The 21st Century Deals A New Supply Chain Hand –

How To Play It?

OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

2OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

Today’s Session

About KPMG

Recent Trends and Events in the Supply Chain

The State of the Supply Chain

What to Do?

3OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

What is Supply Chain Management?

PLAN, DECIDE, REPORT

Trends:

• Longer Supply Chains

• Security

• Visibility

• Responsiveness

• Product and channel explosion

• Cost vs. growth

• Collaboration

• Outsourcing

PurchasePurchase

MakeMake

DeliverDeliverServiceService

SellSell

4OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

#7: Wilma

10 Most Costly Insurance Disasters:Becoming More Frequent, Worse?

World’s Top Ten most costly losses incurred by the insurance industry, Complied by Swiss Re, Fortune Magazine, 2006

$6.9 $8.9

$22.2

$11.7

$18.5 $20.7

$8.3 $10

1990 91 92 93 94 95 96 97 98 99 2000 01 02 03 04 05

$10

$45

#10: Daria

#9: Mireille

#2: Andrew

#4: California Earthquake

#3: 9-11#8:

Charley

#5: Ivan

#6: Rita

#1: Katrina

5OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

The 11 Greatest (Man-Made) Supply Chain Disasters

6OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

Aon’s 2006 Political and Economical Risk Map

Source: http://aon.com/politicalrisk

7OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

Longer Supply Chains7-8+ weeks, $4,000 - $5,500+ per container

Place Place OrderOrder

Agree Agree TermsTerms

LSP Arranges LSP Arranges TransportationTransportation

Supplier picks order Supplier picks order and loads container and loads container

(2 weeks)(2 weeks)

Container arrives at Container arrives at Consolidation Centre Consolidation Centre

(optional)(optional)

Container Arrives at Container Arrives at Embarkation Port, Embarkation Port,

Customs ClearanceCustoms Clearance

Container is Container is Loaded onto ShipLoaded onto Ship

Ship crosses Atlantic Ship crosses Atlantic Ocean – 14 DaysOcean – 14 Days

Container is Destuffed or Container is Destuffed or Put on a Cross-Country Put on a Cross-Country Train ($1,200) or Truck Train ($1,200) or Truck

($5,000)($5,000)

Container is Drayed from Container is Drayed from Debarkation Port to Debarkation Port to

Deconsolidation CentreDeconsolidation Centre

Container is Unloaded from Container is Unloaded from Ship, Customs Clearance, Ship, Customs Clearance,

Inspection ($700-$1,000),…Inspection ($700-$1,000),…

Container is Delivered Container is Delivered and Destuffed, and Destuffed, Returned Returned

Same Day or Demurrage Same Day or Demurrage $75/Day$75/Day Arrival at Arrival at

Destination Rail Destination Rail yardyard

8OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

The CFO’s View of the Supply Chain

There is a gap between process importance and performance

Source: CFO’s and the Supply Chain, CFO Research Services & UPS Consulting, 2003

34%

33%

39%

46%

51%

63%

50%

47%

53%

56%

59%

69%

73%

74%

74%

81%

0 10 20 30 40 50 60 70 80 90

Product design

Supply chain strategydevelopment

Corporate planning

Operations management

Logistics

Cash management

Procurement

Customer relationshipmanagement

% citing as "very important"

% saying performance is"very good"

9OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

The CFO Does Not Believe You!

You think you are putting 75-80% savings in the bag

The CFO gives you credit for less than half that – 34%

30-40% estimating & tracking

20-25% compliance

5-7% negotiation effectiveness

18.5% unaddressed spend

The CFO’s View of Procurement, Aberdeen Group, September 2005

10OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

More of the Same – Just Much More of It…

Price & Demand Volatility

Shortened Product Life Cycles

More channels, more differentiation, lower volumes

Longer Supply Chains

Low Cost Country sourcing

Outsourcing & off-shoring

Growth in Third Party Logistics

Disasters

Natural disasters

Supply Chain disruptions

11OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

…and Some New Issues

Security & Legislation

Increased scrutiny

Increased regulation and compliance burden

Uncertain liability

Sustainability

Reduction of Hazardous waste legislation

Recognition of “global warming”

Critical Infrastructure

West Coast Ports

Truck driver shortages

12OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

Three Truths For This Century

1. You Only Know What You Know, No More, No Less

3. You Can’t Mitigate All Uncertainty

5. Do The Right Things, Do Them Right

13OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

What To Do?

Check Your Alignment With Your Company’s Value Proposition

With Your Company’s Agenda

With Your Partners

With Your People

Articulate Your Contribution What Have I Done For You Lately?

What Is My Core Purpose?

What Else Should You Come To Me For?

Here’s How We Can Do What You Are Trying To Achieve

Make It Happen Event Management

SLA’s & KPIs

Staff & Partner Alignment

14OIPMAC National Conference, 13 October 2006.OIPMAC National Conference, 13 October 2006.

Our Challenge……..

It will not be easy, but . . .

Supply Chain people can

make it happen!

KPMG’s Operations Cost Management helps clients align the right goods and services in the right place at the right time, at the right terms- at every

stage of the supply chain.