of 55
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upp y a n anagemenBusiness Financial Performance
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 1 | 25 July 2010
Joseph Francis, Executive Director SCC
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A Bit of History: 1930-1950
Willie Sutton When asked wh he
robbed banks, Sutton
simply replied "Because that's
where the money is."
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Supply Chain is Dominant Company Cost Driver
In2007,USbusinesslogisticscostsroseto
analltimehighof$1.4trillion(10.1%ofUS
Fortune-10 CompanySupply-Chain Cost as% of Total Costs 2
nominalGrossDomesticProduct) 3
SupplychaingenerallyaccountsforFord 93%Conoco 90%
Wal-Mart 90%w y
costs1
Chevron 88%
IBM 77%
Exxon 75%
supplychainprocesseshas3000% 5000%
theimpactofa2%improvementin
GE 63%
Citi1 0%
AIG1 0%
e c ency
or
nance
a es
1 Exclusive of Financial Services companies2 Source: Hoovers 2006 Financial Data Su l -Chain Council 2006 SCM
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 3 | 25 July 2010
,Benchmark data on SCM cost for discrete & process industries3 CSCMP 19th Annual State of the Logistics Industry
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Value Dif ferent ial: 2:1 Margin Advantage
nue
o
fReve
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 4 | 25 July 2010
Source: PRTM/The Performance Measurement Group
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What Keeps You Up at Night?
Stock Market Volatility, Oil Prices, Labor,Political Instability, Security
Reducing Total SupplyChain Costs
Reducing Inventory/Working Capital/ AssetManagement
Supply Chain Resiliency
& Sustainability:s anagement
& Green
Global Market
Providing Superior & Consistent
Customer Service While IncreasingRevenue & Margin
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Supply Chain is Direc t ly Connected to Company Value
The Supply Chain Impacts .The Supply Chain Impacts .. .. .
& Shareholder& ShareholderValueValue
The Knobs &The Knobs &LeversLevers
Improve customer service and
response Optimize inventory flow,
utilization & productivity Profit
Revenue
Best-in-class customer
relationships
Expense
capabilities
Best-in-class strategic supplier
WorkingCapital
Leverage of outsourcing ofbusiness processes
Unique supply chain models
Efficiency
Fixed Capital
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What is an Elephant?
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What is a Supply Chain?
Custos
ses
Custos
ses
merpro
lier
proc
Product Design
DCOR
Sales & Support
CCOR
merpro
lier
proc
Product Design
DCOR
Sales & Support
CCORessesS
upp
essesS
upp
Su l Chain
SCOR
SCOR
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 9 | 25 July 2010
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How Many Supply Chains?
We use a tool called theSupply Chain Definition Matrix
Region 1 Region 2
to e ne t e supp y-c a ns
within an enterprise Column Generation:
Segment
A
Segment
B
Segment
C
Segment
D
The columns in the matrix arefocused on demand e.g.
channels or segments or
Group 1 X X X
Row Generation:
The rows in the matrix are Group 3 X. .
business lines or products orlocations or suppliers Group 4 X X X
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 10 | 25 July 2010
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What s Your St rategy?
We use a tool called the Supply Chain Strategy Matrixto Identify priority strategic features or attributes ofsupply-chains.
Each supply chain strategy is indicated by a collection
Responsiveness From Customer Request to final acceptance
Flexibility How long to scale up? How expensive to scale down?
Cost Cost of Processes? Cost of Goods Sold?Assets Working Capital? Return on Investments?
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Supply Chain St rategy in 5 Minutes
Build Strategy Model Lifecycle Likely Priority
Buy1. Assets.
Make ETO 1. Reliability2. Response
BTO.
2. Reliability
BTS Start
1. Flexibility
2. Response
Middle1. Cost2. Reliability
Commodity1. Cost.
EOL1. Assets2. Cost
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 12 | 25 July 2010
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What Are Your Met rics? Why?
