Collaborative Execution: Closing the Loop on Supply Chain

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October, 2011

Collaborative Execution: Closing the Loop

on Supply Chain Planning and Execution

Aberdeen Group's Chief Supply Chain Officer (CSCO) Survey (January

2011) collected data from 191 companies. That study revealed that over the

past 12 months, the supply chain is both more global (85% of companies

operate internationally) and more complex. It is also much more strained as

there have been several unpredictable major disruptions to the extended

supply chain, including natural disasters and geo-political unrest. The added

complexity and all of these potentially disruptive events have served to

heighten the importance of minimizing the gap between supply chain

planning and collaborative execution across partners and beyond the

enterprise.

In September 2011 we completed a follow-on survey with 97 enterprises.

That survey reinforces the premise that the increase in the number of global

disruptions combined with the increase in suppliers, customers, carriers,

and countries are changing the importance of collaborative execution

between all parties in the multi-tiered global supply chain. Aberdeen’s

research indicates that as a result of this growing complexity, there is a

growing shift in focus towards closed loop integration of planning and

execution both within the enterprise and its extended supply-demand

network. Indeed, a majority of all companies claim to have processes to

integrate planning and execution (61 companies).

This report will focus on the key process and technology differentiators

displayed by the 61 companies with tight closed-loop integration and

synchronization between supply chain planning and supply chain execution

across partners and beyond the enterprise. It will also show that such

companies are enjoying a significant advantage in both cost and service

results compared to companies without that level of integration.

Business Pressures

Given the growing globalization, complexity of the supply chain, and rising

cost of fuel and raw materials; collaborative synchronization between supply

chain planning and supply chain execution is of paramount importance. The

data shows that the rising cost of supply chain management (48%) and the

growing complexity of the supply chain (38%) are the top two business

pressures cited by supply chain executives. Surely, supply chain management

has grown more complex and more expensive; consumer demand has also

become increasingly more volatile serving to complicate matters further. In

fact, demand volatility was the third largest business pressure at 34% among

survey respondents. Together, all of these pressures serve to highlight the

importance of synchronization between supply chain planning and supply

chain execution inbound-to-outbound across both supply and demand.

Demographics

In September 2011, Aberdeen

surveyed 97 qualified industry

respondents:

Job title: C-Level executive

(CEO, CFO, CTO, CIO)

(6%); VP/General Manager

(18%); Director (19%);

Manager (36%); other titles

(21%).

Functional Responsibility:

Logistics/Supply Chain (37%);

operations / procurement

(24%); information

technology (9%);

manufacturing/production

(8%); other areas (22%).

Company size: Under $50

million (17%); $50 million to

$1 billion (42%); $1 billion

and up (41%)

Geography: North America -

Includes USA, Canada,

Mexico (60%); South/Central

America and Caribbean (2%);

Asia/Pacific (7%); Europe

(27%); Middle East, Africa

(4%)

Research Brief

Aberdeen’s Research Briefs

provide a detailed exploration

of a key finding from a primary

research study, including key

performance indicators, Best-

in-Class insight, and vendor

insight.

Collaborative Execution: Closing the Loop on Supply Chain Planning and

Execution

© 2011 Aberdeen Group. Telephone: 617 854 5200

www.aberdeen.com Fax: 617 723 7897

Figure 1: Supply Chain Cost and Complexity are Paramount

23%

23%

34%

38%

48%

0% 25% 50% 75% 100%

Escalating demand for service from customers

Lack of visibility with external trading partners

Increased demand volatility

Growing complexity of globaloperations logistics channels

Rising supply chain management costs

Percent of Respondents n=97

All Respondents

Source: Aberdeen Group, September 2011

The sections that follow serve to further illustrate the benefits and the

challenges inherent to synchronized planning and execution in today's multi-

tiered, multi-enterprise supply chain particularly as it pertains to

collaborative execution (defined in the sidebar).

Strategic Actions

When looking at key strategies for the survey respondent companies, we

found that knitting a tighter and more interoperable supply and demand

process competency was a top priority. For example, the top strategy

employed by survey respondents was to increase supplier-side

collaboration/visibility (55%).

