Agility – Beyond Operational Excellence
DOAG ConferenceDortmund, May 7, 2014
Transforming the organization to beLean, Responsive and Agile.
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Agenda
1. Introduction – EY’s competence in supply chain management
2. Agility – what does this mean for your business?
3. Agility in your business – Ensuring adaptiveness to changed market conditions
4. What is the speed you need – time horizons of agility
5. Sources of agility – levers in organization, processes, systems, staff
Agility - Beyond Operational Excellence
Page 3 Agility - Beyond Operational Excellence
IntroductionEY
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Global compentence in Value Chain optimization
Agility - Beyond Operational Excellence
140countries
27kprofessionals
$4.3brevenue
► Americas9,700 professionals
► EMEIA12,400 professionals
► APAC3,900 professionals
Germany Switzerland Austria (GSA)900 EY professionals(in that 250 ex-J&M professionals)
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Our service offering
Agility - Beyond Operational Excellence
Supp
lyC
hain
Stru
ctur
esSupply
Chain
Day-to-D
ayO
perations
ServiceOffering
Supply ChainTechnologies
Supply ChainPerformanceand controls
Supply ChainSegmentation
End-to-EndSupply Chain
Design
Supply ChainOrganization
IntegratedValue ChainManagement
► Monitoring of current supply chainperformance
► Matching with customer requirements► Targeted controls and KPI to monitor
and improve SC
► Integrative information flow across systems► From demand signals to demand fulfilment► Focus on ERP and APS functionalities► SAP ERP, SAP SCM, SAP EIS, SAP S&OP
on HANA, SPP DS, Icon SCM, Asprova, I2,Infor, OMP, OrSoft ,Steelwedge, et al.
► Integrated processes, procedures,rules/policies, responsibilities
► SC processes designed based onlean principles
► Operations structured according toSC principles
► Global, regional, and local leadershipstructures and roles
► Required formal empowerment todrive operational performance andrequired improvements
► Escalation procedures andaccountabilities
► SC Strategy alignment to businessstrategy and market requirements
► International supply chain structures► Based on relevant SC maturity► Creation of demand and/or
supply driven segments► Differentiation of
manufacturing and supplystrategies
► SC complexity reduction orcontrol improvements
► Total view on the supply chain► Integration of suppliers and
customers into planning anddelivery processes
► Consideration of individualconstraints and performancerequirements
► Sales and Operations planningused as core businessmanagement process
► Collaboration across functionsand across corporate boundaries
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Current highlights for You
Agility - Beyond Operational Excellence
www.de.ey.com/supplychaindays
Supply Chain Trend Study 2014
Starting June 2014
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Agility – what doesit mean?
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Some definitions …Agility in value chains describes the ability of companies to adapt to changed marketconditions, providing appropriate responses in a meaningful frame of time
3 Factors are decisive for business agility:
► Ability for early recognition of changes in Markets, and the need to initiate the adaptation inthe company. This includes access to the nature of changes, but also to learn to accelerate andimprove this capability over time.
