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Learning from Leaders: Gartner’s Top 25 Global Supply Chains Kevin Sterneckert Janet Suleski January 15, 2013 1
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Learning from Leaders: Gartner’s Top 25 Global Supply Chains
Kevin Sterneckert
Janet Suleski
January 15, 2013
1
Gartner delivers the technology-related insight necessary for our clients to make the right decisions, every day.
How Today's Shoppers Shape Demand-Driven Requirements
Economic Uncertainty
Evolving Supply Chains
Empowered Consumers
Volatility
Key Issues for Becoming a Demand-Driven Retailer
1. How do you create a demand-driven foundation?
2. What types of initiatives enable demand-driven retailing?
3. What's the business value of creating a demand-driven retail supply chain?
Demand-Driven Value Network (DDVN) and Demand-Driven Retailing Strategies
Demand Supply
Product
Understand and Respond to
Demand Signals
Build Value Networks
Use the Supply Chain to Support
Products and Services Innovation
Fulfill Cross-Channel Demand
Deliver Consumer-Centric
Retailing
Tomorrow's Profitability and Innovation Are Built On the Right Foundation
End-to-EndSC Process
Outside-In View
AlignedX-Functional Objectives
Technology
Cost Optimized
Risk Management
Global Network Management
Demand Management
SegmentationCost to Serve ResiliencyPredictive Analysis
End-to-End Visibility
Talent Management Integrated PLM Downstream Data
Management
Profitable Trade-OffsServicesSustainabilityAlign to
Customer Value
Supply Chain Excellence: Value Through Operations and Innovation Balance
Higher Cash Flow, Profits and P/E
1. How does the supply chain enable my business strategy?
2. What role does the supply chain play in creating differentiation?
3. What is my technology adoption preference?P
D
S
Demand Supply
Product
OperationalExcellence
(On-Shelf Availability,Total Supply Chain Cost)
Leader
LeaderLaggard Innovation Excellence(Time to Value, Return on R&D)
Span of Control for Retail Supply Chains
DC Transportation Procurement
DC Transportation Procurement Forecasting/Replenishment
DC Transportation Procurement Forecasting/Replenishment NPDI Sourcing
Store OperationsDC Transportation Procurement Forecasting/Replenishment NPDI Sourcing