Figure 2: Top Strategic Execution Actions

21%

31%

34%

36%

55%

0% 20% 40% 60%

Enable multi-tier external process

collaboration and integration

Customer enablement - Increase B2B

collaboration / visibility into customer-side

processes with customers, trading

Improve external cross-network process

collaboration and design

Improve perfect order rate by improving

pick accuracy and on-time shipment

Supplier enablement - Increase B2B

collaboration / visibility into supplier-side

processes with suppliers, trading partners

Percentage of Respondents, n = 123

21%

31%

34%

36%

55%

0% 20% 40% 60%

Enable multi-tier external process

collaboration and integration

Customer enablement - Increase B2B

collaboration / visibility into customer-side

processes with customers, trading

Improve external cross-network process

collaboration and design

Improve perfect order rate by improving

pick accuracy and on-time shipment

Supplier enablement - Increase B2B

collaboration / visibility into supplier-side

processes with suppliers, trading partners

Percentage of Respondents, n = 123 Source: Aberdeen Group, September 2011

This collaboration involves the effort from survey respondents to improve

supplier-side process/data integration to assist supply chain planning and

execution on the inbound side.

The theme continues with the second rated strategy (36%, Figure 2),

optimizing or the perfect order rate or customer service levels on the

Collaborative Execution

Defined:

Collaborative execution

provides continuous or real-

time visibility into multi-

enterprise orders/shipments,

inventory levels, and partner

activities. Collaborative

execution relies on

technology for collaborative

problem solving. It involves

the bi-directional exchange

of supply chain planning and

execution data to "close the

loop" on multi-level process

events across-enterprises. A

robust collaborative

execution solution includes:

The ability to propagate new

plans and monitor

exceptions on a single, global

platform

Real time multi-tier demand

and supply data

Role-based participation of

all partners. This is not just

an external requirement, but

requires internal integration

across functional

departments, operating

divisions, and global

geographies

Rapid resolutions in order to

“make the plan,” so it can

respond intelligently to

supply/ demand shifts or

disruptions

Enables dynamic resolution

of the majority of exceptions

quickly and cost-effectively,

while reducing cost, noise,

and latency


Execution



outbound or demand side. In addition 31% also indicated they are focusing

on customer enablement - increase B2B collaboration into processes. When

asked about efforts to minimize the gap between planning and execution,

also on the outbound customer-demand side, 42% are focusing on creating a

tighter feedback loop from actual market activity during execution (e.g.,

point of sale data) to demand assumptions or planning. It is apparent that no

plan is adequate if it does not meet market/operational needs. It follows that

one needs feedback during execution to feed the planning process and

adjust to operational inputs in an ongoing cycle of demand-to-supply

process steps. For agile execution, it is important to facilitate frequent

bidirectional information flows in the execution window. Particularly when

it comes to unplanned events, such as the recent Japan tsunami, it is clear

that companies perform better, and demonstrate more execution agility

when they operate on a collaborative technology platform that allows for

bidirectional data flows on a near real-time basis. In later sections we will

examine the correlation between improving the integration/automation of

these process steps and closing the loop between execution and planning

across both the supply and demand side of the extended supply chain.

Process and Organizational Capabilities

In an effort to understand the real value of integration between supply chain

planning and supply chain execution, we divided the survey pool into

companies claiming "closed-loop integration across planning and execution"

(61 respondents) and those that did not (36 respondents). For those with

closed-loop integration the data reveals a significant advantage in core process

and organizational capabilities.

