Driving Smarter, More Efficient Supply Chains Through Analytics

Transcription

1 Driving Smarter, More Efficient Supply Chains Through Analytics Business Leadership Track Paul A. Hoy, CPIM WW Business Analytics Industrial and Distribution Sector Executive 2011 IBM Corporation

2 Presentation topics Competitive pressure and market demand change the way organizations view their supply chains Sales and Operations Planning (S&OP) drives supply chain planning Best practices for monitoring supply chain performance and driving responsiveness How to get started 2011 IBM Corporation 2

3 Today, in the 21st century, companies are doing much more than just shipping. By embedding product and process innovation in supply chain operations and consciously managing and shaping demand from a customer, production and fulfillment standpoint, supply chain management has advanced a great deal. 20 years ago, a typical product company had the supply chain organization reporting to manufacturing, with responsibility mainly for inbound materials management and outbound shipping. Now 61% * of Supply Chain heads report into the CEO office It s clear supply chain has grown, with the business taking notice. * According to the Supply & Demand Chain Executive magazine, 2011

4 Supply Chain Imperatives Key Performance Management Drivers Visibility Flooded with more information than ever, supply chain executives still struggle to see and act on the right information. Cost Containment Rapid, constant change is rocking this traditional area of strength and outstripping supply chain executives ability to adapt. Risk CFOs are not the only senior executives urgently concerned about risk; risk management ranks remarkably high on the supply chain agenda as well. Customer Intimacy Despite demand-driven mantras, companies are better connected to their suppliers than their customers. Globalization Contrary to initial rationale, globalization has proven to be more about revenue growth than cost savings. 4 Source: IBM Global Chief Supply Chain Office Study, 2009

5 Sales and operations planning (S&OP) is the key integrated process that the supply chain organization can leverage to achieve visibility and transformation across the entire organization and throughout the value chain. Aberdeen s S&OP study highlights the results of over 196 companies involved in S&OP-related initiatives. Key Pressures 59% Improving Top Line Revenue 53% Reduce Supply Chain Operating Costs 49% Management of Increasing Demand Volatility All of these pressures are competing against each other amidst an increased complexity of supply chain processes and the global nature of these supply chains. Aberdeen s S&OP Study Results 9/20/2011

6 Even small improvements in the S&OP process yield significant gains Integration of financial, forecast, and operational data is key to improved customer service Overwhelming gains in gross margin performance Source: Ventana Research

7 Focus on a financially driven integrated supply and demand planning process How can my planning and review processes be customer responsive yet thorough? Can I evaluate my suppliers capabilities when creating my supply plan?? How do I model the Financial impact of Demand or Supply changes? What are the capacity, labor, supplier material and financial obstacles to meeting the demand plan? How can I model capacity, cost and throughput of multiple products across multiple plants? Can we deliver a consistent plan across all functional units with performance visibility? Do I know which sales volume and promotions I need to drive my revenue and demand volume plans? 7

8 Analytics Driving Supply Chain Performance Scorecards Reports & Analysis Dashboards Finance Supply Chain Metrics Optimized S&OP Executive Review Integrated Financial Plan Operational Planning & Execution Demand Analytic Applications Sales, Procurement, Finance, Workforce, etc Supply Predictive Models Demand Quantities Inventory Maintenance Customer Behavior After markets Operations Data ERP Inventory Supply Chain Logistics / 3PL MES Customer CRM Syndicated Data POS Data Trade Promotion Results

9 Best practices

10 Sales & Operations Planning Supply chains becoming more sophisticated & decentralized Changing market conditions require near real-time visibility, and constant plan review An effective S&OP process: Links day-to-day operations with business goals, operational planning, and financial planning Unites disparate sales, marketing, operations, and finance functions Helps management model the effect of meeting demand on the company s supply capabilities and financial goals Provides visibility into the P&L impact of plans Becomes the tool for senior executives to manage the business

11 Go for an optimized S&OP process! Predictive Models Demand Quantities Inventory Maintenance Customer Behavior After markets Demand Planners Sales Marketing Product Management Demand Forecast Demand EXECUTIVE REVIEW Source Systems Fulfillment & Distribution Planning Consensus Resolve Issues Set Direction Supply Forecast Supply Determine Strategic Impact Supply Chain Operations Engineering Logistics

12 Analytics transforming the value chain Dashboards Alignment of supply and demand Integrated supply and demand planning, balancing with financial targets Key metrics Sales and Operations Planning Overview organizations can establish and manage planning and decision making processes that attempt to balance demand and product supply, and link production / supply chain operations with business goals, operational planning, and financial planning. Improve organizational alignment, collaboration, and performance. Improve supply chain performance for better competitiveness and responsiveness. Leverage investment in transaction systems. SKU level demand planning - visualize the possible impact of product decisions at both customer and product levels.

