain
Trade-offs Channel Strategy Product and Supplier Strategy
Service Portfolio
Sales Distribution Manufacturing Logistics Procurement
Supply Chain Policies Policies Policies Policies Policies
Waste
Returns Backorders First Pass Yield Empty Miles Material Yield


Useful Ratios

Growth Profitability Cycle Complexity
R&D Margin Cash on Hand C2C Cycle Altman Z
Days of Finished
R&D to COGS Ratio Free Cash Flow Ratio Capital Turnover
Goods
SGA Margin Gross Margin Days of Inventory Current Ratio
Days of Payables
SGA/COGS Net Profit Quick Ratio
Outstanding
COGS as Percent of Days of Raw
Operating Margin Return on Assets
Net Sales Materials
Days of Sales
Pretax Margin (EBIT) Return on Equity
Outstanding
Days of Work in Return on Invested
YoY Sales Growth
Progress Capital
Operating Margin DPO/DSO Return on Net Assets
Inventory Turns Revenue/Employee
Receivables Turns Cost of Sales


Who does it Best?

SC Excellence
38%

21%
17%

4% 4%

P&G Apple Dell Wal-Mart Toyota

Revenue/Employee for the Period of
2000-2011
P&G Colgate Unilever Kimberly-Clark Nestle Kraft
700
Revenue/Thousands of Employee

600

500

400

300

200

100

0

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

Bricks Matter



The Supply Chain of the Future

World
Population

North America Europe Asia
2007 2020 2007 2020 2007 2020
339M 342M 731M 722M 4.0B 4.6B

L America
2007 2020 Africa Oceania
572M 660M 2007 2020
2007 2020
965M 1.3B 34M 40M
Source: “The World at Six Billion” United Nations, 2004; The World UN Population Assessment 2006; “Unsustainable World,” 04/15/08, BBC

MARCO TRENDS

Supply Chain Management:
Top 3 Elements of Pain for Respondent


Ease of Getting Total Supply Chain Costs:
Manufacturers, Retailers & Distributors

USERS: Ease of Getting Total Supply Chain Costs

Extremely/very easy 5 Neutral 3 Extremely/very difficult

Users 12% 12% 24% 24% 29%

24% EASY 53% DIFFICULT

___________________________________________________________
Source: Supply Chain Insights LLC, Transportation (Aug-Oct 2012)
Base: Transportation Users (Manufacturers, Retailers and Distributors) (n=34)
Q18. How easy is it for your company to get total supply chain costs for your operations?


Data Latency and Distortion

Retailer DC Manufacturer DC Suppliers
Store

Demand
Signal

Accurate
Almost Weekly
Trivial Easy Difficult Impossible Forecasting
is ...

Instant 3-10 Days 10-20 Days Delay from
20-50 Days
20-45 Days Purchase to
Variable 7-20 Days 45-80 Days Signal

Red Represents Emerging Economies with Distributor Trade


Collaboration: The Right Stuff

SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE

SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION

SHARED
VISION
+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY

SHARED FALSE
+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =
VISION STARTS

SHARED
VISION
+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION

SHARED GRADUAL
+ SKILLS + RESOURCES + PLAN + LEADERSHIP =
VISION CHANGE
Source: J.P. Kotter


Value Network Strategy

Business Strategy
What are the right things to do to increase company value?

Value-network Supply Chain Strategy
What are the right ways to support the business strategy?
What are the right trade-offs between value drivers for each value network?

Align demand Right product Design the Build Align supply
Supply chain strategy
relationships platforms supply organizational relationships
response systems and
manage talent
Effective Supply
Demand Networks Design Networks Continuous Networks
Improvement
Joint Value Creation Innovation Supply Chain Execution of buy-
Strategies Methodologies Network Design Capabilities Required side strategies

Business Process
How do I do the right things right?
Source: Supply Chain Insights, LLC


Bricks Matter

• Chapter 1
• Chapter 2
• Chapter 3
• Chapter 4
• Chapter 5
• Chapter 6


Opportunity
at the Intersection
of the Social and Interest Graph(s)


More than Just “Like”


Newell Rubbermaid Gets IT!