Figure 3: Core Capabilities Gaps - those with Closed-Loop

Integration and Without

7%

25%

33%

27%

25%

19%

47%

60%

34%

52%

57%

58%

62%

64%

84%

86%

0% 20% 40% 60% 80% 100%

Cloud-based trading partner collaboration - 4.86x

Ability of personnel to view the supply chain

holistically in terms of linked processes - 2.08x

Visibility across multiple tiers of supply base -

1.73x

Ability to automatically collaborate on what-if

scenarios - 2.15x

End-to-end supply chain data and process

visibility - 2.48x

The ability to access real-time supply chain data

needed for decision-making - 3.37x

Ability to perform constrained supply chain

planning and execution - 1.79x

Ability to create demand forecasts that reflect

true customer demand - 1.43x


Close-Loop Integration

No Integration7%

25%

33%

27%

25%

19%

47%

60%

34%

52%

57%

58%

62%

64%

84%

86%

0% 20% 40% 60% 80% 100%

Cloud-based trading partner collaboration - 4.86x

Ability of personnel to view the supply chain

holistically in terms of linked processes - 2.08x

Visibility across multiple tiers of supply base -

1.73x

Ability to automatically collaborate on what-if

scenarios - 2.15x

End-to-end supply chain data and process

visibility - 2.48x

The ability to access real-time supply chain data

needed for decision-making - 3.37x

Ability to perform constrained supply chain

planning and execution - 1.79x

Ability to create demand forecasts that reflect

true customer demand - 1.43x


Close-Loop Integration

No Integration


“We are mainly focusing on

getting closer to customers to

better understand forthcoming

demand, and we are also

ensuring optimal stock levels

across product range and

storage locations.”

~ Daniel Muir, Logistics

Manager, Highland Spring Ltd.


Execution



A deeper look reveals that the 61 companies with closed-loop integration

between supply chain planning and execution have huge advantages in the

following three core competencies:

Cross-network visibility. In regards to visibility (Figure 3),

companies with closed-loop integration were 2.5 times as likely as

companies without integration to have end-to-end supply chain data

and process visibility and 3.37 times as likely to have the ability to

access the real-time supply chain data needed for decision making (64%

closed loop integration claim real-time access to true demand data

versus 19% respectively). Companies with closed-loop integration are

also more automated. Eighty-six percent (86%) of companies with

from customers versus 60% for all others. They were 3 times as

likely to have online (real-time) visibility into supply chain

exceptions during supply or demand execution (only 19% of others

can make this claim). Finally, these companies were 1.73 times as

likely to have visibility across multiple tiers of the supply base (57% versus 33% respectively).

Collaborative execution. Companies with closed-loop

integration were anywhere from 2.2 to 4.9 times as likely as others

to have ability to collaborate during execution. When it comes to

both demand sensing and matching on the customer or demand-

side, or collaborating with suppliers or trading partners on the

supply-side they are able to adjust plans dynamically. For example,

84% claim that they perform constrained supply chain planning and

execution and 64% have access to real-time data for decision-making

(versus only 19% to 47% of other companies). This advantage links

to automation capabilities where companies with closed-loop integration (versus other companies) are:

o 1.4 times as likely to have the ability to create demand forecasts that reflect true customer demand

o 2.2 times as likely to have the ability to automatically collaborate on what-if scenarios

o 4.9 times as likely to have cloud-based trading partner

collaboration as a "collaborative technology platform"

When it comes to today's extended multi-enterprise supply chain it

is important to understand that data and product flows across tiers

are lengthening under globalization. In the past technologies were

not available to allow multi-enterprise collaboration across

networks beyond the immediate upstream or downstream tier of

suppliers or trading partners. Under older technology, network

communications were primarily one-way and passed from one tier

to the next in a "serial" sequenced chain rather than simultaneously.

Globalization has lengthened lead-times and also the number of

transition points in the supply chain. Along with providing for

multitier, multi-enterprise visibility, it is important to move away

from serial B2B communications to simultaneous bidirectional

"We are deploying supply

network collaboration tools to

share forecast, inventory and

confirmed supply information

that will enable us to share

information and react to

changes in demand with our

first and second tier supplier."

~ Director at a Large Sporting

Goods Manufacturer

"Our current supply chain

management initiatives center

on implementing an end-to-end

S&OP process reviewing an

upgrade replacement of our

current TMS solution."

~ Director at a Large

Consumer Electronics

Manufacturer


Execution



communications. Today's technologies support this, and those that

are most proficient in collaborative execution are as much as 5 times as likely to have the proper collaborative technology platform.

Collaborative demand sensing and matching. Companies with

closed-loop integration were 1.43 times as likely as companies

without integration to have the ability to create demand forecasts that

reflect true customer demand. This is supported by the degree of

automation, where companies with closed-loop integration were

98% more likely to have the ability to segment the demand forecasts

based on key product-customer characteristics. Finally, these

companies were 58% more likely to have the ability to match

customer demand through automated demand signals. In the past

companies had no choice but to rely on forecasts. But new

collaborative technology platforms allow for simultaneous sharing of

real-time customer sales data that allow for true demand, sensing and collaborative supply-demand matching, feedback, and exchange.