► Flexibility to rapidly initiate, implement, and accomplish changes in regards to product,processes, and organizational, being in internal structures and setups, as well as in the externalinterfaces to customers and suppliers, and other stakeholders
► Transformation velocity, being defined by the time required, to initiate, implement, andaccomplish the required changes in the company and ist environment competently and in a securedfashion
Agility - Beyond Operational Excellence
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Agility requires some level of collaboration
Finance & Controlling
Innovation & Product LifecycleManagement
Supply Chain Operations
Finance and controlling
Sales andmarketing
Service andspare partsMgmt
Pro-duction
Ware-housing
Logis-tics
Distri-bution
OrderMgmt
Plan-ning
QualityMgmt
Mainte-nance
1. Functional Silos
Finance & Controlling
Innovation & Product LifecycleManagement
Supply ChainManagement
Supply Chain Operations
Finance and controlling
Sales andmarketing
Service andspare partsMgmt
Pro-duction
Ware-housing
Logis-tics
Distri-bution
OrderMgmt
Plan-ning
QualityMgmt
Mainte-nanceSourcing &
Purchasing
2. Internally integrated SCM
3. Integration with customers and suppliers
CustomerSupplier
Innovation & Product Lifecycle ManagementSupply ChainManagement
Supply Chain Operations
Finance and controlling
Sales andmarketing
Service andspare parts Mgt
Pro-duction
Ware-housing
Logis-tics
Distri-bution
OrderMgmt
Plan-ning
QualityMgmt
Mainte-nanceSourcing and
purchasing
Supply ChainChampions 2012
Sourcing andpurchasing
EY SCM Service Offering / Advent International 18.2.2014
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Agility – ensuringadaptiveness
Agility - Beyond Operational Excellence
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Fast-changing & complexproduct & service portfolio
CostPressure
FinancialRisk
Shortage ofResources
UbiquitousInternet
DemographicChange
Globalisation
Urbanisation
Mobility
Transformation is essential due to megatrends in afast-changing world companies are facing today
Highly individualised & volatilecustomer demands
Agility - Beyond Operational Excellence
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Fast-changing & complexproduct & service portfolio
CostPressure
FinancialRisk
Shortage ofResources
UbiquitousInternet
DemographicChange
Globalisation
Urbanisation
Mobility
Main challenge are the dynamics from intensiveinteraction between the individual challenges
Highly individualised & volatilecustomer demands
Agility - Beyond Operational Excellence
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Game changing business trends:Acceleration
Hours Days Weeks Months
Structural Reduction
Internet
Customizedto Order
24 hr Delivery
Moment ofNeed
Select
Produce
Deliver
Time
New EnablersTraditional process
Agility - Beyond Operational Excellence
Moment ofFulfilment
Moment ofFulfilment
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Game changing business trends:IT-Integration
Agility - Beyond Operational Excellence
Shipment Signals
Production Signals
Sourcing Signals
Demand & Supply Data
Supply Chain Cockpit
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Game changing business trends:Integration in the value chain
Agility - Beyond Operational Excellence
Lean
The 1980’s:Automotive optimizesinbound supply(“JIT”)
Supply Production Distribution Consumer
ResponsiveThe 1990’s:Retailers optimizeinbound distribution(“ECR”)
Supply Production Distribution Consumer
DynamicThe 2000’s:Electronics optimizesthe chain flow(“CPF”)
Supply Production Distribution Consumer
Customer centricand integrated
The 2010’s:E-Tailers integrate withthe consumer, andleverage on superior SCcapabilities along theentire chain
JIT Just-in-Time | ECR Efficient Consumer Response | CPF Continuous Product Flow
Supply Production Distribution Consumer
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Game changing business trends:Volatility from working capital optimization *)
Agility - Beyond Operational Excellence
Increased volatility in supply chains Increased complexity in the value network
► Increasing upstream demand volatility► Increasing requirements on flexibility► Increased product portfolio
► Extensive global sourcing networks► Less time to respond to quality problems► More exposure to transport risks
Impulse
Old paradigm: Large inventories as security buffers
New paradigm: Inventories as unwanted capital
*) Similar effects account from “operational excellence” initiatives,streamlining operations, but making them often more vulnerable
Page 17 Agility - Beyond Operational Excellence
The speed youneed
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For a business, agility has two main sides:internal value chain, and value network
Agility - Beyond Operational Excellence
Internal value chain Value network
► Internal alignment of functions► Collaboration on adjustment scenarios► Embedded agility from built-in flexibility
► Being close to customers► Taking advantage of global capabilities► Swift adjustments when required
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Agility is the ability to respond in the appropriatetime, based on having key enablers in place
Agility - Beyond Operational Excellence
Response TriggerEnabler
► Internal Impulses§ Management Decisions§ Product portfolio changes§ Investments (M&A)§ Divestments (M&A)§ …
► External impulses§ Raw materials§ Customers§ Competition§ Pricing§ New technologies§ New practices§ …
Yourbusiness
► Organizational response§ …§ …§ …§ …
► Process responses§ …§ …§ …§ …
► Segmentation► Modularization► Standardization► Globalization► Partnering► Networks► Strategic stocks► Financial reserves
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Main objective is to create the readiness to beagile when needed
Agility - Beyond Operational Excellence
► For each business, an individual agilityconcept should be implemented
► Modularity of the business is a keyenabler for having a higher potentialagility, and to respond to impulses fromthe market
► In case of a “disturbance”, the requiredmodules can be activated with targetedactions, and thus enable the adaptationof the business to the new situation
► Preparing in this way, makes theorganization much more nimble, andreduces the time span to respondsignificantly
► Additional advantage is that all requiredpreparations can be done without directstrain on the business, thus allowingactions to be planned and preparedthoroughly, and well thought through
Low agility High agility
Where does your business stand today?
