Planning, Forecasting & Process Optimization. Is Your Supply Chain a Strategic Growth Enabler?

Transcription

1 Planning, Forecasting & Process Optimization Is Your Supply Chain a Strategic Growth Enabler? Erich L. Gampenrieder, Head Global Supply Chain CoE, KPMG

2 Trends & Call for Growth Support

3 Agenda 1 Trends & Call for Growth Support 2 Capabilities & Enablers 3 Case Studies & Lessons Learnt Data: 469 executives from consumer companies headquartered in 32 countries

4 Trends & Call for Growth Support Since last year s survey, the clear focus of (consumer goods) executives has shifted from survival towards technology and operations - particularly around four topics 54% DIGITAL STRATEGY engaging consumers through mobile and digital platforms is a top concern #1 DATA ANALYTICS is the top ranked area of importance for companies strategies this year 45% SUPPLY CHAIN of executives say speed and agility is their top priority for improving the supply chain #1 EXECUTION EXCELLENCE is the number one challenge of executives, heading a list of some 80 issues, including innovation, geopolitical instability, and top-line growth Source: KPMG Top of Mind Survey, 2015; Harvard Business Review Why Strategy Execution Unravels and What to Do About It, March 2015

5 Trends & Call for Growth Support In addition, renewed optimism drives (consumer) executive priorities - growth is one of the areas in focus of COOs Renewed Optimism Projections for organic growth over the next two years (by headquarters region) Integration & Transformation Initiatives COOs or equivalents who say that the following initiatives are planned or already in progress in their organization Source: KPMG Top of Mind Survey, 2015 Data: Source survey of ~800 senior executives in major markets

6 Capabilities & Enablers Which capabilities are needed to close the gap? Transforming the supply chain for growth from efficiency oriented to responsiveness oriented spans both Customer and Supply Chain capabilities We had previously grown organically, but we d ended up with 4,000 procedures which weren t effective. Now we are simplifying and streamlining: there is a lot of value from having more simplified and harmonized processes. SVP Supply Chain, Chemicals Company, 2008 We started a growth initiative in the last year entirely focused around complexity reduction: trying to understand our customer portfolio and where do we want to grow; how we can reduce the complexity of the way we work today in order to win business. COO, Beverage Company, 2014 I know that we have to differentiate our supply chain to meet our marketing needs, but I don t know exactly what that entails Director of Customer Service & Logistics, Consumer / LSHC Company, 2015 Efficiency Oriented Responsiveness Oriented $ Efficient Continuous Flow Fast Differentiated Value Driven Flexible Agile

7 Capabilities & Enablers What should we do? As a result supply chains should focus to be differentiated, value-driven, flexible, and allow enhanced agility to manage grow Responsiveness Oriented $ Differentiated Value Driven Flexible Agile Legend A Case Studies Enablers (selected) A Supply Chain Segmentation to improve profitability through balanced flexibility and efficiency Integrated Business Planning to quickly run scenarios / sensitivity analysis Design network around strategic customers requiring flexibility Cost-to-serve to view on the economic value created by each customer, channel or any other customer grouping B Supply Chain Analytics to support continuous improvement Align corporate strategy with customer / service-focused metrics to ensure matching objectives along the value chain SKU rationalization to increase effective capacity to handle break-ins / surges Source: KPMG Top-of-Mind Survey 2014, KPMG Project Experience, KPMG Research, under consideration of Gartner: Transform Your Supply Chain to Become Demand-Driven (2014)

8 Agenda 1 Trends & Call for Growth Support 2 Capabilities & Enablers 3 Case Studies & Lessons Learnt A Supply Chain Segmentation

9 Due to increased number of SKUs over time and Case Study - SC Segmentation Situation Increase in products / SKUs has historically required linear growth in overhead Graph deleted

10 increased complexity in serving global markets Case Study - SC Segmentation Situation Increase in products / SKUs has historically required linear growth in overhead The mix of market types and complexity of managing the supply chain for the markets was increasing Graph deleted

11 client needed to balance flexibility and efficiency in order to enable growth Case Study - SC Segmentation Situation Increase in products / SKUs has historically required linear growth in overhead The mix of market types and complexity of managing the supply chain for the markets was increasing Increased competition Industry consolidations through M&A Increased regulatory scrutiny for new products Enable Growth A segmented supply chain provides the platform to support growth in new and existing markets Benchmark: Up to 5% potential topline growth Maximize Profitability Segmentation to unleash value by optimizing operating expenses and working capital Benchmark: 5 10% potential COGM and COS reduction Balance Flexibility & Efficiency When executed well, the segmented supply chain will serve customers at optimal performance levels Benchmark: 3 5x potential Supply Chain Performance Gain Scope The end-to-end supply chain is defined as information and physical flows related to PLAN, SOURCE, MAKE and DELIVER and related SUPPORT activities Outcomes Detailed understanding of the supply chain segments, Business case for segmentation Capability gaps between current and future state Roadmap for implementation

