Agenda
1.Background
2.Supply Chains in 2014
3.Key Trends
4.Concluding Thoughts
Agenda
1.Background
2.Supply Chains in 2014
3.Key Trends
4.Concluding Thoughts
Demand Volatility
Supply Complexity
Complexity Management
Cost Control
Risk Management
Service Centricity
Balance Forecasting and Responsiveness (Agility)
Technology Pillars: Cloud, Big Data/Analytics, Mobility,
Social Business
Agile Inventory
THE Business Challenge
Information
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Platform 1 –
Mainframe to
Client/Server
Platform 2 –
Client/Server to
Internet
The Productivity Imperative
Five Critical Capabilities Enabled by the
3rd Platform
The 3rd Platform creates the underpinnings for
business process transformation…and in some
cases, business model transformation
Businesses will be able to transform:
How they engage with customers
The speed at which they deliver their products
and services
How they innovate
Their resiliency
The reliability of their operations
With such high stakes, the business is increasingly
taking a front seat in technology initiatives
©2013 IDC Visit us at IDC.com and follow us on Twitter: @IDC 9
Manufacturing Industry Performance
Sluggish exports offset by
confidence led consumption. A
virtuous cycle ahead?
Global revenue recovery, but
margin pressure
Source: IDC MI GPI, Q3, Q4 2013 Estimates
50
55
60
65
70
75
80
85
90
30
35
40
45
50
55
60
Consum
er
Confidence
PM
I
PMI
Consumer Confidence
-1
0
1
2
3
4
5
6
90
100
110
120
130
140
150
Q10
9
Q20
9
Q30
9
Q40
9
Q11
0
Q21
0
Q31
0
Q41
0
Q11
1
Q21
1
Q31
1
Q41
1
Q11
2
Q21
2
Q31
2
Q41
2
Q11
3
Q21
3
Q31
3
Q41
3
Net
Pro
fit M
arg
in
Revenue I
ndex
Revenue Net Profit Margin Actual
10
Translating Trend to Spend
© IDC Manufacturing Insights Visit us at IDC-mi.com 11
MFG
Segment
2013 2014 Change
Asset 68,819 71,799 4.3%
Brand 61,406 64,841 5.6%
Engineering 116,417 121,546 4.4%
Technology 43,319 45,546 5.1%
Region 2013 2014 Change
Asia/Pac 57,275 59,217 3.4%
USA 112,511 118,474 5.3%
Western
Europe
87,972 91,150 3.6%
Other 32,203 34,891 8.3%
“We are no longer a tier 1 automotive supplier. We are
a technology company in the automotive space” —Lynn
Tilton, CEO Patriarch Partners, addressing employees
at one of their portfolio companies.
Emerging Market to Emerging Market trade will re-
shape supply chains and product strategies - IDC
Manufacturing Insights Asia/Pacific Predictions
“What we get paid to do is consumer focused
innovation” – Keith McLoughlin, CEO of Electrolux, on
the company’s goal of getting products to market 30%
faster.
“The goal is a free market in talent, so the cream rises” -
Zhang Ruimin, Haier CEO on the company’s goal of
eliminating middle management.
Robotic equipment has increased production volume
30% and reduced headcount by two-thirds according to
Derrek Holland, President of Closet Doctor, a maker of
organizers.
Note: Amounts are millions of dollars except percentages
Agenda
1.Background
2.Supply Chains in 2014
3.Key Trends
4.Concluding Thoughts
Implications for the Supply Chain
Complex and extended global supply networks are a consequence of
globalization and the chase for "low cost" manufacturing.
Volatile demand is a fact of life. Consumers are less brand loyal, and far
more selective, than ever before — and, frankly, are willing to "leave their
wallet at home" if the value they require in a purchase is not apparent.
The accelerating pace of business is putting pressure on manufacturers
to be more "agile" and run the clock speed of their supply chains more
quickly.
Inflation and direct input costs remain a concern for manufacturers that
are seeing recent margin declines and volatility and often lack the ability to
make price increases stick or are already at a cost disadvantage versus
competition.
13
Seven Years of Supply Chain Predictions
2008: Cost centric but thinking about speed, flexibility, and service
2009: Financial crisis and manufacturing slump drive efficiency in
assets, inventory … and supply chain modernization
2010: Evolving from fixed-cost-driven supply networks to variable-
cost value networks
2011: Supply chain complexity, balanced with the need to simplify
and segment
2012: Speed and responsiveness across the demand and supply
sides of the supply chain to support the intelligent economy
2013: Supply chain resiliency, with responsiveness as a first
principle
For 2014, IDC Manufacturing Insights sees a continuation of the
focus on supply chain resiliency, with operational resiliency as the
focus of supply chain strategies in the coming year and beyond.