Performance Metrics

In the previous sections we have demonstrated how companies with closed-

loop integration between supply chain planning and execution deliver

significant process and automation capabilities over their counterparts in

both supply-side and demand-side process steps. However, do those

advantages translate to real cost savings or deliver improvements against

cost and service metrics? Even while transportation and warehousing costs

and hence overall supply chain costs (48%, Figure 1) are increasing under

globalization, those companies with tight integration between supply chain

planning and execution have been able to minimize the rising supply chain

related cost relative to companies lacking such integration. In Table 1 the

final two columns display the performance gaps between these two groups.

Table 1: Performance Metrics (year-over-year percent change) Compared

Company

Top Integrated

Companies

n = 17

With Closed-

loop integration

n = 61

Without Closed-

loop integration

n = 36

Change in Total landed costs per unit handled 0.57% 3.14% 3.63%

Change in Domestic transportation costs per

unit shipped -0.19% 3.00% 3.66%

Change in International transportation costs

per unit shipped 1.67% 2.53% 2.98%

Change in Actual warehouse operating cost -1.23% 3.31% 3.87%


At a high level, the full group of 61 companies "with closed-loop integration"

reported an 18% smaller increase in domestic transportation costs. Also,

those same companies were able to reduce the impact of lengthened supply


Execution



chains and rising fuel costs - holding the rise in international transportation

costs to 2.53% (column 2). Hence companies with closed-loop integration

overall delivered a 15% performance advantage versus those lacking closed-

loop integration. Across these four metrics we can see that closed-loop

integration of planning and execution in today's complex extended supply

chain can translate into sizable performance advantages.

But a fairly large number of companies (63%) are claiming a tight level of

closed-loop integration between planning and execution. Within such a large

group it is therefore not surprising that are there are even larger gaps in

performance that can be delivered for those companies most successful in

managing their operations. Indeed, those most successful in the cost/service

(the top 20%) have also exhibit higher levels of closed-loop integration of

process and technology in and certain key processes, and we will explore

those next.

A deeper analysis revealed that the top 20% of the companies (top

companies are defined in the sidebar) with closed-loop integration and

synchronization between supply chain planning and execution were

performing dramatically better than even other companies with closed-loop

integration. The 17 top companies managed to minimize the rise in supply

chain logistics costs when compared to other integrated companies. In fact,

the top companies have even managed, in some cases, to lower their costs.

Table 1 shows that top integrated companies were able to lower their

domestic transportation costs by 0.19% and they were able to lower their

warehousing costs by better than 1.2%. These savings, especially for large

multi-tiered supply chains, are very significant. We will examine how such

companies are implementing new capabilities in the sections to follow.

The priority shifts to "closed loop" collaborative and

responsive implementations

While the case for closed-loop integration between supply chain planning

and execution is overwhelming, it is important to discuss a priority

hierarchy for an integration initiative. What are the top methods for

improving supply chain execution and planning integration and

synchronization? Based on the data, the overall survey respondent pool

listed improving or increasing two core elements:

1. Supply chain visibility is the most important integration improvement

strategy scoring a 3.99 on a 5-piont scale (5 being highest priority)

2. Increasing the integration of supply chain collaborative technology with

internal legacy and ERP systems (3.94) and improving current continuous S&OP processes (3.89)

For the best performers (17 top performers) these two priorities hold

constant - but the priority of collaborative planning is the top selected item.

For this group a deeper look into the data reveals these high performers

(i.e., lower landed costs, lower warehouse operation costs (see sidebar) are

improving their current S&OP process was the top strategy (4.12). In short,

for the best of the best, collaborative planning is a continuous process

“We are currently optimizing

our S&OP process and

beginning development of a

distribution requirements

planning process to better

support our global distribution

capabilities.”