12 Case Study - SC Segmentation The segmentation simplified supply chain complexity by grouping products and customers with similar attributes ILLUSTRATIVE 1 Sample demand and supply dimensions are examples of data points that can be used for a segmentation analysis Sample Demand Dimensions 1 Market Access Index Customer Volume by SKU Lead Time Expectation by Customer Channel Characteristics Customer Margin % Average Price paid per SKU by Customer Sample Supply Dimensions 2 Product Volume Volume Volatility Product Complexity Number of Suppliers per Raw Material Manufacturing Capacity Packaging Complexity Illustrative Segments 2 Customer Groups Efficient (e.g., High Volume, Mature Products, Stable Demand, Premium Customers) Dedicated (e.g., Low Volume, Growth Products, Stable Demand, Premium Customers) Agile (e.g., Low Volume, Growth Products, Variable Demand, Regular Customers) Responsive (e.g., High Volume, Mature Products, Variable Demand, Regular Customers) 2 Segment names are an example to demonstrate the combination of product and customer groups Product Groups

13 Case Study - SC Segmentation The right segmentation option needed to be selected, based on data, relevance to the business, and ability to simplify-the-complex OPTION A OPTION B OPTION C Graph deleted Graph deleted OPTION CHARACTERISTICS Product focused segmentation option optimizes the supply chain based on product life cycle considerations OPTION CHARACTERISTICS Regional focused segmentation option optimizes the supply chain based on geographic presence and future expansion OPTION CHARACTERISTICS Customer centric segmentation option optimizes the supply chain based on channel and various customer service levels required. No one option is right,

14 the strategy that was the best fit for growth in the next 5-10 years was selected Case Study - SC Segmentation Advantages Optimizes physical and information supply chains Accommodates product lifecycle shift in the coming 5-10 years Implies minimal changes in supply chain in select segments Enables geographic nuances and demand driven value streams across segments Provides the landscape for future products Graph deleted Challenges Requires investments in new capabilities to close gaps in specific segments Requires commercial engagement for potential renegotiations in customer expectations

15 Case Study - SC Segmentation All supply chain functions were reviewed to determine the right alignment with each segment Stable and Profitable Efficient Highly Variable PLAN SOURCE MAKE DELIVER Agile Unique Needs Graph deleted Dedicated Diverse Low Volume Responsive

16 Case Study SC Segmentation Value stream and operating model design will follow. Cross-functional collaboration and alignment as well as time to socialize is important. What s next? Realignment with segmentation will leverage a robust fitgap assessment that prioritizes changes based on payback time (benefit vs. cost) Detailed value stream and operating model design will follow the segmentation assessment Graph deleted Key Takeaways at this point of the journey Cross-functional collaboration and alignment drives the success of demand driven segmentation process (Analyze, Engage SMEs, Gained Alignment, Evaluation and Value, Implement) Data is critical, need to build the analytical model once and refresh periodically Incorporate the Voice of Customer into the analysis Challenge biases based on the current way of working Allow for time to socialize options and acknowledge the hurdles so that they can be addressed Recognize the need to change before it is mission critical segmentation takes time

17 Agenda 1 Trends & Call for Growth Support 2 Capabilities & Enablers 3 Case Studies & Lessons Learnt B Supply Chain Analytics

18 Case Study Supply Chain Analytics Process Analytics reconstructs what really happened and provides the capabilities to find the root cause of why, how, what, who and when Graph deleted

19 Case Study Supply Chain Analytics Client leadership strives to strengthen continuous improvement by enabling the business with fact based process insights Current State Desired State Process performance highly mature Achieve significant business impacts Pressure to further improve service capabilities towards internal customers New approaches for further Agility Increase needed with Continuous Improvement (CI) through the business itself based on Open-minded improvement culture Business Performance Analytics Fact based insight and business driven hypotheses Improvements identified by cross functional teams Supported by a Center of Excellence (CoE) to support BPA empowered by

20 Case Study Process Performance Analytics The current approval policy leads to high efforts across the organization reducing the approval complexity is a lever for efficiency increase Improvement area Reduction of approval complexity Reference ID 2 Deep Dive Yes/later Approach Improve throughput times and avoid workload by reducing approval steps Rational PO approval not examined PO approval > indirect material 1st approval automatic? 2nd to 4th approval 2500 (= p.a.) Value approach Approach: re-think value limits and double approvals in indirect Graph deleted Improvement Lever Free up capacity at approvers and speed up Lead Time Reduction order times Material Cost Saving Working Capital Improvement

21 Case Study - Supply Chain Analytics To proactively improve operational performance a cross-functional Continuous Improvement (CI) operating model was implemented Graph deleted

22 To recap Growth is one of the areas in focus of COOs Transforming the supply chain for growth from efficiency oriented to responsiveness oriented spans both Customer and Supply Chain capabilities There is no one-size-fits-all approach to enable growth: different customers require different capabilities and enablers Supply Chain Segmentation is a key enabler profitable growth based on differentiated services So What and continuous improvement are the real outcomes of Supply Chain Analytics

23 Happy to discuss Vita Erich L. Gampenrieder Partner Ganghoferstrasse 29 D Munich Phone: +49 (0) Cell: +49 (0) Career Summary During his almost 20 years of experience, Erich has been responsible for high profile cross-border programs for a number of Fortune 500 companies. Erich leads KPMGs Global Supply Chain CoE and is a member of KPMGs Global Management Consulting Leadership Team Erich joint KPMG firm from Deloitte where he led the Operation Consulting practice in Germany. Previously, Erich was a partner in Accenture s global supply chain practice. Prior to his consulting career Erich served the German Army as Electronic Warfare Officer for 12 years Highlights of Client Experiences BASF Siemens Henkel Lanxess Bayer Healthcare Krauss-Maffei Wegmann Raytheon Marine Robert Bosch Energy Drink Producer