StrategicAttribute Metric(Strategic)
Reliability PerfectOrderFulfillment
Responsiveness OrderFulfillmentCycleTime
Agility SupplyChainFlexibility
Su l Chain Ada tabilit Custom
er
Cost SupplyChainManagementCost
Cost
of
Goods
Soldalsse s as o as yc e me
ReturnonSupplyChainFixedAssets
ReturnonWorkingCapital
Inter
u side and downside ada tabilit metrics
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 13 | 25 July 2010
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SCORcards in 5 Minut es
Philosophy
You need to have the most data where erformance is
most critical You need to have least data where performance is
Select Level 1 Metric Level 1 Metric Level 1 Metric
and Level 2 Metric Level 2 Metric
and Level 3 Metric
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 14 | 25 July 2010
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A Metrics Architec ture
Supply-ChainSCORcard
S/A/P Level1Metric Level2Metric Level3Metric Summary
Reliability S Perfect Order Fulfil lment
Reliability
% Orders Delivered in
Full % Orders Delivered in Full
Reliability Delivery Item Accuracy Delivery Item Accuracy
erna
l
Delivery Quantity Accuracy Delivery Quantity Accuracy
Reliability Delivery Performanceto Commit Date
Delivery Performance toCommit Date
Reliability Date Achievement Date Achievement
Ext
Reliability Location Achievement Location Achievement
ReliabilityAccurateDocumentation Accurate Documentation
ReliabilityShipping DocumentationAccuracy
Shipping DocumentationAccuracy
Reliability Billing DocumentationAccuracy
Billing DocumentationAccuracy
Reliability Perfect Condition Perfect Condition
Reliability% Orders Received % Orders Received
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 15 | 25 July 2010
- -
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Where Are Your Goals?
Attribute SAP Metric(level1) You Parity Adv Superior Gap
Reliability S PerfectOrderFulfillment 95% 92% 95% 98% 3%
Response A OrderFulfillmentCycleTime 14days 8days 6days 4days 8Days
Flexibility P Ups.SupplyChainFlexibility 62days 80days 60days 40days 0
Cost P Su l ChainM mtCost 12.2% 10.8% 10.4% 10.2% 1.4%
Assets A CashtoCashCycleTime 35days 45days 33days 20days 2Days
Critical to understand Performance in a particularDemographic
Can be internal (competing against other supplychains in same company)
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 16 | 25 July 2010
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Where are the Problems?
c.
Retail,
in S1.1
Schedule Prod.Deliveries
Customer P.O. Delivery Commit
p3
HQ
D2.2Receive, Enter,
D2.3Reserve Inv.
S2.1Schedule Prod.
C.O. C.O.
tory
Inter-Company P.O.
.Reserve Inv.Calculate Date
mp3Fa
c
.Receive, Enter,Validate Order
C.O. = Customer Order, Inv. = Inventory,P.O. = Purchase Order, Prod. = Product
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The SCOR System
SCOR is a supply chainprocess reference model Supply ChainSupply Chaincon a n ng over
process elements, 550metrics, and 500 bestpractices including risk
Customerro
cess
es
Cu
stomerro
cess
es
Plan
management
Organized around the five
primary management
proce
sseSupplier
proce
sseSu
pplier DeliverMakeSource
, ,Make, Deliver and Return
Developed by the industryfor use as an industry
ReturnReturn
-interested organizationcan participate in itscontinual development
rocess, arrow n ca es ma er a ow rec on
Process, no material flow Information flow
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 18 | 25 July 2010
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From St rategy to Operat ions: The System
us ness ra egy
Supply ChainStrategy
Supply ChainConfiguration
Supply ChainAssets
Supply ChainPerformance
Supply ChainProcesses
Supply ChainSkills
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SCOR KPIs Help Measure Performance
