Presentation at the Chief Supply Chain Officer Conference on June 19th

In Search of Supply Chain
Excellence
Lora Cecere of Supply Chain Insights

Supply Chain Insights LLC Copyright © 2013, p. 2
Supply Chain Insights is focused on delivering
independent, actionable and objective
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.
About Us

18 Reports in 2012

Over 30 Reports Planned for 2013
#sciwebinar

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
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
Second Printing of Bricks Matter:
15 Five-Star Reviews on Amazon
Book can be ordered from Amazon.com in Hardcopy or Digital Format

Publishing Two eBooks in
2013 on Supply Chain
Metrics That Matter
– Consumer Value Networks
– Industrial Value Networks
2013 Publications
#sciwebinar

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

Evolving Practices

Where are we on Supply Chain
Excellence?

 Perform better than peer group
 Improve year-over-year results
 Alignment in metrics
 Delivery of performance against the business
strategy
 Consistency in results
 Be a leader in managing trade-offs
What Is Supply Chain Excellence?
#sciwebinar

A Look at History: Progress in Productivity
#sciwebinar

Source: Supply Chain Insights, Corporate Annual Reports 2000-2011
Inventory Performance
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
0.0
50.0
100.0
150.0
200.0
250.0
DaysofInventory

Current State: Corporate Social
Responsibility

Current State: Sales and Operations
Planning

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

The Effective Frontier
Profitable Growth
Revenue Cost of Goods
Working Capital
Corporate Social Responsibility
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

Trying to Reach Balance

Cross Industry View: (2000-2011)
#sciwebinar

Apparel

Apparel Performance

Consumer Packaged Goods Industry
Performance

Three Different Strategies

Another View

Comparison

Industry Progress

Introducing the
Supply Chain Index
A formulaic representation of
how companies are trading off
growth, profitability, cycle and
complexity performance on
selected supply chain financial
metrics against market
valuation.
#sciwebinar

Selected 14 Core
Supply Chain Ratios to Study
Financial Metrics
Growth Profitability Cycle Complexity
Common Shares Cash Cash-to-Cash Cycle Altman Z
Employee Growth Cash Change in Period Days of Finished Goods Capital Turnover
Employees Cash on Hand Days of Inventory Current Ratio
Market Capitalization Cash Ratio TTM Days of Payables Outstanding Quick Ratio
R&D Margin Cash Ratio Quarter Days of Raw Materials Return on Assets
R&D Ratio Cash Ratio Year Days of Sales Outstanding Return on Equity
R&D to COGS Ratio Cost of Goods Sold Days of Work in Progress Return on Invested Capital
Revenue EBITDA DPO/DSO Return on Net Assets
Revenue Growth Free Cash Flow Ratio Finished Goods Inventory Revenue per Employee
Revenue Growth TTM Gross Margin Inventory Working Capital Ratio
Revenue TTM Gross Profit Inventory Turns
SG&A Margin Net Profit Margin Receivables Turns
SG&A Ratio Operating Cash Flow Ratio Raw Materials Inventory
SG&A to COGS Ratio Operating Margin Work in Progress Inventory
OPEX Ratio
Pretax Margin
Source: Supply Chain Insights LLC
#sciwebinar
Selected Ratios

Identified Industry Metrics
#sciwebinar
Market Capitalization vs. Revenue Growth
Insight: For
example,
growth did
not correlate
for chemical
companies.

Metrics that Matter

Consumer Value Chain
Metrics That Matter by Industry
Mass Retail Industry
Consumer Packaged
Goods Industry
Chemical Industry
Operating Margin Operating Margin Operating Margin
Days of Inventory Days of Inventory Days of Inventory
DPO/DSO
Days of Payables
Outstanding
Days of Payables
Outstanding
Return on Invested Capital Return on Invested Capital Return on Assets
Working Capital Ratio Current Ratio
Free Cash Flow Ratio
SG&A to COGS Ratio
#sciwebinar

Healthcare Value Chain
Metrics That Matter by Industry
Medical Care Industry Medical Distribution Pharmaceutical Major
Free Cash Flow Ratio Operating Margin Free Cash Flow Ratio
Working Capital Ratio Return on Invested Capital Return on Invested Capital
Operating Margin Free Cash Flow Ratio Altman Z
SG&A to COGS Ratio Working Capital Ratio Current Ratio
YoY Revenue Growth Return on Net Assets
Days of Payables
Outstanding
Current Ratio DPO/DSO Ratio
Days of Sales Outstanding Current Ratio
Days of Inventory Days of Inventory
Days of Payables
Outstanding

SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + PLAN + LEADERSHIP = CHANGE
SKILLS + INCENTIVE + RESOURCES + PLAN = CONFUSION
SHARED
VISION
+ INCENTIVE + RESOURCES + PLAN + LEADERSHIP = ANXIETY
SHARED
VISION
+ SKILLS + INCENTIVE + RESOURCES + LEADERSHIP =
FALSE
STARTS
SHARED
VISION
+ SKILLS + INCENTIVE + PLAN + LEADERSHIP = FRUSTRATION
SHARED
VISION
+ SKILLS + RESOURCES + PLAN + LEADERSHIP =
GRADUAL
CHANGE
Source: J.P. Kotter
Collaboration: The Right Stuff

What is a Market-Driven Value
Network?

