Supply Chain Insights Webinar on Supply Chain Excellence in the Process Industries
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Transcript of Supply Chain Insights Webinar on Supply Chain Excellence in the Process Industries
Supply Chain IndexTwenty Years in the Making:
A Focus on Process Industries
Webinar: September 24, 2012
Supply Chain Insights LLC Copyright © 2012, p. 2
Our Presenters Today
Lora Cecere Founder Supply Chain Insights
Abby Mayer Research Associate Supply Chain Insights
BRICKSMatterThe Role of Supply Chains in Building Market-Driven Differentiation
LORA M. CECERE CHARLES W. CHASE JR.
BookPublishes December
2012
Supply Chain Insights LLC Copyright © 2012, p. 4
Agenda
Background
What is Supply Chain Excellence?
A Look at Leaders
Wrap-up
Supply Chain Insights LLC Copyright © 2012, p. 5
Evolving Practices
Supply Chain Insights LLC Copyright © 2012, p. 6
• Self-reported data• Peer group relevance• Congruency:
– Point in time– Similar data models– Holistic Views. Metric
understanding
Problems in Benchmarking
Supply Chain Insights LLC Copyright © 2012, p. 7
Our Process
Initial Data CollectionFebruary – May 2012
Located annual reports back to 1990
Built spreadsheet comparisons by industry
Examined industry averages for:
-Inventory
-Year-over-Year Growth
-Revenue per Employee
Evaluating the MetricsMay – August 2012
Identified the metrics that matter
Analyzed by ratios to enable meaningful comparison in light of size and currency differences
Characterized the ratios by the drivers on the Effective Frontier
Charted the intersections by 4 categories of metrics
Determining Industry PotentialAugust 2012 - present
Charting industry trade-offs and evaluating the impact and industry potential
Personalized charts offered as a free service in the SCI Community to accelerate learning
Augment quantitative surveys and maturity models with the data from the Effective Frontier
Building the IndexAugust 2012 - present
Build an equation by industry peer group to understand industry potential
Examine the relationship between supply chain maturity and balance sheet financials
Supply Chain Insights LLC Copyright © 2012, p. 8
Year-over-Year Sales Growth
Supply Chain Insights LLC Copyright © 2012, p. 9
Free Cash Flow Ratio
Supply Chain Insights LLC Copyright © 2012, p. 10
Source: Supply Chain Insights 2012
Average Days of Inventory by Year
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods
59 57 62 64 67 67 68 70 70 64 64 67
Chemical
71.5 71.9 78.2 75.1 62 70.3 68.1 64.3 64.3 78.6 72.9 72.8
Pharma
122.236691097869
133.699100562175
190.147616165968
170.986522478989
184.342617399859
175.550260476877
167.799951139247
149.815153981283
154.915781882591
198.663134119976
154.313480863244
131.819794240294
High Tech
93.1 57.6 46.5 48.5 35.9 37.3 43.8 36.8 34.6 41.3 34.8 30.4
Average
86.4591727744674
80.0497751405437
94.2119040414919
89.6466306197472
87.3106543499647
87.5375651192192
86.9249877848117
80.2287884953207
80.9539454706477
95.6407835299941
81.503370215811
75.5049485600736
25.0
75.0
125.0
175.0
225.0
Da
ys
of In
ve
nto
ry
Supply Chain Insights LLC Copyright © 2012, p. 11
Source: Supply Chain Insights 2012
Average Days of Working Capital by Industry
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Consumer Packaged Goods
-20 -8 -12 -2 -21 -23 -8 -18 -11 -10 -12 -13
Chemical
37.3 44.7 61.7 71.9 64.8 64.1 63.8 57 51.7 74.8 85.6 77
Pharma
64.1312232310575
56.4017153199571
48.4177907877281
56.1915353741853
71.8377359146444
94.0630645718506
92.6081805769852
88.054253352194
87.1105878511032
111.040082720036
115.985297910064
113.223926160093
High Tech
231.5 290.3 283.5 243.5 173.5 138.9 109.4 103 92.4 131.9 138.9 140.9
Average
78.2328058077644
95.8504288299893
95.404447696932
92.3978838435463
72.2844339786611
68.5157661429627
64.4520451442463
57.5135633380485
55.0526469627758
76.9350206800089
82.1213244775161
79.5309815400233
Series6
0 0 0 0 0 0 0 0 0 0 0 0
-25.0
25.0
75.0
125.0
175.0
225.0
275.0
325.0
Days o
f W
orkin
g C
ap
ital
Supply Chain Insights LLC Copyright © 2012, p. 12
Agenda
Background
What is Supply Chain Excellence?