& Shareholder& ShareholderValueValue
The Knobs &The Knobs &LeversLevers
Profit
Revenue
OrderFulfillment
Cycle
Time
SupplyChainFlexibility
ExpenseSupplyChainAdaptability
SupplyChain
Management
Cost
WorkingCapital
CostofGoodsSold
CashtoCashCycleTime
Efficiency
Fixed Capital
Return
on
Supply
Chain
Fixed
Assets
ReturnonWorkingCapital
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 21 | 25 July 2010
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And to Diagnose Root Cause Issues
Level3Diagnostic Level2Diagnostic Level1KPI
DeliveryItemAccuracy %OrdersDeliveredin
FullDeliveryQuantity
Accuracy
DateAchievement
PerfectOrder
Fulfillment
toCommitDateLocationAchievement
Shipping
Documentation
Accuracy Accurate
Documentation
Profit
Revenue
Expense
BillingDocumentation
Accuracy
%OrdersReceived
DamageFreePerfectCondition
CapitalEfficiency
Value
WorkingCapital
Fixed
CapitalExample:How might we analyze improvementsin Delivery Accuracy
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 22 | 25 July 2010
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The Dupont ModelNet Sales
Example:What would be the
$ 60
COGS
Net ProfitMargin $ 3.00
NetProfit
$ 40
GrossProfit
impact of a strategy
to increase deliveryreliability?Fixed Expenses
$ 12
Expenses
3 %
Sales
$ 34
TotalExpenses
FinancialReturn on
Inventory Expenses
$ 4
$ 100
$ 3
TaxesROA
6.8 %11
Leverage
74.91 %
net worth
AccountsReceivable
Inventory
$ 16
2.27
AssetTurnover
divided by
$ 100
Sales
$ 26
CurrentAssets
Other CurrentsAssets
$ 8
$ 2
$ 44
TotalAssets $ 18
Fixed
Assets
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 23 | 25 July 2010
Assumption: Financial Leverage is a company-wide constant= Total Assets / Shareholder Equity
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Income StatementNet Sales
The Dupont Model
$ 60$ 40
$ 3.00
COGS
GrossProfit
NetProfit
Net ProfitMargin
$ 12$ 34
3 %
Fixed Expenses
ExpensesTotal
Expenses
SalesFinancialReturn on
74.91 %
$ 4
$ 3
$ 100
6.8 %
11 Inventory Expenses
ROATaxes
Leveragenet worth
$ 16
2.27
$ 26
$ 100
AccountsReceivable
InventoryCurrentAssets
divided by
Sales
AssetTurnover
$ 8
$ 2
$ 18
$ 44
Other CurrentsAssets
Fixed
AssetsTotalAssets
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 24 | 25 July 2010
Assumption: Financial Leverage is a company-wide constant= Total Assets / Shareholder Equity
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Net SalesThe Dupont Model
$ 60$ 40
$ 3.00
COGS
GrossProfit
NetProfit
Net ProfitMargin
$ 12$ 34
3 %
Fixed Expenses
ExpensesTotal
Expenses
SalesFinancialReturn on
74.91 %
$ 4
$ 3
$ 100
6.8 %
11 Inventory Expenses
ROATaxes
Leveragenet worth
$ 16
2.27
$ 26
$ 100
AccountsReceivable
InventoryCurrentAssets
divided by
Sales
AssetTurnover
Balance Sheet
$ 8
$ 2
$ 18
$ 44
Other CurrentsAssets
Fixed
AssetsTotalAssets
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 25 | 25 July 2010
Assumption: Financial Leverage is a company-wide constant= Total Assets / Shareholder Equity
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Comparison: SC Change to Sales Change
SC Change -1%
Net Sales 100 Gross Profit 40.6 Net Profit 3.76 NPM 3.76% ROA 8.58%
COGS 59.4Total
Expenses 33.84 Sales 100Asset
Turnover 2.28 Leverage 11
VairableExpenses 11.88 Taxes 3 Sales 100 Return 94.34%
FixedExpenses 18
CurrentAssets 25.84
TotalAssets 43.84
InventoryExpenses 3.96 Fixed Assets 18 In this model ever 1% of Su l Chainnven ory .
AR 8
Other Assets 2
Sales Chan e 3%
Cost Reduction is equivalent to a morethan 3% increase in sales.
A 10% supply chain reduction is
Net Sales 103.3 Gross Profit 41.32Net
Profit 3.825 NPM 3.70% ROA 8.54%
COGS 61.98Total
Expenses 34.396 Sales 103.3Asset
Turnover 2.30 Leverage 11
VairableExpenses 12.396 Taxes 3.099 Sales 103.3 Return 93.93%
equ va en o a more an ncreasein sales staff.
