Presentation given by Lora Cecere at the OM Partners conference in Belgium on September 30, 2015. In this presentation, Lora examines the role of planning excellence in driving supply chain performance, and shares insights on the future evolution of planning.

1. Supply Chain Insights LLC Copyright © 2015, p. 1
Supply Chain Planning: A Look
Back and a Look Forward
September 2015

2. Supply Chain Insights LLC Copyright © 2015, p. 2
Disclaimer: I am a Skeptic

3. Supply Chain Insights LLC Copyright © 2015, p. 3
A Curmudgeon…

4. Supply Chain Insights LLC Copyright © 2015, p. 4
A Fortune-teller of Sorts….

5. Supply Chain Insights LLC Copyright © 2015, p. 5
I Write for the Supply Chain Leader

6. Supply Chain Insights LLC Copyright © 2015, p. 6
Current State

7. Supply Chain Insights LLC Copyright © 2015, p. 7
9 out of 10 Supply Chains are Stuck

8. Supply Chain Insights LLC Copyright © 2015, p. 8
Progress: All Industries
Industry Snapshots (2006-2013)
Industry
Year –over-
Year Revenue
Growth
Operating
Margin
Inventory
Turns
Cash-to-
Cash Cycle
Revenue per
Employee
(K$)
SG&A
Ratio
Retail Apparel Industry
18%
39%
0.39
27%
05
05%
68
26%
325
18%
27%
05%
Apparel Manufacturing Industry
14%
82%
0.12
32%
05
68%
150
08%
400
355%
27%
63%
Mass Retail Industry
09%
50%
0.06
20%
06
06%
03
148%
350
48%
23%
6%
Beverage Industry
09%
61%
0.19
16%
02
04%
53
46%
512
NC
24%
16%
Pharmaceutical Industry
08%
47%
0.23
29%
03
16%
155
47%
572
32%
27%
08%
Chemical Industry
08%
45%
0.10
10%
06
04%
87
23%
557
23%
14%
27%
Medical Device Industry
06%
38%
0.14
32%
02
13%
206
16%
351
12%
34%
04%
Grocery Retail Industry
06%
31%
0.03
37%
17
01%
10
50%
405
54%
14%
06%
Consumer Packaged Goods
05%
25%
0.14
73%
08
482%
72
17%
333
14%
26%
09%
Food Industry
05%
55%
0.10
19%
07
17%
40
04%
534
55%
20%
18%
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2013
Industry Average comprised of public companies (combined food & beverage industry: NAICS 3112% where % is any number from 0-9, 311320, 311520, 311821,
311941 & 312111), (chemical: NAICS 325188 & 325998), (consumer packaged goods: NAICS 3256% where % is any number from 0-9), (medical device
industry: NAICS 339112), (pharmaceutical industry: NAICS 325412) reporting in One Source with 20123annual sales greater than $1billion
NC=no change

9. Supply Chain Insights LLC Copyright © 2015, p. 9
Descriptors Used by Leaders

10. Supply Chain Insights LLC Copyright © 2015, p. 10
Fallacy: Functional Excellence

11. Supply Chain Insights LLC Copyright © 2015, p. 11
Functional Organizational

12. Supply Chain Insights LLC Copyright © 2015, p. 12
Growing Demand Volatility

13. Supply Chain Insights LLC Copyright © 2015, p. 13
Why? The Long Tail of the Supply Chain:
Growing Complexity

14. Supply Chain Insights LLC Copyright © 2015, p. 14
A Project-based Focus

15. Supply Chain Insights LLC Copyright © 2015, p. 15
Which Metrics Matter?

16. Supply Chain Insights LLC Copyright © 2015, p. 16
What We Expected

17. Supply Chain Insights LLC Copyright © 2015, p. 17
A Supply Chain
is a Complex System
with Complex
Processes
with Increasing
Complexity
What We Learned….

18. Supply Chain Insights LLC Copyright © 2015, p. 18
The Supply Chain Effective Frontier

19. Supply Chain Insights LLC Copyright © 2015, p. 19
Correlations to Market Capitalization

20. Supply Chain Insights LLC Copyright © 2015, p. 20
Carlsberg Brewery Gaining Ground

21. Supply Chain Insights LLC Copyright © 2015, p. 21
7.50
8.00
8.50
9.00
9.50
10.00
10.50
11.00
0.11 0.12 0.13 0.14 0.15 0.16 0.17 0.18 0.19
InventoryTurns
Operating Margin
Kimberly Clark
2000
2014
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
Kimberly-Clark Losing Ground
Source: Supply Chain Insights LLC, Corporate Annual Reports 2002-2012 from YCharts
Best Scenario
KMB
0.15, 9.01
Trace the line from 2000
point to 2014 point to
follow the performance
over time.
The diamond shows the company’s
average over the period. Ex: The
Kimberly Clark Co. (KMB) has an
average of .15 for operating margin
and 9.01 for inventory turns.
Ideally,
companies are
increasing
inventory turns
and operating
margin moving
towards the
upper right
corner of the
graph over time.
Average (Operating Margin, Inventory Turns)
Here, we plot inventory turns (y-axis)
vs. operating margin (x-axis).