Mat
uri
ty
Low HighMedium
High
Span of Control
Hierarchy of Retail Supply Chain Metrics
What It Tells You
Customer FulfillmentEffectiveness
Financial Effectiveness
OperationalEffectiveness
Customer Performance Trade-Offs
Customer vs. Supplier Balance
Stability of Processes Driving
Value
Forecast Accuracy
ProductAvailability
SCMCost
Supplier Perfect Order
SupplierOn Time
DC ServiceLevelSupplier Quality
On-Time toStore
SCM Cost Detail
DC Perfect Order
Store Effectiveness
AccountsPayableRevenue
Write-Offs
Inventory
DOS
Product Availability
Detail Backroom/Sales Floor Efficiency
Systems of Record
Systems of Differentiation
Systems of Innovation
Think of the Different Layers Your Organization Needs …
New Ideas
BetterIdeas
CommonIdeas
11
Retail Supply Chain Top 15
Key Issues for Becoming a Demand-Driven Retailer
1. How do you create a demand-driven foundation?
2. What types of initiatives enable demand-driven retailing?
3. What's the business value of creating a demand-driven retail supply chain?
Demand-Driven Retailing Strategies
Strategy DescriptionUnderstanding and responding to the demand signals
Sensing, shaping and responding to the consumer demand signal across sales channels
Delivering a consumer-centric supply chain
Creating a supply chain that supports and responds to the key merchandising planning and execution activities
Fulfilling cross-channel demand Creating effective and efficient fulfillment strategies that support cross-channel and multichannel demands of the shopper
Building value networks Aligning the people, processes and technology that drive pull-based replenishment models and joint value creation
Using the supply chain to support products and services innovation
Creating an agile and responsive supply chain that enables and supports innovation across an organization
Demand-Driven Retailing InitiativesStrategy Description
Understanding and responding to the demand signals
• Demand forecasting• Demand signal repository• Shopper segmentation
Delivering consumer-centric retailing
• Merchandising• Space management• Life cycle pricing• Insights and segmentation (shopper/channel)
Fulfilling cross-channel demand • Customer, order, inventory management and visibility• Execution enablement
Building value networks • Demand management• Merchandising, inventory and operations execution (MIOE)• Supply chain segmentation• Network design• Inventory optimization
Using the supply chain to support products and services innovation
• PLM• Cycle time reduction• Item management• Innovation/inspiration capture and evaluation
Demand-Driven Retailing Priorities
Strategy GrocerySpecialtyRetailers
MassMerchant
ConvenienceStore
Chain Drug
DepartmentStores
Understand and respond to demand signal
H L/M H H H M
Fulfill cross-channel demand
L/M H M L M H
Deliver consumer-centric retailing
H H M M H H
Drive innovation into products and services
M/H H M L H H
Build value networks M H M L/M M/H H
Note: Priorities — Low, Medium, High
Demand-Driven Initiatives Priorities
Strategy InitiativesNorth
AmericaU.K./
Europe
Understanding and responding to the demand signals
• Demand forecasting• Demand signal repository• Shopper segmentation
H M
Delivering a consumer-centric supply chain
• Merchandising• Space management• Life cycle pricing• Insights and segmentation
(shopper/channel)
M H
Fulfilling cross-channel demand• Customer, order, inventory management and visibility• Execution enablement
H H
Building value networks
• Demand management• MIOE• Supply chain segmentation• Network design• Inventory optimization
M M
Using the supply chain to support product and service innovation
• PLM• Cycle time reduction• Item management
L L
Geographic Demand-Driven Maturity Comparison
Retail Segment and Geography Maturity Comparison
Key Issues for Becoming a Demand-Driven Retailer
1. How do you create a demand-driven foundation?
2. What types of initiatives enable demand-driven retailing?
3. What's the business value of creating a demand-driven retail supply chain?
Why Becoming Demand-Driven Matters
Based on Supply Chain Top 25 Metrics:
• Return on Assets (ROA)
• Inventory Turns
• Revenue Growth
Demand-Driven Leaders Compared With Peers
MetricDifference
(2009)Difference
(2010)Difference
(2011)Difference
(2012)
ROA 73.8% 2X 27.3% ~3X
Inventory Turns 19.1% 4% 23.7% 54%
Revenue Growth 55.0% 3X 26.7% ~2X
Demand-Driven Maturity Value Proposition
Reacting Anticipating Collaborating Orchestrating
ROA -1.1%
Inventory Turns 8
Revenue Growth .8%
6.9%
9.1
3.9%
7.5%
10.2
7.7%
Source: Gartner Supply Chain Top 25 retail candidates (n=43)
TBD
TBD
TBD
Stage 1 to Stage 2
Stage 2 to Stage 3
Stage 3 to Stage 4
698%
14%
389%
9%
12%
97% TBD
TBD
TBD
Demand-Driven Business Value
Growth Service Cost AgilityDemand Management
MIOE
Network Design
Supply Chain Segmentation
Inventory Optimization
Reduction in Out-of-Stocks
20%-30%
Gross MarginImprovement
3%-5%
Inventory ▼15%-30%
Obsolescence 10%-15% less
ProductivityIncrease5%-10%
RevenueImprovement
2%-5%
Inventory ▼15%Cash-2-Cash ▼35%
Working Capital ▲15%
BetterService
Gross MarginImprovement
3%-5%
Asset Utilization▲5%-10%
Improved Productivity
3%-5%
Profit Growth2x
Asset Utilization3x
Faster Runs2x
Value to CustomersCost/Service
Choices
GrowthPotential
Identification
Cost of ComplexityUnneeded Variability
Unique Valueand Agility per
Segment
BetterCustomer Choice
No Negative Service Impact
End-to-End
Oriented Metrics
Supply chain organization design (span of control)
Proactive supply chain talent strategy
Time-to-MarketLead Time Reduction
Demand-Driven Supply Chain Action Plan
Monday Morning
- Take the DDR self-assessment to gauge current maturity levels.
Next 90 Days
- Determine the role of your supply chain and how it should enable your business strategy.
- Create and administer a supply chain skill set assessment.
Next 12 Months
- Compare your DDR initiatives to the recommended list.
- Create your DDR process and technology road map.
Recommended Gartner Research The 2012 Retail Handbook for Becoming Demand-Driven
Mike Griswold, and others (G00229233)
Toolkit: Assess Your Retail Value Chain Maturity Against the Five Demand-Driven StrategiesKevin Sterneckert, and others (G00211566)
Key Issues for Retail Supply Chain Leaders, 2011: Aligning Planning and ExecutionMike Griswold, Janet Suleski (G00210875)
Demand-Driven Retailers Align Planning and Execution Across Their Supply Chains by Answering Three Key QuestionsMike Griswold (G00209003)
Demand-Driven Retail Supply Chains Use Three Critical Skill Sets to Balance Operational and Innovation ExcellenceMike Griswold, Allen Johnson (G00207240)
For more information, stop by Gartner Solution Central or email us at [email protected].