Fixed
Expenses 18
Current
Assets 26.792
Total
Assets 44.792InventoryExpenses 4 Fixed Assets 18
Inventory 16.528
AR 8.264
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 26 | 25 July 2010
Ot er Assets 2
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SCM Asset Returns: Superior Valuat ion
ComparisonofFortune1000Council
membercompanysharepriceaggregate
rowthfrom2003 resenttoS&P500
andDOWindices.
Growthinflected
after
2years,
and
the
spreadbetweenSCORindexcompaniesand
points.
Growthisincreasingexponentially:
Compoundinterest
on
SC
performance.
orre ates em ers p
investmentswithShareholdervalue.
SamepatternevidentinFTSE100,DAX,
NIKKEIandotherindices.
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SCOR Best Prac t ices Levers & Financial Performance
2006/7 the SCOR Financial Research team reviewedSCOR Practices
Estimated correlation between practices and balancesheet outcomes
Resulting SCOR Financial Impact Paper providesexcellent guidelines
,knobs they dont directly create outcome
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 28 | 25 July 2010
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Example Study Outcomes
Revenue &Capital Effects
BestPractice
&
Definition
Estimated Impact:
Neutral, Increaseor ecrease
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Prac t ice Maturity and Supply Chain Performance
Early Stage Mature
PRTM analyzed data from about 100 companies that submitted practice maturity and quantitative performance data
Stage 4:Cross-EnterpriseCollaboration
50 Companies 50 Companies
Stage 2:
InternalStrategic partnersthroughout the globalsu l chain
IT and eBusinesssolutions enable acollaborativesupply chainstrategy that:
Aligns participating
Stage 3:
ExternalIntegration
Discrete supplychain processes
ntegrat onStage 1:
FunctionalFocus
Company-wideprocess and datamodel continuouslymeasured at thecompany, process,and dia nostic levels
collaborate to:
Identify jointbusiness objectivesand action plans
Enforce commonprocesses and
business objectivesand associatedprocesses
Results in real-timeplanning, decision-making, and
documented andunderstood
Resources managed atdepartment level andperformance measuredat functional level
Resources managedat both functional andcross-functionallevels
a a s ar ng
Define, monitor,and react toperformancemetrics
chain responses tocustomerrequirements
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 30 | 25 July 2010
Copyright 2006 The Performance Measurement Group, LLC, a PRTM Company
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Stage of maturity correlates w ith performance,
profitability, and sales grow th
Analysis Results:
Mature companies have a Mature companies have a Mature companies have12% advantage in Total
Supply Chain ManagementCosts (as % of total revenue)
Mature companies have 10%
10% advantage in Delivery
Performance to CommitDate
Mature companies have a
4.5% lower COGS (as a
% of total revenue)
Mature companiesdemonstrated a 4.8%
higher Unit Forecast Accuracy 30% advantage in UpsideProduction Flexibility
year over year netdecrease in COGS
Supply ChainSupply Chain
LocalCustomers
ManufacturingFacilities
Customer Serviceand Warehousing
Suppliers
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 31 | 25 July 2010
Note: Results based on performance data from discrete companies which included: Consumer Goods, Electronic Equipment, Industrial, Telecom, Computers, andAerospace & Defense.
