Collaborative Execution: Closing the Loop on Supply Chain Planning and Execution

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1 Collaborative : Closing the Loop on Supply Chain Planning and 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. October, 2011 Research Brief Aberdeen s Research Briefs provide a detailed exploration of a key finding from a primary research study, including key performance indicators, Bestin-Class insight, and vendor insight. 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%) This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc.

2 Collaborative : Closing the Loop on Supply Chain Planning and Page 2 Figure 1: Supply Chain Cost and Complexity are Paramount Rising supply chain management costs 48% Collaborative Defined: Growing complexity of global operations logistics channels Increased demand volatility Lack of visibility with external trading partners Escalating demand for service from customers 23% 23% 38% 34% All Respondents 0% 25% 50% 75% 100% Percent of Respondents n=97 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 multitiered, 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 Actions Supplier enablement - Increase B2B collaboration / visibility into supplier-side processes with suppliers, trading partners Improve perfect order rate by improving pick accuracy and on-time shipment Improve external cross-network process collaboration and design Customer enablement - Increase B2B collaboration / visibility into customer-side processes with customers, trading Enable multi-tier external process collaboration and integration 21% 34% 31% 36% 55% 0% 20% 40% 60% 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 provides continuous or realtime visibility into multienterprise 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

3 Collaborative : Closing the Loop on Supply Chain Planning and Page 3 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. 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. Figure 3: Core Capabilities Gaps - those with Closed-Loop Integration and Without Ability to create demand forecasts that reflect true customer demand x 60% 86% Ability to perform constrained supply chain planning and execution x 47% 84% The ability to access real-time supply chain data needed for decision-making x 19% 64% End-to-end supply chain data and process visibility x 25% 62% Ability to automatically collaborate on what-if scenarios x 27% 58% Visibility across multiple tiers of supply base x 33% 57% Ability of personnel to view the supply chain holistically in terms of linked processes x Cloud-based trading partner collaboration x 7% 25% 34% 52% Close-Loop Integration No Integration 0% 20% 40% 60% 80% 100% Percentage of Respondents, n = 123 Source: Aberdeen Group, September 2011

4 Collaborative : Closing the Loop on Supply Chain Planning and Page 4 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 demandside, 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 o o 1.4 times as likely to have the ability to create demand forecasts that reflect true customer demand 2.2 times as likely to have the ability to automatically collaborate on what-if scenarios 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

5 Collaborative : Closing the Loop on Supply Chain Planning and Page 5 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 closedloop 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 Closedloop integration n = 61 Without Closedloop 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 Change in International transportation costs per unit shipped -0.19% 3.00% 3.66% 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 Source: Aberdeen Group, September 2011

6 Collaborative : Closing the Loop on Supply Chain Planning and Page 6 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 closedloop 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. 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 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 Top Performing Company Definition n = % 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)

7 Collaborative : Closing the Loop on Supply Chain Planning and Page 7 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 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. Fast Facts: Collaborative planning is a continuous process requiring constant feedback during execution The complexity of the multitier supply chain adds to the degradation of information and time particularly when each tier is handled in a serial fashion 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,

8 Collaborative : Closing the Loop on Supply Chain Planning and Page 8 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 midsize 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.

9 Collaborative : Closing the Loop on Supply Chain Planning and Page 9 Figure 4: Extent of Integration Application user interface level integration of workflow and data Real time transfer of data but user has to go to different user interfaces Batch based transfer of data but user has to go to different user interfaces Our ERP/legacy solution is not integrated with our supply chain planning solution 16% 24% 24% 16% 27% 12% 34% 31% 6% 34% 19% 59% Top 20% of Integration No Integration Integration "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 0% 20% 40% 60% 80% Percent of Respondents n=97 Source: Aberdeen Group, September 2011 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 Internal supply chain performance dashboards (e.g., across departments, regions, divisions, product channels etc.) External supply chain performance scorecards (e.g., across carriers transportation, manufacturing partners, suppliers, customer / product segments) Exception alerts - responding to supply - demand disruptions Top 20% Close-Loop Integrated Companies Without Closed-loop integration 70% 42% 65% 43% 82% 47%

10 Collaborative : Closing the Loop on Supply Chain Planning and Page 10 Feature/Function Role-based visibility views external supply chain partners Supply-demand synchronization with connectivity, process orchestration, and exception management Multi-tier inventory collaboration with suppliers / others (inbound) Channel inventory collaboration with customers, hubs, 3PLs (outbound) 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 Analytics (e.g., statistical analysis, trending, route cause analysis, etc.) Supply chain modeling (e.g., what-if scenarios, network design, etc.) Top 20% Close-Loop Integrated Companies Without Closed-loop integration 44% 21% 47% 13% 53% 10% 41% 7% 41% 3% 53% 30% 41% 20% Financial settlement or financing triggers 30% 30% Source: Aberdeen Group, September 2011 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.

11 Collaborative : Closing the Loop on Supply Chain Planning and Page 11 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 (TCOO TM )", said Harvinder Sembhi, Senior Vice President, Supply Chain Management and Chief Procurement Officer at Celestica. To facilitate this TCOO TM 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, 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 TCOO TM 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 TCOO TM. The advanced processes and capabilities of the collaboration/integration platform have become foundational to delivering on our TCOO TM 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

12 Collaborative : Closing the Loop on Supply Chain Planning and Page 12 become more responsive and agile in its global in-bound and out-bound logistics. In support of the TCOO TM 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 supplydemand 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-

13 Collaborative : Closing the Loop on Supply Chain Planning and Page 13 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

14 Collaborative : Closing the Loop on Supply Chain Planning and Page 14 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 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 Related Research 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, Kevin Permenter, Research Associate, Supply Chain Management For more than two decades, Aberdeen's research has been helping corporations worldwide become Best-in-Class. Having benchmarked the performance of more than 644,000 companies, Aberdeen is uniquely positioned to provide organizations with the facts that matter the facts that enable companies to get ahead and drive results. That's why our research is relied on by more than 2.5 million readers in over 40 countries, 90% of the Fortune 1,000, and 93% of the Technology 500. As a Harte-Hanks Company, Aberdeen s research provides insight and analysis to the Harte-Hanks community of local, regional, national and international marketing executives. Combined, we help our customers leverage the power of insight to deliver innovative multichannel marketing programs that drive business-changing results. For additional information, visit Aberdeen or call (617) , or to learn more about Harte-Hanks, call (800) or go to This document is the result of primary research performed by Aberdeen Group. Aberdeen Group's methodologies provide for objective fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by Aberdeen Group, Inc. and may not be reproduced, distributed, archived, or transmitted in any form or by any means without prior written consent by Aberdeen Group, Inc. (2011a)

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