Future Evolution
Align:
Market
Driven
Building Horizontal
Process Connectors
Continuous
Testing
Learning
Improving
In Market
Orchestrate
Demand and Supply
Resilient
Reliable
Adapt:
Demand
Driven
Efficient
Sense
Demand
and Supply
Shape
Demand and
Supply based
on Market
Absorb
Demand
Volatility
Absorb Supply
Volatility
Right Product
Right Place
Right Time
Right Cost
Cost
Procure to
pay/order to
cash

A network that senses demand with minimal
latency to drive a near-real time response for
demand shaping and demand translation.
What Is a Demand-driven
Value Network?

Rising Price of a Barrel of West Texas
Intermediate (WTI)

Commodity Price Increases and Volatility

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.
What Is a Market-driven Value Network?

Demand-shaping Levers
New Product Launch
Marketing
Sales Incentives
Trade Promotions
Distributor Incentives
Assortment
Price
Run-out of obsolescence or mark-
down strategies
Orchestration Levers
Market-driven Orchestration Levers
Price to Price Orchestration
Alternate Bill of Materials
Alternate Sourcing
Change in Assortment
Orchestration of Product Mix (Incent
products with less commodity
variability)
Changes in Demand Shaping
Strategies
Commodity Hedging

Market-Driven Value Networks
Characteristics

Value Network Strategy
Supply chain 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?
Right product
platforms
Design the
supply
response
Build
organizational
systems and
manage talent
Align supply
relationships
Align demand
relationships
Effective Supply
Networks
Execution of buy-
side strategies
Continuous
Improvement
Capabilities Required
Supply Chain
Network Design
Design Networks
Innovation
Methodologies
Demand Networks
Joint Value Creation
Strategies
Business Process
How do I do the right things right?
Source: Supply Chain Insights, LLC

Outside-In
Value-Based Outcomes
Delivered by Value Networks
Supply Chain Excellence =
Supply Chain 2020 Tipping Points
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025
Talent
Shortage
Compliance on
Safe & Secure
Orchestration
Big Data
Supply Chains
Internet of Things
Learning
Supply Chains
Digital Manufacturing

Connecting the Extended Supply Chain
45
Trading Partner 1 Trading Partner 2 Trading Partner 3
Transactional
Applications
Transactional
Applications
Transactional
Applications

Connecting the Extended Supply Chain
Collaborative
Layer
Collaborative
Layer
Collaborative
Layer
Enterprise Data
Warehouse
Enterprise Data
Warehouse
Demand Signal
Repository
Supply Signal
Repository
Predictive Analytics
Key:
Inter-Enterprise Systems
of Record: Transactional
Adapters and Intelligent
Rule Sets
Trading Partner 1 Trading Partner 2 Trading Partner 3
Transactional
Applications
Transactional
Applications
Transactional
Applications
Enterprise Data
Warehouse

Definition
Challenges:• Transactional
• Time phased data
Structured
Data
• Social
• Channel
• Customer Service
• Warranty
• Temperature
• RFID
• QR codes
• GPS
• Mapping and GPS
• Video
• Voice
• Digital Images
Unstructured
Data
Sensor
Data
New
Data
Types
Volume
Velocity
Variability

Rethinking Analytics

• Outside-in
• End-to-End Orchestration
• Supply Chain Matters
Path Forward

Questions?

Join Us!
www.supplychaininsightsglobalsummit.com
#sciwebinar

• July 11th: Big Data Supply Chains and the Future of Analytics
• August 15th: State of Supply Chain Talent. Missing Link in the
Supply Chain
Upcoming Webinars
Each webinar is based on new and relevant research
and will feature two-three industry leaders

Who Is Lora?
• Founder of Supply Chain Insights
• Partner at Altimeter Group (leader in open
research)
• 7 years of Management Experience leading
Analyst Teams at Gartner and AMR Research
• 8 years Experience in Marketing and Selling
Supply Chain Software at Descartes Systems
Group and Manugistics (now JDA)
• 15 Years Leading teams in Manufacturing and
Distribution operations for Clorox, Kraft/General
Foods, Nestle/Dreyers Grand Ice Cream and
Procter & Gamble.

Where Do You Find Lora?
Contact Information:
lora.cecere@supplychaininsights.com
Blog: www.supplychainshaman.com
(4000 pageviews/month)
Twitter: lcecere 3800 followers. Rated as the
top rated supply chain social network user.
LinkedIn: linkedin.com/pub/lora-
cecere/0/196/573 (3560 in the network)

Presentation at the Chief Supply Chain Officer Conference on June 19th

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Presentation at the Chief Supply Chain Officer Conference on June 19th