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Forecast accuracy matters Fill Rate
Companies are clearly achieving higher fill rates with better forecast accuracyFill rate vs Forecast accuracy
OFR = 0.9026FA + 4.1173
80
90
100
20
30
40
50
60
70
Fillrate(%)
Forecast accuracy vs. Fill rate using a cross industry population of 67 companies, showed similar trends and correlation = 0.4
0
10
0 10 20 30 40 50 60 70 80 90 100
Forecast accuracyN = 21
Correl: 0.68 P value: 0.007
..while production flexibility and overall inventory do not show the same relationship to fill rate
Order Fill rate vs Upside Production Flexibility
90
100
Order Fill rate vs Finished Goods Inventory Days of
Supply
100
10
20
30
40
50
60
70
Fillrate(%
)
20
40
60
80
FillRate(%)
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 32 | 25 July 2010Cross industry population N = 160, Correl: -0.006Cross industry population N = 104, Correl: -0.08
0
0 50 100 150 200 250
Upside Production flexibil ity (Days)N = 25
Correl: -0.09
0
0 20 40 60 80 100 120 140 160 180
Finished Goods Inventory Days of SupplyN = 62
Correl: -0.09P value: 0.67 P value: 0.51
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Forecast accuracy matt ers Best In Class Performers
The best performing companies have better forecast accuracy performance they have engineeredtheir supply chain, product architectures and customer relationships in a manner that allows them toachieve superior business performance and utilize a forecasting methodology that both meets theirbusiness needs and promotes higher forecast accuracy
Forecast accuracy:
Forecast accuracy vs "Best Performers" (Delivery toCommit, Fill rate, EBIT, Finished Goods Inventory)
100
Best Performers: 94%
Population average: 76%
FA = 5.4208BP + 51.074
4050
60
70
80
90
staccuracy
0
10
20
30
0 2 4 6 8 10 12 14
Forec
N = 14
NOTE:
Correlation analysis against a cross industry population of 55 companies, showed similar trends and correlation = 0.2
Best Performers (Fill rate, DPC, FGI, EBIT)orre: .
P value: 0.028
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 33 | 25 July 2010
,Fill Rate, EBIT and Finished Goods Inventory.
This index provides a method for sorting best performer companies from typical or low performers
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Forecast accuracy matt ers Delivery Performance
Forecast accuracy is directly correlated with delivery performance.Forecast accuracy vs Delivery Performance to Commit
90
100
(%)
Forecast accuracy vs Delivery Performance to Request
=90
100
est
= 0.4725 + 46.526
30
40
50
60
70
80
PerformancetoCommit. .
30
40
50
60
70
80
Performanc
etoReq
(%)
Cross industry population N = 203, Correl: 0.26 Cross industry population N = 218, Correl: 0.2
0
10
20
0 10 20 30 40 50 60 70 80 90 100
Forecast accuracy
Deliver
N = 65
Correl: 0.46P value: 0.0001
0
10
20
0 10 20 30 40 50 60 70 80 90 100
Forecast accuracy
Deliver
N = 67
Correl: 0.36
P value: 0.0027
And to profitability, butFore cast accuracy vs EBIT
60
80
while the EBIT correlation issignificant, the correlationcoefficient is not very strong
EBIT = 0.2375FA - 7.4343
-20
0
20
40
0 10 20 30 40 50 60 70 80 90 100EBIT%Revenu
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 34 | 25 July 2010
Cross industry population N = 187, Correl: 0.12
-60
-40
Forecast accuracyN = 61Correl: 0.27
P value: 0.037
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Core Value1
Improvement of operating results of an average of 3% inthe initial SCOR implementation phase by means of costreduction and improvement in customer services
Increase in profitability (between 2x and 6x) with regardsto ro ect investments costs within first 12 months ofimplementation
Reduction in IT costs through minimizing system
functionality
Continuous actualization of process change portfolio by
with the objective of increasing annual profits by 1% to3%
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 37 | 25 July 2010
1Poluha (2007) Application of the SCOR Model in Supply Chain ManagementNew York, USA
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Douglas Pharmaceutic als Limited
The Challenge Si nificant rowth from 2003 to 2007
The Solution Turnin oint for or anization DIY not
300% increase in new product development 122% growth in production volume
61% growth in employees Created the perfect storm of supply chain
issues
always best Board mandated review at its April 2007
meeting Process established to evaluate options SCE program initiated using SCOR
onver e o new n ugus Burning Platform:
Customer DIFOT (Export) Down to 20% Product Lead Times Up to 8 months New Product Introduction Lead Times Up to 9
months
17 week SCE program between May andSeptember 2007
Stock Turns Down to 2.1x YTD Sales Down 30%
Available Spare Capacity Unknown Customer complaints impact new licensing
opportunities and future earnings growth
value: EBIT (15.9%) Enterprise Value ($25.2M)
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 38 | 25 July 2010
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Douglas Pharmaceut icals Limited cont inued
The Solution Benefits Achieved
Established emphasis on reliability and
supply chain cost Confirmed size and relative importance
of current performance gaps
Metric Improvement
Sales peremployee
20%
rov e ear y rec on on roo causes Generated basis for calculating
opportunity cost Created immediate visibility over
supply chain performance
Inventory daysof supply
20%
Cash to cash 15% u con ence o move on o ase
Two
24 problem areas impacting reliabilityand COG
Portfolio of 50 improvements
cycle (days)
Shareholderreturns
$4.1 millionIRR 300%EV Uplift= $12.1m
addressed key problem areas Drive Chain now forms basis of an
enterprise wide transformationprogram
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 39 | 25 July 2010
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Typical Potential Improvements1
Area Improvement
Raw materials purchase cost 25%
Cost of Distribution 35%
Total resource deployed 50%
Investment in Tooling 50%
Order cycle time 60%
New product development cycle 60%
Inventory 70%
Paperwork and Documentation 80%
Quality Defects 100%
1Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK
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SAAB AB
Challenge The Saab Common Solution .