22. Supply Chain Insights LLC Copyright © 2015, p. 22
Dow Chemical Company: Treading Water

23. Supply Chain Insights LLC Copyright © 2015, p. 23
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014
2006
4.0
5.0
6.0
7.0
8.0
9.0
10.0
-0.10 0.00 0.10 0.20 0.30 0.40 0.50 0.60
Operating Margin
Eli Lilly and Company Novo Nordisk
2014 NVO
0.31, 6.48
2014
2006
Best Scenario
LLY
0.24, 8.30
Average (Operating Margin, Inventory Turns)
InventoryTurns
Novo Nordisk Making Progress

24. Supply Chain Insights LLC Copyright © 2015, p. 24
General Mills More Resilient
5.0
7.0
9.0
11.0
13.0
15.0
0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20
Operating Margin
General Mills Kellogg
K
0.14, 12.68
2014
2006
2014
2006
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2014
GIS
0.17, 11.00
Average (Operating Margin, Inventory Turns)
InventoryTurns
Best Scenario

25. Supply Chain Insights LLC Copyright © 2015, p. 25
Measuring Supply Chain Improvement
Overall Ranking per Company
• Balance: Return on Invested Capital & Revenue Growth Vector Trajectory (30%)
• Strength: Inventory Turns & Operating Margin Vector Trajectory (30% of score)
• Resiliency: Inventory Turns & Operating Margin Mean Distance (30%)
𝑺𝒖𝒑𝒑𝒍𝒚 𝑪𝒉𝒂𝒊𝒏 𝑰𝒏𝒅𝒆𝒙 =
𝟏
𝟑
𝑩𝒂𝒍𝒂𝒏𝒄𝒆 𝑭𝒂𝒄𝒕𝒐𝒓 +
𝟏
𝟑
𝑺𝒕𝒓𝒆𝒏𝒈𝒕𝒉 𝑭𝒂𝒄𝒕𝒐𝒓 +
𝟏
𝟑
𝑹𝒆𝒔𝒊𝒍𝒊𝒆𝒏𝒄𝒚 𝑭𝒂𝒄𝒕𝒐𝒓

26. Supply Chain Insights LLC Copyright © 2015, p. 26
Supply Chains to Admire Methodology
Performance
Beats the industry
average for operating
margin, inventory turns
and ROIC for 2006-
2014 and 2009-2014
Improvement
Ranks above peer
group average on
The Supply Chain
Index for 2006-
2014 or 2009-2014
+

28. Supply Chain Insights LLC Copyright © 2015, p. 28
Winners Two Years in a Row

29. Supply Chain Insights LLC Copyright © 2015, p. 29
High Performance. Stalled
Improvement.
High Improvement. Performance not
at Peer Group.
Apple Bridgestone
AstraZeneca Church & Dwight
BASF Hershey
Coca-Cola Medtronic
Colgate Novo Nordisk
Reckitt Benckiser Smucker’s
Seagate Under Armour
TSMC Unilever
The Dilemma

30. Supply Chain Insights LLC Copyright © 2015, p. 30
• Continuity of leadership
• Supply chain talent development
• Focus on a multi-year supply chain strategy
• Clear governance to guide cross-functional decision-making
• Strength in horizontal processes
• Excellence in supply chain planning, network design and inventory
management
What Drives Top Performance?

31. Supply Chain Insights LLC Copyright © 2015, p. 31
Why Technology
Matters

32. Supply Chain Insights LLC Copyright © 2015, p. 32
Current State of Planning

33. Supply Chain Insights LLC Copyright © 2015, p. 33
IT Systems:
Importance & Satisfaction by Role & Supply Chain

34. Supply Chain Insights LLC Copyright © 2015, p. 34
Gaps in Visibility

35. Supply Chain Insights LLC Copyright © 2015, p. 35
Best of Breed versus ERP Planning

36. Supply Chain Insights LLC Copyright © 2015, p. 36
S&OP: Technology Matters

37. Supply Chain Insights LLC Copyright © 2015, p. 37
4.4X Higher Agility

38. Supply Chain Insights LLC Copyright © 2015, p. 38
Effective S&OP: Improved Alignment

39. Supply Chain Insights LLC Copyright © 2015, p. 39
• Which metrics matter?
– Growth, operating margin, inventory turns, ROIC, customer
service (in the eyes of the customer)
• How do we get unstuck?
– Focus cross-functionally on a balanced portfolio. Bonus
employees against a portfolio.
– Augment with functional metrics focused on improving
RELIABILITY.
• What are the functional reliability metrics?
– Examples include: Forecasting, first pass yield, OEE, on-time
delivery, orders shipped complete, hands-free orders, schedule
attainment, safety metrics, employee turnover
How do You Improve Value?

40. Supply Chain Insights LLC Copyright © 2015, p. 40
• Kill the Spreadsheet Ghettos!!!
• Work for Clarity of the Supply Chain Planning
Footprint and Time Horizons
• Carefully Define the Terms.
• Be Clear on the Goal: Responsive, Efficient and
Agile
• Ensure the Fit of the Model
• Redefine Demand to be About the Market
• Give Planners Time to Plan
How do You Improve Value Through Planning?

41. Supply Chain Insights LLC Copyright © 2015, p. 41

42. Launches
Oct. 1,
2015

43. Supply Chain Insights LLC Copyright © 2015, p. 43
Founder: Lora Cecere
• Founder of Supply Chain Insights
• “LinkedIn Influencer”
• Guest blogger for Forbes
• Author of 4 books: Bricks Matter (2012), Shaman’s Journal (2014)
and Supply Chain Metrics That Matter (December 2014), Shaman’s Journal (2014)
• 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.
Contact Information:
• Email: lora.cecere@supplychaininsights.com
• Blog: www.supplychainshaman.com (8,000 pageviews/month)
• Forbes: http://www.forbes.com/search/?q=lora+cecere
• Twitter: lcecere (6200 followers)
• LinkedIn: linkedin.com/pub/lora-cecere/0/196/573 (46,000 followers)