Click to edit Master title styleThe Role of Finance

BRICKSMatterThe Role of Supply Chains

in Building Market-Driven

Differentiation

LORA M. CECERE CHARLES W. CHASE JR.

BookPublishes in

August 2012

3

What’s in

a name?

A rose by any other

name would smell as

sweet.William Shakespeare

4

5

• Current State

• Alignment and Measurement

• Process Maturity

• Agility

• Governance

• Wrap-up

Agenda

S&OP Challenge

Impact of Supply Chain Challenges(among those without S&OP Experience)

8

• Current State

• Alignment and Measurement

• Process Maturity

• Agility

• Governance

• Wrap-up

Agenda

Typical Organization

A Supply Chain

is a Complex System

with Complex Processes

with Increasing Complexity

Looking at Supply Chain

as a Complex System

Profitable Growth

Revenue Cost of Goods

Working Capital

Corporate Social Responsibility

CorporateTrade-offs

R&D Strategy and Investment Asset Strategy and Investment

InvestmentTrade-offs

SalesPolicies

DistributionPolicies

ManufacturingPolicies

LogisticsPolicies

ProcurementPolicies

Returns Backorders First Pass Yield Empty Miles Material Yield

Supply ChainWaste

Forecast Accuracy Customer Service Inventory

Channel Strategy Product andService Portfolio

Supplier Strategy

Supply ChainTrade-offs

Growth Profitability Cycle Complexity

R&D Margin Cash on Hand C2C Cycle Altman Z

R&D to COGS Ratio Free Cash Flow Ratio Days of Finished Goods Capital Turnover

SGA Margin Gross Margin Days of Inventory Current Ratio

SGA/COGS Net ProfitDays of Payables Outstanding

Quick Ratio

COGS as Percent of Net Sales

Operating Margin Days of Raw Materials Return on Assets

Pretax Margin (EBIT)Days of Sales Outstanding

Return on Equity

YoY Sales GrowthDays of Work in Progress

Return on Invested Capital

Operating Margin DPO/DSO Return on Net Assets

Inventory Turns Revenue/Employee

Receivables Turns Cost of Sales

Useful Ratios

Evolution of Supply Chain Process Excellence

Align

ResilientReliable

Adapt

Efficient

Building Horizontal Process Connectors

ContinuousTesting

LearningImprovingIn Market

OrchestrateDemand and Supply

Sense Demand

and Supply

Shape Demand andSupply based

on Market

DemandVolatility

Supply Volatility

Right Product

Right Place

Right Time

Right Cost

Cost

Procure to pay/order to

cash

Supply Chain Excellence Definition

Most Mature

15

• Current State

• Alignment and Measurement

• Process Maturity

• Agility

• Wrap-up

Agenda

Developing the Supply Chain Strategy

Business Process

How do I do the right things right?

Strategic Planning

Network Design

Rethinking Planning

Tactical Planning: HorizontalProcesses

Revenue ManagementSales and Operations

PlanningSupplier Development

Tactical Planning: Vertical

Processes

Sales Forecasting

Global Demand Planning

Tactical Supply Planning

Procurement Planning

ProductPlanning

Product PlatformsNew Product Launch

OperationalPlanning

Regional Sales

Execution

Regional Demand Planning

Distribution Requirements

Transportation Requirements

Manufacturing Planning

MaterialRequirements

Contract Manufacturing

Planning

Scenario Planning

What-if Analysis

Common Practice Market-driven Focus

S Ask salesFocus on market drivers:How do we best shape demand?

& Direct integration to supplyDesign of the value chain to optimizetrade-offs, minimize risk, balance cycles, and orchestrate demand

OP Manufacturing planTrade-offs between make, source and deliver

Getting to Letter Perfect

20

S&OP Evolution

Manufacturing-Driven

Deliver a Feasible Plan for Operations

Match Demand with Supply

Sales Driven

Match Demandwith Supply

Business-planning Driven

Maximize Profitability

Demand Driven

Maximize Opportunity Sense and

ShapeDemand

Market Driven

Maximize Opportunity and

Mitigate Risk. Orchestrate

DemandMarket to Market

Greater Benefit

• Growth

• Resilience

• Efficiency

Technology

• Volume to mix to revenue/profitability

• Equivalent units

• Reward systems

• Alignment on “What good looks like”

Modeling Challenges

S&OP ProcessPlan Execution

25

• Current State

• Alignment and Measurement

• Process Maturity

• Agility

• Governance

• Wrap-up

Agenda

An Athlete Needs:

What is Agility?

S&OP Balance

The Need for Balance

Agility Importance vs. Performance

31

• Current State

• Alignment and Measurement

• Process Maturity

• Agility

• Governance

• Wrap-up

Agenda

S&OP ProcessExistence, Goals & Processes

Supply Chain Organization

Multiple S&OP Processes

Executive S&OP

Regional S&OP

Processes

Supply Chain Planning Processes with Key Suppliers

S&OP Processes With Key

Customers

Supply Chain Center of Excellence(among those with S&OP Experience)

Center of ExcellenceImportance vs. Performance

S&OP Process Operations(among those with S&OP Experience)

Integration of S&OP with Financial Planning(among those with S&OP Experience)

• Tried to get precise on inaccurate data.

• Believed that the most efficient supply chain is

the most effective supply chain.

• Built efficient chains, but not effective networks.

• Focused inside-out, not outside-in.

• Rewarded the urgent, not the important.

Historically, we have…

39

• Start with strategy and a clear definition of

supply chain excellence

• Build metrics to drive balance in a complex

system

• Improve agility through “what-if” capability

• Focus on a multi-year road map

• Fuel the energy through a guiding coalition

and continuous improvement initiatives

Wrap-up