~ Managing Director at a Small

Health and Beauty Product

Manufacturer

Top Performing Company

Definition n = 17

0.57% increase in total

landed costs per unit handled

(includes warehousing,

transportation costs, and

import / export duties and

tariffs) over prior year

.19% decrease in domestic

transportation costs per unit

shipped over prior year

1.67% increase in

international transportation

costs per unit shipped over

prior year

1.23% decrease in actual

warehouse operating cost

(YTD performance vs.

budget)


Execution



requiring constant feedback during execution. In this sense, cross network

planning was the most important factor in improving their closed-loop

integration and synchronization followed closely by visibility into the

extended supply chain.

This is underscored in previous Aberdeen reports, as we have expounded

on the importance of sales and operations planning process to achieving

visibility and transformation throughout the entire organization. It is

important to note for the purposes of this discussion that Sales and

Operation Planning (S&OP) can be "continuous and collaborative" and can be

used a means of increasing reaction time to changing market dynamics and

avoiding inventory excess inventory.

Among the top integrated companies, we conducted several interviews

where supply chain visibility was rated a "high priority" when trying to

increase the integration and synchronization internally and externally. "We

are currently extending the integral supply chain in order to create visibility

and improve responsiveness up and including the second tier suppliers in

order to improve planning and execution integration," explains a Manager at

a large lighting manufacturer. Being able to quickly and accurately view the

current state of your supply chain (i.e., inventory, supplier capacity, inbound

and outbound shipments) allows companies to achieve the following:

Better match of consumer demand through higher levels of collaboration, responsiveness and matching

Avoid transportation bottlenecks in execution

Improve inventory management

Top companies understand that supply chain visibility is more of a

continuous process than a static goal - it is an ever changing and ever

evolving target and is a first step to achieving collaborative execution. In

fact, even among those that reported that they have end-to-end supply

chain visibility, it was still the top area targeted for incremental investment

in 2012. For 67% of all companies, supply chain visibility and its integration

into the closed loop process is the highest investment priority for the next

12 months. The complexity of the multi-tier supply chain adds to the

degradation of information and time (see sidebar on page 13) particularly

when each tier is handled in a serial fashion. A continuous and collaborative

S&OP and visibility solution provides for simultaneous synchronized

exchange of supply chain data bearing procurement, production and delivery

phases across each tier.

Voice of the market - What are your current initiatives

around the integration of planning with execution?

When asked about strategies around enhancing the level of synchronization

and integration of planning with collaborative execution within the extended

multi-enterprise supply chain, the response was overwhelming. In an effort

to go beyond the data and bring the end users voice into the discussion,

Fast Facts:

Collaborative planning is a

continuous process requiring

constant feedback during

execution

The complexity of the multi-

tier supply chain adds to the

degradation of information

and time particularly when

each tier is handled in a serial

fashion

http://www.aberdeen.com/aberdeen-library/7087/RA-sales-operations-planning.aspx



Execution



here are some of the more interesting comments from the end user

community:

"We are deploying supply network collaboration tools to share forecast,

inventory and confirmed supply information that will enable us to share

information and react to changes in demand with our first and second tier

supplier," reveals the director of manufacturing at a large sporting goods

manufacturer.

"Our supply chain management approach is far more focused on

collaborating with multiple tiers of our supply chain throughout the product

lifecycle to ensure designs are producible and processes are established to

consistently produce acceptable hardware among a supply base that will

remain viable in our turbulent market," explains the Vice President of a mid-

size aerospace and defense manufacturer.

"To get a better understanding of when parts of the new fashion collections

are received, is important to know where the goods are and when we can

ship them to the customers. We need to know in detail the status to

combine those deliveries into a balanced collection for each shop so that

matching tops and bottoms arrive at the shop at the same moment," says

the managing director of a small European apparel company.

"Collaborating with suppliers to gain visibility into their production will

enable our organization to schedule purchases and plan for ebbs and flows

in inventory. This kind of collaboration is essential to building the lasting

relationship necessary for a small industrial supplier to maximize fixed -

price contract performance by making sure that the product needed will

always be available with the lowest possible holding costs. Another

important initiative is a massive forecasting overhaul. Making forecasting

improvements is essential to making intelligent purchasing decisions," reveals

the director of logistics, at a small North American industrial tools

manufacturer.