14
3D
Value
Chain
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5 Year Horizon
Value of
Transformation
Now
Resilient Supply Chain and
Collaborative Commerce
Networks
Demand Oriented
Data Driven
Digitally Executed
Segmentation
Integrated Planning
Resilient SC
Optimized
Customer
Experience
Strategic
Partner
Management
Collaborative
Commerce
Networks
15
Agenda
1.Background
2.Supply Chains in 2014
3.Key Trends
4.Concluding Thoughts
Operational Resiliency in 2014 ….
And Beyond
Extreme granularity both upstream and
downstream.
Further develop a ‘demand orientation’
through demand sensing and capture
Clarity around key purpose and focus
through product and service segmentation
Speed necessitates more deeply integrated
planning and execution functions
Supply and operational visibility
Digital execution, leveraging data to
broaden and extend ‘supply chain
intelligence’
B2B Commerce Networks become
anthropological "dig sites" for wealth of data
assets.
Manufacturers seek new ways to extract
data-driven value, leveraging mobile and
cloud for access anywhere, anytime.
17
Political/Social instability
Conflict Minerals
Natural Disasters/
Weather
Workforce (work
stoppages, fair wage)
Energy costs
Counterfeit/Gray Market
Product Quality, Safety
Global Trade
(regulation, trading
rules)
External Forces
Just-in-Time
Forecast-centric
Globally Distributed
Supply Networks
Long lead-times
Outsourcing (blend of
owned and outsourced
supply points)
From LEAN to
BRITTLE
Supply consolidation/
rationalization
Cost obsessed
Internal Practices
Supply Chain
Risk
… with Three Key Enablers
Extreme granularity
Accurate Speed
Operational visibility
18
Manufacturers Prioritize Risk and Resilience
Capabilities, Particularly in Supply Chain
Monitoring and Visibility
The opportunity to blithely ignore supply chain risk is over — do so
at your peril!
As supply chains continue to globalize, extend, and increase in
speed, the opportunity for something to go catastrophically wrong
increases geometrically.
It is not just about the big event, it is also about the hundreds of little
disruptions that occur every day that can significantly impact the
health of your supply chain.
But the devil is very much in the details!
IDC Manufacturing Insights believes that companies must improve
supply chain monitoring and visibility, with particular focus on
recognizing supply chain vulnerability to both external and internal
forces and then beginning a readiness assessment.
19
Technology Investment Involves
Modernizing Existing Systems … Whilst
also Trying New Approaches
Faster and more integrated planning, both in terms of better linkages
to demand signals and deeper scenario planning
Broader adoption of cloud-based tools, both for edge applications
like transportation management but also in key orchestrating
capabilities like sales & operations planning
Supply chain risk and resiliency investments, particularly in supply
chain monitoring and visibility
Renewed interest in the ‘data management organization’ with key
participation from IT
Investments in execution excellence, notably around more
integrated supply chain execution and the delivery of ‘product-
wrapped services’.
20
The Need to be Faster Requires
Manufacturers to Explore More Deeply
Integrated Supply Chain Planning … and
Fulfillment Functions
There is little question that the pressures are
growing on the supply chain to be faster, and
more nimble, while retaining accuracy and
precision.
One of the trends we began to see in late 2012,
and has continued into 2013, is the notion of
integrated planning. Moving from a set of
individual planning components into a cohesive
planning effort that ties all element together
seamlessly. We’ve articulated this in the past in
the context of planning, and specifically Sales &
Operations Planning, but it is more than that; it is
also about integrated fulfillment.
21
Extracting Data-Driven Value
The reality is that data exists somewhere to facilitate just about
every decision — you just have to find it!
And it is not just about what a business knows versus what a
business doesn't know, it is also about making information available
to critical decision makers when and how they need it
Consider "event driven" analytics as a way to better manage
potential events in the supply chain that might heretofore have gone
unrecognized.
Cloud-enabled services as support for either installed applications
or exiting business process - leveraging mobile and cloud for
access anywhere, anytime.
22
Agenda
1.Background
2.Supply Chains in 2014
3.Key Trends
4.Concluding Thoughts
Planning Assumptions
End-user supply chains must embrace flexibility and visibility if
they are to adapt to a global marketplace that is evolving to be
simultaneously volatile, personalized, and demanding of
quality in product and service.
2014 will see the emergence of a fully staffed technology
group focused on the line of business technology.
Investments in supply chain process and technology must
deliver against productivity goals – waste elimination,
continuity of operations and the ability to double their revenue
without adding any net-new management personnel.
Support, even facilitate, both product reliability and superior
service performance – while maintaining cost competitiveness
24
Supply Chain Essential Guidance
Deliver productivity – cost remains a top priority; growth
without adding headcount
Establish operational resiliency – both known and
unknown disruptions
Upstream and downstream visibility – can’t anticipate or
quickly react to what you don’t see
Integration over functionality – both important, but world
class capability not used is not helpful
Service performance – the top priority for many
manufacturers; ‘customer centricity’
25