Enterprise1
Three strategic business segments:aeronautics, defense and securitysolutions s stems and roducts
on ERP and/or Best of Breed)
Cross-functional collaboration andcommon trust
Challenged to execute profitable
and customer adapted logisticsintensive businesses
The degree of coordination of
Align SCM Strategy with CorporateStrategy
Key Enablers
og s cs opera ons g y mpacSaabs cost level for logistics
Coordination enables CELprocesses to ensure delivery tocustomers demands
and Roadmaps
Standardization Codification Information Systems
Needed to build competitiveoperations, planning, logistics, andsupport
To do so, wanted to move to a full
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 41 | 25 July 2010
-oovers.com
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SAAB Coordinated Effect ive Logist ics (CEL)
Solution -
Benefits Achieved
Multiple supply chains and methods
Lack of structured methods and processes Knowledge tied to individuals Lack of information sharing
Supply Chain Management Framework
Delivering incremental capabilities Using SCOR Methodology, Processes
and Metrics hierarchy
Initial business cases have identified
Use of the SCOR model Common definitions and process mapping
Sustainable and structured methodology
savings of 73 FTEs and a total of US$15M
being used as framework for realization ofall logistics and SCM activities withinProject CEL throughout all of its phases;from cradle to the grave
Project management
Engineering technique
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 42 | 25 July 2010
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Raytheon IDS
The Challenge US 4.7B subdivision of US 23.1B Defense
The Solution SCOR/Six-Si ma ro ram assessin all su l
Services Provider1 Rapid growth but antiquated processes and
procurement focus in supply chain left IDSfacing non-competitive operating costs
No skills within existing team to background
chain processes within IDS, with focus allSCOR process areas
8550 people within Raytheon IDS, and 7600supplier partners went through transformationfor accomplishing five key challenges:
- Connecting every employee to the business Creating purposeful, collaborative partnerships Accelerating top-line, double-digit growth Achieving predictable, best-in-class bottom-line
performance
Benefits Achieved 37 Percent reduction in headcount but increase
of college-educated population to 66% 75% reduction in transactional processing for
material acquisition 25% improvement in SC Cost-to-Sales
$57M in bottom-line savings 98% supplier conformance to contract
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 43 | 25 July 2010
oovers.com
1
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Comparat ive Data1
Improvement Area Range
Deliver erformance 16% - 28%
Inventory Cost Reduction 25% - 60%Reduction in order fulfillment cycle time 30% - 50%
Improvement to forecast accuracy 25% - 80%
Increase in overall productivity 10% - 16%Lower supply chain costs 25% - 50%
Improvement of fill rates 20% - 30%
Improved capacity realization 10% - 20%
1Stephens (2000) 1997 Comparative StudyPittsburg, USA
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SASOL S l Ch i O i i i
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SASOL Supply Chain Opt im izat ion
The Challenge US 16B annual South African Petrochemical
The Solution The SASOL Su l Chain O timization Journe
Concern 1 Embarked on Supply Chain Optimization to
identify synergies and improvementopportunities across multiple business units
Complex changing political environment and
Awareness identified SCOR as a tool (2004) Embarked on SCOR pilot project tackling
problem area to show benefits and understandprocess
First in-house project (to build internal success)
without deep experience Approval for permanent Center of Excellence(CoE) competency Prioritization of supply chain projects (project
demand exceeds supply)
Project 2, 3, 4..X
Benefits Achieved Ongoing CoE for supply chain optimization Sample project generated IRR of 139% over
Estimated US$1B cost improvements over 3year period
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oovers.com
C i
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EvenMoreCompanies
$200M Cost Improvements Single
US$2.3B Savings supported witherger
$5B Working Capital
$66M Revenue/Inventory
2M Improvements Single Division(Peroxides)
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, .