Though the approaches vary from company to company, it is apparent from

the end users that establishing tight integration and synchronization

between supply chain planning and supply chain execution is top of mind.

Extent of Integration and Automation

Another major issue underlying this discussion is the extent to which you

need to be integrated to your ERP or legacy systems to receive maximum

benefit. Figure 4 shows that while some integration is likely better than

none; the most value is derived when there is an application user interface

level integration of workflow and data.


Execution



Figure 4: Extent of Integration

19%

31%

27%

24%

34%

34%

16%

16%

6%

12%

24%

59%

0% 20% 40% 60% 80%

Our ERP/legacy solution is not integrated with our supply

chain planning solution

Batch based transfer of data but user has to go to different

user interfaces

Real time transfer of data but user has to go to different

user interfaces

Application user interface level integration of workflow

and data

Top 20% of Integration

No Integration

Integration

Percent of Respondents n=97


In fact, the top performing close loop integrated companies were 1.4 times

as likely as other integrated companies to have application user interface

level integration. In short, bringing the integration all the way to the line of

business users desktop (in a single user interface) allows for much greater

visibility and collaboration - all of which positively affect supply chain costs.

A related issue to the extent of integration is which features or functions

are the most important to automate. To that end we have put together a

list based on survey data which compares companies without integration to

the very top performing closed-loop integrated companies (top 20%

integrated companies) and companies and highlights those features with the

largest automation gaps.

Table 2: Automated Features/Functions Gaps

Feature/Function

Top 20%

Close-Loop

Integrated

Companies

Without

Closed-loop

integration

Internal supply chain performance

dashboards (e.g., across departments,

regions, divisions, product channels etc.)

70% 42%

External supply chain performance

scorecards (e.g., across carriers

transportation, manufacturing partners,

suppliers, customer / product segments)

65% 43%

Exception alerts - responding to supply -

demand disruptions 82% 47%

"Our current supply chain

management initiatives center

on implementing an end-to-end

S&OP process reviewing an

upgrade replacement of current

TMS solution."

~ Director at a Large

Consumer Electronics

Manufacturer


Execution



Feature/Function

Top 20%

Close-Loop

Integrated

Companies

Without

Closed-loop integration

Role-based visibility views external

supply chain partners 44% 21%

Supply-demand synchronization with

connectivity, process orchestration, and

exception management

47% 13%

Multi-tier inventory collaboration with

suppliers / others (inbound) 53% 10%

Channel inventory collaboration with

customers, hubs, 3PLs (outbound) 41% 7%

Performs true multi-tier analytics to

assess impact of supply shortages and

reallocations and to reduce, allocate, or

manage inventory held at various stages

in the supply chain

41% 3%

Analytics (e.g., statistical analysis,

trending, route cause analysis, etc.) 53% 30%

Supply chain modeling (e.g., what-if

scenarios, network design, etc.) 41% 20%

Financial settlement or financing triggers 30% 30%


The data shows that among the top 20% of integrated companies

(companies with lower total landed costs and lower warehousing costs)

exception alerts are the most popular automated feature (82%). As is typical

of these types of automation gaps they tend to bolster the company's ability

to measure and manage today's more complex global supply chains in both

planning and execution. Looking back at the top business pressures, we saw

that the growing complexity of the supply chain was top of mind for supply

chain professionals. Automating exception alerts allows today's supply chain

professional to navigate their dynamic supply chain with greater ease. Table

2 details specific areas the features and functions that, if automated, tend to

yield the most operational value to cost and service.

Another popular automated feature is an internal supply chain performance

dashboard (e.g., across departments, regions, divisions, product channels

etc.) with 70% of the top integrated companies. This again allows the supply

chain professional to compensate for a key business pressure - rising cost of

supply chain management.


Execution



Case in Point: $6.5 Billion Global Electronics Firm

Deploys Closed-Loop Supply Chain Technology for

Double-Digit Gains

Headquartered in Toronto Canada, Celestica is a global leader in the

delivery of end-to-end lifecycle solutions. In 2010, it reported $6.5 billion in

revenue. The company's global operating network comprises 35,000

employees at over 20 locations in 14 countries in the Americas, Europe and

Asia regions. Celestica's expertise is in design and engineering, electronics

manufacturing and supply chain management services. Its suite of solutions

spans the entire product lifecycle - from design, through to delivery and

after-market support.

