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2010 SCC Engen Financial

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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."

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 2 | 25 July 2010

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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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 5 | 25 July 2010

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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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 6 | 25 July 2010

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    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 7 | 25 July 2010

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    What is an Elephant?

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 8 | 25 July 2010

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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?

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 11 | 25 July 2010

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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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 17 | 25 July 2010

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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

    18

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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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 19 | 25 July 2010

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    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 20 | 25 July 2010

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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.

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 27 | 25 July 2010

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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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 29 | 25 July 2010

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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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    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 35 | 25 July 2010

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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

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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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 44 | 25 July 2010

    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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 45 | 25 July 2010

    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)

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 46 | 25 July 2010

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    , .

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 47 | 25 July 2010

    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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 48 | 25 July 2010

    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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 50 | 25 July 2010

    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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 51 | 25 July 2010

    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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 52 | 25 July 2010

    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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 53 | 25 July 2010

    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

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 54 | 25 July 2010

    Thanks!

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    Thanks!

    [email protected]

    www.supply-chain.org

    2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Engen Financial | 55 | 25 July 2010


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