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SCC: An independent non profit global assoc iat ion
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SCC: An independent , non-profit global assoc iat ion
Formed in 1996 to create and evolve a standard industry processreference model of the supply chain for the benefit of helping companiesra idl and dramaticall im rove su l chain o erations
SCC has established the supply chain worlds most widely acceptedframework the SCOR process reference model for evaluating andcomparing supply chain activities and their performance
It can be used to describe supply chains that are very simple or verycomplex using a common set of definitions and enabling a commonunderstanding
It lets companies quickly determine and compare the performance ofsupply chain and related operations within their company or againstother companies
con nua y a vances s oo s an e uca es mem ers a ou ow
companies are capitalizing on those tools
With membership open to all interested organizations
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Global Scope With Over 800 Member Organizat ions
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Global Scope With Over 800 Member Organizat ions
Member Distribution
China
Australia/New Zealand
South Africa
LatinAmerica
SoutheastNorth
Member AffiliationJapanAmerica
End User
SME
overnmenurope
Also developing chapters inIndia and the Middle East Non-Profit/Academic
Consultant
na ng ec no ogy
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0% 10% 20% 30% 40% 50%
Industry Membership Scope
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Industry Membership Scope
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SCC membership accelerates a companys use of and
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SCC membership accelerates a company s use of and
benefits from SCOR and related models
Reference models,benchmarking, tools
Training, certification,career development and
researc an e p romSCOR experts
volunteer opportunities
Chapters, events andforums to share SCOR andsupply chain knowledgeand experience
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Member benefits Unlimited Employee Access to
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Member benefits Unlimited Employee Access to
Resources
SCOR A supply chain process reference modelcontaining over 200 process elements, 550metrics, 500 best practices, and 200 skills
management
RelatedFrameworks
Additional process reference models such asCCOR (customer chain) and DCOR (designchain)SCORmark Benchmarking of supply chain performance against industry peers
Research Ongoing research on supply chain processes, practices, metricsand skills both globally and by industry and geographic region
Tools Templates, website, software and methods developed andcontributed by volunteer SCC working groups as well academicsand third party providers
, ,
ExpertNetwork
Access to staff, trainers and advisors to coach individuals andteams in use of SCOR
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Member benefits Individual Capability Development
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Member benefits Individual Capability Development
Training Public and in-house training courses onthe SCOR framework, its implementation,CCOR and DCOR models and more
Certification Individual Employee SCOR Professionalcertification on understanding of, andability to use, the SCOR model as well asSCOR Academic certification for thoseentering the workforce from school
Volunteering Participation on numerous committees and
workin rou s to develo new modelstools and practices in supply chainmanagement
Career Skills identification, career path,
positions requiring SCOR knowledge, andin-person member networkingopportunities
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Member benefits Know ledge Netw orks
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Member benefits Know ledge Netw orks
Chapters Chapter meetings, networks and materialsin local languages discussing supply chainissues of greatest regional interest
Events Frequent webinars (over 80 archived for
members) and annual regional conferencessuch as Supply-Chain World
Forums Virtual and in-person discussion forums fornetworking and problem-solving amongcommunities of common interest (such as
industr s ecial interest rou s
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Thanks!
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Thanks!
www.supply-chain.org
2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 55 | 25 July 2010