• Newell Rubbermaid

#Future15SB @bwdumars


Newell Rubbermaid Gets IT!

#Future15SB @bwdumars


Bricks Matter



The Long Tail of the Supply Chain:
Growing Complexity

Volume

Level of Predictability
Predictability based on forecast accuracy vs Actual Order Profiles


Commodity Price Increases and Volatility

400.00

350.00

300.00

250.00 Corn (metric Ton)
Wheat (metric Ton)
200.00
Coffee, Robusta (Pound)
$/LB 150.00 Sugar (Pound)
Beef (Pound)
100.00 Crude Oil (Barrel)

50.00

0.00

Source: Index Mundi


Organizational Overview: Typical Consumer Products
Global Organization in 2005-2010

Regional
Customers and Consumers

Team C
u
Regional s
Team t
Demand Visibility Supply Visibility
Regional o

Suppliers
Team m
e
Regional r
Team
One Face
T Reliable,
to the
Channel e
Regional Profitable
Demand a
Team Demand Supplier
& Response from
m
Regional
Demand
Translation Supply Based
Team S
Management u on Demand
Regional p
Team p
o
Over 300 teams r
t
Pull Push
AMR Research: 2007

Change in Wages in China


Manufacturing Evolution
National Multi-National Global: 2000-
Pre-1945 1945-2000 Present
 Products  Protective trade
manufactured • Free Trade
rules closed trade
and sold within • Optimization of
routes of the past
companies within manufacturing beyond
regions  Products country borders into
 Imported manufactured Supply Networks
materials and and sold in • Horizontal,
products exported regions globally integrated
in trade routes  Operation of • Shift from “what to
 Vertical “mini-companies” make” to “how to make”
integration within regions • Management of a
 Operations  Local/regional network
handled at
focus
headquarters


Average Days of Inventory by Year

250.0

200.0
Days of Inventory

150.0

100.0

50.0

0.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods 59.0 57.0 62.0 64.0 67.0 67.0 68.0 70.0 70.0 64.0 64.0 67.0
Chemical 71.5 71.9 78.2 75.1 62.0 70.3 68.1 64.3 64.3 78.6 72.9 72.8
Pharma 122.2 133.7 190.1 171.0 184.3 175.6 167.8 149.8 154.9 198.7 154.3 131.8
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 86.5 80.0 94.2 89.6 87.3 87.5 86.9 80.2 81.0 95.6 81.5 75.5

Source: Supply Chain Insights 2012


Average Days of Working Capital by Industry

350.0

300.0

250.0
Days of Working Capital

200.0

150.0

100.0

50.0

0.0

-50.0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods -20.0 -8.0 -12.0 -2.0 -21.0 -23.0 -8.0 -18.0 -11.0 -10.0 -12.0 -13.0
Chemical 37.3 44.7 61.7 71.9 64.8 64.1 63.8 57.0 51.7 74.8 85.6 77.0
Pharma 64.1 56.4 48.4 56.2 71.8 94.1 92.6 88.1 87.1 111.0 116.0 113.2
High Tech 231.5 290.3 283.5 243.5 173.5 138.9 109.4 103.0 92.4 131.9 138.9 140.9
Average 78.2 95.9 95.4 92.4 72.3 68.5 64.5 57.5 55.1 76.9 82.1 79.5
0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Source: Supply Chain Insights 2012


Kellogg 2010

“Kellogg’s cereal primarily in the U.S. due to an
odor from waxy resins found in the package
liner. Total charges were $46 million with a
$.09 impact on earnings per diluted share.”