Currentstructure
Future statestructure
Enablingstructure
Pre-pare
Exe-cute
t0 t1 t2
Prepare without stress Execute fast
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Agility needs to address individual prohibitors
Agility - Beyond Operational Excellence
Highly Flexible Structure
Adjustable structure
Flexible but needs renewal
Inflexible structure
High
Low
Longterm
Shortterm
ExistingStructural
Agility
Time toadapt
Fundamentalchange
Continuouschange
Incrementalchange
Responsivechange
► For each business, an individual agilityplan should be developed, depending onits individual agility profile
► Key questions to be answered areaddressing- the required speed for change- for what type of impulse- to initiate which type of change- to reach which future state- based on which agility levers- who leads the transformation
► There are specific business conditionswhich provide limitations to agility, suchas large-scale equipment; thereforerequired to identify ways to reduce thetime scale for adjustments by changesof the current investment strategies
► Main emphasis for the roadmap tohigher levels of agility is to identifysources of agility which serve manydifferent types of adjustments
Page 22 Agility - Beyond Operational Excellence
Sources of agility
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Types of agility – levers in organization, processes,systems, staff
Agility - Beyond Operational Excellence
► Nimble organizations that can shift accordingto changing needs
► Adaptive processes that allow to re-routeorders and tasks according to changingrequirements
► Integrated systems with standardizedinterfaces to adapt to new situations
► Staff that is educated, willing to learn, andready to adapt to new working styles
Innovation
Business setup
Order management and fulfilment
Manufacturing
Distribution
IT Platforms
E-o-S
E-o-F
E-o-S Economies of Scale; E-o-F Economies of Flexibility
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Some examples how to make your company moreoperationally agile
Transparency forflexible supplyplanning
More educated „Make-or-Buy“ Decisions
Selective, differentiateduse of different sourcingtypes
Detailed evaluation andselection as well asmonitoring of suppliers,
Develop products andprocesses jointly withsuppliers
Use of autonomousdevelopementorganizations
Use of flexibleworking timemodels
Build competencenetworks based on„Pooling“
Build explicit knowledgepools
Give way for„Partnering“ insteadof enforcing marketpower
Establish and ensuredynamic qualityassurance
Drive required changesusing extensive, pro-active communication
Establish self regulatingproject teams
Integrate with keySupply-Chain-Partnerswith suitable IT-Systems
Quelle: BME / BVL-Studie: Supply Chain Agility - Strategische Anpassungsfähigkeit im Supply Chain Management, 2013
Agility - Beyond Operational Excellence
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Thank you!
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Place imagehere withreference toguidelines
We create Value Chain Champions
Dr. Dieter BölzingPartner SC Strategy & PlanningTel.: + 49 6196 996 17681Mobile: + 49 173 65 54 554E-Mail: [email protected]
Volker StockrahmPartner SC Strategy & PlanningTel.: + 49 6196 996 17908Mobile: + 49 160 939 17908E-Mail: [email protected]
Ernst & YoungMergenthaler Allee 3-565679 Eschbornwww.ey.com
EY SCM Service Offering / Advent International 18.2.2014