A Look at Leaders
Wrap-up
Supply Chain Insights LLC Copyright © 2012, p. 13
Supply Chain Management: Top 3 Elements of Pain for Respondent
Supply Chain Insights LLC Copyright © 2012, p. 14
Evolution of Supply Chain Process Excellence
Align:MarketDriven
Resilient
Efficient
Cost
Procure to pay/order to
cash
Supply Chain Insights LLC Copyright © 2012, p. 15
Evolution of Supply Chain Process Excellence
Align:MarketDriven
Reliable
Adapt: Demand Driven
EfficientRight Product
Right Place
Right Time
Right Cost
Cost
Procure to pay/order to
cash
Supply Chain Insights LLC Copyright © 2012, p. 16
Evolution of Supply Chain Process Excellence
Align:MarketDriven
Resilient Reliable
Adapt: Demand Driven
EfficientAbsorb
DemandVolatility
AbsorbSupply
Volatility
Right Product
Right Place
Right Time
Right Cost
Cost
Procure to pay/order to
cash
Supply Chain Insights LLC Copyright © 2012, p. 17
Evolution of Supply Chain Process Excellence
Align:MarketDriven
Resilient Reliable
Adapt: Demand Driven
EfficientSense
Demandand Supply
Shape Demand andSupply based
on Market
Absorb DemandVolatility
AbsorbSupply
Volatility
Right Product
Right Place
Right Time
Right Cost
Cost
Procure to pay/order to
cash
Supply Chain Insights LLC Copyright © 2012, p. 18
Evolution of Supply Chain Process Excellence
Align:MarketDriven
Resilient Reliable
Adapt: Demand Driven
Efficient
Building Horizontal Process Connectors
ContinuousTesting
LearningImprovingIn Market
OrchestrateDemand and Supply
Sense Demand
and Supply
Shape Demand andSupply based
on Market
Absorb DemandVolatility
AbsorbSupply
Volatility
Right Product
Right Place
Right Time
Right Cost
Cost
Procure to pay/order to
cash
Supply Chain Insights LLC Copyright © 2012, p. 19
Supply Chain Excellence
Supply Chain Insights LLC Copyright © 2012, p. 20
A Supply Chain
is a Complex System
with Complex Processes
with Increasing Complexity
What is a Supply Chain?
Supply Chain Insights LLC Copyright © 2012, p. 21
Typical Organization
Supply Chain Insights LLC Copyright © 2012, p. 22
Looking at Supply Chain as a Complex System
Supply Chain Insights LLC Copyright © 2012, p. 23
Metrics
Supply Chain Insights LLC Copyright © 2012, p. 24
• Performance better than peer group
• Year-over-year improvements
• Consistency in results
• Leadership in managing trade-offs and expanding the limits of the Effective Frontier
What is Best in Class?
Supply Chain Insights LLC Copyright © 2012, p. 25
Agenda
Background
What is Supply Chain Excellence?
A Look at Leaders
Wrap-up
Supply Chain Insights LLC Copyright © 2012, p. 26
Corporate Summary
Supply Chain Insights LLC Copyright © 2012, p. 27
Metrics Included for Comparison
Supply Chain Insights LLC Copyright © 2012, p. 28
Cash-to-Cash Cycle vs. Gross Margin (2000-2003)
Supply Chain Insights LLC Copyright © 2012, p. 29
Cash-to-Cash Cycle vs. Gross Margin (2004-2007)
Supply Chain Insights LLC Copyright © 2012, p. 30
Cash-to-Cash Cycle vs. Gross Margin (2008-2011)
Supply Chain Insights LLC Copyright © 2012, p. 31
Cash-to-Cash Cycle vs. Gross Margin (2000-2011) SUMMARY SLIDE
Supply Chain Insights LLC Copyright © 2012, p. 32
Inventory Turns vs. Revenue per Employee (2002-2003)
Supply Chain Insights LLC Copyright © 2012, p. 33
Inventory Turns vs. Revenue per Employee (2004-2007)
Supply Chain Insights LLC Copyright © 2012, p. 34
Inventory Turns vs. Revenue per Employee (2008-2011)
Supply Chain Insights LLC Copyright © 2012, p. 35
Inventory Turns vs. Revenue per Employee (2002-2011) SUMMARY SLIDE
Supply Chain Insights LLC Copyright © 2012, p. 36
Who is the supply chain leader? Colgate Kimberly Clark Kraft Foods Procter & Gamble Unilever Cannot tell. No leader.