Kellogg Annual Report


Bricks Matter



Horizontal Processes

• Revenue Management
• Sales and Operations Planning
• Supplier Development
• Corporate Social Responsibility


S&OP Process
Existence, Goals & Processes


S&OP Balance


S&OP Evolution
Greater Benefit
Business- • Growth
Sales Driven
planning Driven • Resilience
Match Demand
Maximize • Efficiency
with Supply
Profitability

Market Driven
Manufacturing- Demand Driven
Driven Maximize
Maximize
Opportunity and
Deliver a Feasible Opportunity
Mitigate Risk.
Plan for Operations Sense and
Orchestrate
Match Demand Shape
Demand
with Supply Demand
Market to Market

Benefits Received from S&OP Processes

Increasing revenue ▲ 2% 59%

Improving forecast accuracy ▲ 5-7% 57%

Reduction of inventory ▼ 10-15% 50%

Improving asset utilization ▲ 3-7% 42%

Determining outsourced manufacturing 38%

Determining procurement requirements 36%

Improving new product launch ▲ 3-6% 34%
Transportation and warehouse
management ▼ 2-8% 32%

Capital planning and asset management 32%

Improvements in the perfect order ▲ 3-6% 30%

Source: Supply Chain Insights, 2012
What benefits have you received from your work with S&OP processes?


S&OP Process
Plan Execution


Bricks Matter



Supply Chain 2020 Tipping Points

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Orchestration Internet of Things
Talent
Shortage Big Data Learning
Supply Chains Supply Chains
Compliance on
Safe & Secure
Digital Manufacturing

Supply Chain Excellence =

Value-Based Outcomes
Delivered by Value Networks

Outside-In


Mobile & Social Presence Growing


Center of Excellence


Center of Excellence
Importance vs. Performance


Supply Chain Talent
Today vs. In Five Years


Getting Talent


Middle Management Challenge


Challenge by Position


Current State of Planning


Future State of Planning


Scenario Planning


IT Trends Excited About (Top 3)


Definition
Structured • Transactional
Challenges:
Data • Time phased data

• Social Volume
Unstructured • Channel
Data • Customer Service
• Warranty

• Temperature Velocity
Sensor • RFID
Data • QR codes
• GPS

Variability
New • Mapping and GPS
• Video
Data • Voice
Types • Digital Images

66

Connecting the Extended Supply Chain

67

Connecting the Extended Supply Chain


Historically, We Have…

• Tried to get precise on inaccurate data.
• Been sales-driven or marketing-driven not market-
driven
• 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.

69

Where is Your Opportunity?


Upcoming Book Tour Dates

January 13-15, 2013 February 12, 2013
NRF 102nd Convention & Expo Plan4Demand
Big Idea Session Pittsburgh, PA
New York City, NY
April 7-9, 2013
January 22, 2013 Informs
PROMAT San Antonio, TX
SupplyChainBrain Booth
Chicago, IL June 18-20, 2013
3PL Summit &
January 30, 2013 CSCO Forum
Sam M. Walton College of Business Chicago, IL
University of Arkansas
Bentonville Area, AR

February 6, 2013
APICS
Chapter meeting
Danbury, CT

Continue the Discussion

• Continue the Discussion
– Twitter #BricksMatter
• @lcecere
• @Plan4Demand

– LinkedIn
• Bricks Matter Book Group
• Plan4Demand’s Leadership Exchange

• Keep an eye out for the 12 Winners!
– One announced each day at Noon E.T.


EDUCATE

SCI Research Supply Chain Index Ask a Supply Chain Wizard Supply Chain Wiki

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ENRICH

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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.


Where Do You Find Lora?

Contact Information:
lora.cecere@supplychaininsights.com
Blog: www.supplychainshaman.com
(4000 pageviews/month)
Twitter: lcecere 3350 followers. Rated as the
top rated supply chain social network user.
LinkedIn: linkedin.com/pub/lora-
cecere/0/196/573 (2300 in the network)


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