The company has built its reputation on an agile integrated end-to-end

supply chain that provides for complete contract manufacturing and systems

integration, supplier and inventory management, transportation, global

logistics, and fulfillment.

“Celestica is committed to driving an efficient, high-velocity supply chain

that continually synchronizes planning and execution process steps to

respond to our customers’ needs while reducing costs in the end-to-end,

multi-enterprise supply chain. This strategy provides our customers with the

lowest Total Cost Of Ownership (TCOOTM)", said Harvinder Sembhi,

Senior Vice President, Supply Chain Management and Chief Procurement

Officer at Celestica.

To facilitate this TCOOTM vision, a major supply chain transformation

project was launched about six years ago. The company began looking at

B2B and supply-demand integration solutions to move from fax, email and

manual integration with its numerous supplier and trading partners.

They selected a solution provider to provide state-of-the-art collaborative

technologies. “To support the TCOOTM strategy, we built a global network

of best-in-class supplier partners in close proximity to our principal

manufacturing sites, as well as our vendors and Third-party Logistics

Providers (3PLs) to increase the agility and flexibility of our supply chain and

deliver the shortest overall lead times, while reducing costs. We determined

the true cost of producing, delivering and supporting our customers’

products so we can exceed their expectations for time-to-market and

quality, and provide them with the lowest TCOOTM. The advanced

processes and capabilities of the collaboration/integration platform have

become foundational to delivering on our TCOOTM strategy,” summarized

Sembhi.

Today the process is highly automated - the advanced technology platform

is a cloud-based web portal which facilitates connectivity to electronic

means of data sharing with both large and small suppliers. The flexible tools

and web access options streamline the data collection and sharing process

and also instill a high degree of data integrity and validation.

In concert with the technology migration, the company also streamlined its

global supply chain and operations in both planning and execution to


Execution



become more responsive and agile in its global in-bound and out-bound

logistics. In support of the TCOOTM vision, the multi-year transformation

began reaping benefits almost immediately, including:

Reduced working capital cost of inventory – days sales outstanding by double digit percentage

Redeployed administration -15% increase in employee productivity

Reduced latency by 30% ( latency time is the time required to send

an available to promise request from Celestica to the supplier and back) - the company is now at a standard of 48 hours

Increased percentage yield acceptance by supplier - first accept yield-to-date and quantity has increased to 60% from 18%

Increased agility - time-to-market by reducing dwell time from order to receipt

Increased data accuracy and synchronization in virtually every

planning and execution process

“These benefits are reflective of the level of transformation we embraced in

order to close the loop on planning and execution in our expansive supply-

demand network. Today our integrated global supply chain is adaptive and

responsive to continuous change, tailored to meet each customer's unique

requirements. It is how we help our customers stay ahead in a dynamic

world and adapt to changes quickly,” concluded Sembhi.

Recommendations

The goal of this document is to explore the level of closed loop integration

and collaborative execution that companies possess to orchestrate activities

between planning and execution across their extended end-to-end supply

chains and across partners. The following are three suggested steps for

embracing collaborative execution across the multi-enterprise supply chain:

Embrace collaborative technology. This document

demonstrates that top performers are more tightly integrated and

are better at closing the gap between planning and execution. Both

internal to their organizations, but even more importantly to the

multi-tier extended supply chain, they are up to five times more

likely to have the visibility required to execute collaboratively. They

are 2.4 to 5-times as likely as other companies to embrace

collaborative and or cloud technologies and platforms to manage

simultaneously across multiple tiers in their supply chain. Moving

from serial to collaborative information flows enables visibility - an

investment area for up to 76% of our respondents. Even for

companies with closed-loop integration between supply chain

planning and execution, only about 34% have cloud-based

collaborative technology in place. The investment required is easily

justified for the top performers have significant process advantages

over their counterparts. The top 20% of companies with closed-


Execution



loop integration and collaborative execution between supply chain

planning and execution were dramatically better than even other

companies with closed-loop integration. Top companies managed to

minimize the rise in supply chain logistics costs and exhibit a 3 to 4

percentage point advantage in total landed cost (warehousing and

transportation) when compared to other integrated companies.