Audience Poll
Supply Chain Insights LLC Copyright © 2012, p. 37
Corporate Summary
Supply Chain Insights LLC Copyright © 2012, p. 38
Metrics Included for Comparison
Supply Chain Insights LLC Copyright © 2012, p. 39
Cash-to-Cash Cycle vs. Gross Margin (2000-2003)
Supply Chain Insights LLC Copyright © 2012, p. 40
Cash-to-Cash Cycle vs. Gross Margin (2004-2007)
Supply Chain Insights LLC Copyright © 2012, p. 41
Cash-to-Cash Cycle vs. Gross Margin (2008-2011)
Supply Chain Insights LLC Copyright © 2012, p. 42
Cash-to-Cash Cycle vs. Gross Margin (2000-2011) SUMMARY SLIDE
Supply Chain Insights LLC Copyright © 2012, p. 43
Inventory Turns vs. Revenue per Employee (2002-2003)
Supply Chain Insights LLC Copyright © 2012, p. 44
Inventory Turns vs. Revenue per Employee (2004-2007)
Supply Chain Insights LLC Copyright © 2012, p. 45
Inventory Turns vs. Revenue per Employee (2008-2011)
Supply Chain Insights LLC Copyright © 2012, p. 46
Inventory Turns vs. Revenue per Employee (2002-2011) SUMMARY SLIDE
Supply Chain Insights LLC Copyright © 2012, p. 47
Who is the supply chain leader? BASF
E I Du Pont
Dow Chemical
Cannot tell. No leader.
Audience Poll
Supply Chain Insights LLC Copyright © 2012, p. 48
Corporate Summary
Supply Chain Insights LLC Copyright © 2012, p. 49
Metrics Included for Comparison
Supply Chain Insights LLC Copyright © 2012, p. 50
Cash-to-Cash Cycle vs. Gross Margin (2000-2003)
Supply Chain Insights LLC Copyright © 2012, p. 51
Cash-to-Cash Cycle vs. Gross Margin (2004-2007)
Supply Chain Insights LLC Copyright © 2012, p. 52
Cash-to-Cash Cycle vs. Gross Margin (2008-2011)
Supply Chain Insights LLC Copyright © 2012, p. 53
Cash-to-Cash Cycle vs. Gross Margin 2000-2011SUMMARY SLIDE
Supply Chain Insights LLC Copyright © 2012, p. 54
Inventory Turns vs. Revenue per Employee (2002-2003)
Supply Chain Insights LLC Copyright © 2012, p. 55
Inventory Turns vs. Revenue per Employee (2004-2007)
Supply Chain Insights LLC Copyright © 2012, p. 56
Inventory Turns vs. Revenue per Employee (2008-2011)
Supply Chain Insights LLC Copyright © 2012, p. 57
Inventory Turns vs. Revenue per Employee (2002-2011)SUMMARY SLIDE
Supply Chain Insights LLC Copyright © 2012, p. 58
Who is the supply chain leader? Abbott Laboratories Merck Pfizer Cannot tell. No leader.
Audience Poll
Supply Chain Insights LLC Copyright © 2012, p. 59
Join Us!
www.scicommunity.com
Supply Chain Insights LLC Copyright © 2012, p. 60
Agenda
Background
What is Supply Chain Excellence?
A Look at Leaders
Wrap-up
Supply Chain Insights LLC Copyright © 2012, p. 61
• Supply chain management is thirty years old
• The definition of supply chain excellence is evolving
• Delivery can best be measured through the analysis of financial metrics and the balance sheet
Wrap-up
Supply Chain Insights LLC Copyright © 2012, p. 62
Questions?
Supply Chain Insights LLC Copyright © 2012, p. 63
• Thank you so much for joining us today and we look forward to continuing the conversation on Twitter. Follow along and participate with hashtag #SCIWebinar.
• Be sure to view the full research report, Conquering the Supply Chain Effective Frontier by Lora and Abby on our website under research at www.supplychaininsights.com
• Also check out Lora's blog Supplychainshaman.com and Abby's blog SupplyChainIndex.com
• I invite you to friend me as well as Lora and Abby in the community at SCIcommunity.com. Lets continue this conversation there. I look forward to meeting you.
• See you on October 26th for the next installment of our webinar series. Supply Chain Index: a Focus on Discrete Industries.
Supply Chain Insights LLC Copyright © 2012, p. 64
Who is Supply Chain Insights?
Supply Chain Insights is focused on delivering actionable advice for supply chain leaders. A company dedicated to research, turn to us when you want the latest insights on supply chain trends, technologies to know and metrics that matter.
Supply Chain Insights LLC Copyright © 2012, p. 65
Metric Equations