They were able to hold these costs constant, and in some cases,

also lower costs in this troubled economy (Table 1). With these

types of performance gains possible the investment cost can be

justified.

Streamline process and enable collaborative execution.

Moving from a serial to a synchronized and robust continuous

S&OP and collaborative execution platform requires significant

process reengineering. Developing a technology roadmap with your

suppliers, carriers and other trading partners for the frequent and

accurate exchange of global data requires planning and due diligence.

Make sure you equip and train your staff and educate your partners

on their role in making sure that communications and protocols are

in place for the new streamlined process. Moving from a serial to a

multi-enterprise collaborative closed loop supply chain execution

process is not simple. No technology platform by itself enables

supply chain transformation - it requires a reengineered process and

in some cases a reconfigured supply chain. For the best

performance results, effort must be devoted to fully leverage the

collaborative technologies within the enterprise and across the

extended supply chain. Top companies demonstrated superior cost

metrics but often times it is the value of time that results in the

most significant positive impact to supply chain execution (see sidebar).

Equip and empower people. The data shows that among the top

integrated companies (i.e., companies with lower total landed costs

and lower warehousing costs) exception alerts are the most popular

automated feature (82%, Table 2). Looking back at the top business

pressures, we saw that the growing complexity of the supply chain

was top of mind for supply chain professionals. Exception

management is the only way to properly address the complexities of

today's supply chain and it requires technology. However, a

technology platform is only as good as the people that operate and

control it. Top companies generally recognize that a member of

senior management needs to be given authority and responsibility

for collaborative execution within the company (over 88% of all

companies and 95% of the 17 top companies make this claim). Top

companies recognize the need to equip their people, train them and

work in a collaborative fashion with their suppliers, carriers and

other trading partners to execute. Fifty-two percent (52%) of the

companies with closed loop integration indicate that their personnel

have the ability to view the supply chain holistically in terms of

length processes and 58% indicate that they have the ability to

Time as a Driving Factor

A driving factor in execution

agility in this is the value of

time. Time is the only resource

that cannot be replaced or

outsourced. Once it has passed,

the impacts are significant and

only the costs remain: Impacts

include:

Lost customer confidence

Lost sales; market valuation

Inventory carrying and aging

Expediting costs , tariffs /

duties, and customs sanctions

Capacity underutilization

Overtime labor


Execution



collaborate on what-if scenarios (Figure 3). It is not surprising that

they are doing a better job financially and are more equipped to

move from serial to collaborative real-time execution requirements.

It is important that companies equip their staffs to manage the

exceptions as they occur with agility and competency. It is also

important to train and equip suppliers, carriers and trading partners

in proper and frequent exchange of data that is critical to supply chain operations.

The dramatic savings in time and improvements in customer satisfaction

demonstrated in this document are the reasons that leading companies have

developed a core competency in collaborative execution. By utilizing the

three steps above, today's company can ensure that its people, process, and

technology are equipped for supply chain transformation. With leadership

and collaborative execution ingrained throughout the supply chain

organization, today's company can embrace the complexities of the multitier

supply chain and begin to deliver superior performance results.

For more information on this or other research topics, please visit

www.aberdeen.com.

Related Research

Sales and Operations Planning 2011:

Key Lever for Enabling Business

Profitability for the Chief Supply Chain

Officer; August 2011

Demand Management: Bridging External

Market Inputs with Internal Statistical

Forecasting; June 2011

Business Intelligence Command and

Control Center for the Chief Supply

Chain Officer; May 2011

2011 Transportation Contract, Tender

and Spend Management; April 2011

Supply Chain Visibility: Fostering Security,

Resiliency, and Efficiency; February 2011

Warehouse Management Excellence:

Maximizing Resources and Efficiency;

November 2010

Authors: Bob Heaney, Senior Research Analyst, Supply Chain Management,

([email protected])

Kevin Permenter, Research Associate, Supply Chain Management

([email protected])

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Collaborative Execution: Closing the Loop on Supply Chain

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