13 Sales and Operations Planning (S&OP) Process Reconcile sales and demand forecasts with supply plans Identifies capacity, labor, supplier, material and financial obstacles to meeting the demand plan Allows capacity, cost, and throughput modeling of multiple products across multiple plants, to determine the right combinations Helps plan product mix among various plant and contract suppliers Evaluates supplier capabilities when creating the supply plan Provide the views and detail appropriate to each role Units, revenue dollars, labor hours, machine hours, etc. Monitor the plan on an ongoing basis using scorecarding and analytics, making right-time adjustments as needed Model and assess the financial impact of supply/demand scenarios to create a multi-plant S&OP view

14 S&OP Process Integrated Demand and Supply Planning Considers sales volume and promotions to drive revenue and demand volume plans Helps plan product mix among various plant and contract suppliers Allows capacity, cost, and throughput modeling of multiple products across multiple plants, to determine the right combinations Evaluates supplier capabilities when creating the supply plan Identifies capacity, labor, supplier, material and financial obstacles to meeting the demand plan

15 S&OP Process Executive Review Conduct what-if analysis to simulate the effect of S&OP scenarios on Balance Sheet and P&L performance Measure plan versus actual performance for sales, revenue, cost of goods sold (COGS), inventory, customer delivery metrics, and gross margin Easily analyze and drive performance by category, division, geography, channel or for the entire enterprise Deliver consistent plan performance visibility across all functional units, improving collaboration and consensus planning across the organization

16 Supply Chain Visibility Procure Produce Distribute Fulfill Sell SUPPLIER Supply Capability MANUFACTURER Supply Capability DISTRIBUTION CENTER Supply Capability RETAILER Demand Signals Demand Signals Demand Signals Daily, Weekly, and Real Time dashboards Metrics to drive performance and provide consistent measurement Analytics to identify root cause identification and drive improvement 16

17 Supply Chain Analytics is Critical Component of SCM Traditional Supply Chain Visibility Approach Does Not Provide The Required Strategic View Users of supply chain technology are, and will continue to be, voracious consumers of analytics in their pursuit of understanding supply chain performance, and how to change/improve it. Supply chain analytics solutions fall into two key classes: those that support functional/operational processes (supply chain analytics), and those that support enterprise-level strategic and tactical decision making (product performance management [PPM]). Although supply chain organizations have been predominately operationally/functionally focused, they will increasingly require a more-strategic, endto-end supply chain analytical focus if they are to continue to perform in increasingly global and complex operating environments. This will drive the need for more of a PPM focus for analytical solutions. Although supply chains should live and breathe analytics, because they are fundamental to understanding supply chain behavior, most supply chain groups struggle with an ad-hoc, "mishmash" of fragmented analytical approaches. Source: Gartner Research - Supply Chain Analytics: Driving Toward Product Performance Management, 2009

18 What is SCOR? Supply Chain Operations Reference model Developed by the Supply Chain Council, a non-profit designed for furthering supply-chain best practices Common language to describe supply-chain processes Common metrics to measure performance Goals: Reduce inventory Improve cash flow Improve agility and flexibility Improve customer service Improve deliveries Reduce returns and warranty 18

19 Analytics transforming the value chain Dashboard Management processes Visibility of key metrics throughout the supply chain Impact analysis Supply Chain SCOR Metrics Overview Benefits Links processes, metrics, best practices and technology to improve supply chain management with 550+ pre-defined metrics that link to the performance attributes of the Supply Chain Operations Reference (SCOR) model, developed by the Supply Chain Council. Identify and make improvements in supply chain processes to drive down costs and improve service. Extend beyond ERP systems by analyzing supply chain performance at any level of detail Obtain metrics linked to SCOR functional areas: Plan, Source, Make, Deliver, Return. Monitor performance based on the five SCOR attributes: reliability, responsiveness, agility, cost and assets. Get calculated metrics and exception alerts to measure supplier, production and delivery performance based on industry standards. Perform throughput modeling of multiple products across multiple plans to optimize capacity, reduce materials, labor and services costs

20 Tangible Business Benefits Integrated planning process, starting at the strategic level down to demand planning by account, providing the ability to predefine market growth assumptions, and identify and reduce risks through improved alignment of marketing and sales Global brewery Integrated sales, operations and financial planning, including activity and material cost planning S&OP to simulate demand and supply in an SAP/i2 environment Integrated financial and operational planning process. We now have a far better insight into the financial effects of changes to our sales plans. It allows us to adjust our course in plenty of time if market conditions change Sales, Depletion and Inventory Planning as well as Forecasting and Pricing management handled across the US Supply Chain visibility solutions; 356% ROI with payback in 4 months Large B2C and B2B supplier Within the two week testing period, it was discovered that there was a multi-million dollar backorder issue created by the delays and inaccuracy of ordering

21 Tangible Business Benefits Dashboards for all aspects of operations; 92% increase in Gross Margin Use S&OP Blueprint for forecast and production allocation across 15 plants; balance cost and delivery Supplier performance & shortage focus; Shortages cut 50%; Rejects cut 30%. Balanced Scorecard now utilized across entire organization BMW of North America we make hundreds of millions of dollars of decisions each month based on Cognos demand and supply analysis From a September 23, 2010 S&OP Webinar

22 Getting started

23 Follow proven approach for operationalizing analytics 5 Use an information agenda to plan for the future 4 Keep existing capabilities while adding new ones 3 Embed insights to drive actions and deliver value 1 Focus on the biggest and highest value opportunities Item-level Demand Planning Introduce Supply & Financial planning Predictive capabilities Detect patterns Predict demand Business analytics 2 Within each opportunity, start with questions, not data Source: Analytics: The New Path to Value, a joint MIT Sloan Management Review and IBM Institute of Business Value study. Copyright Massachusetts Institute of Technology 2010.

24 Leverage IBM s business analytics solutions Manage enterprise processes. SKU Level Demand Planning Blueprint Understand purchase patterns, customer preferences and buying trends Promotion Planning Blueprint Model, plan and measure marketing performance: spend, campaign budgets, vendor trade fund compliance IBM Cognos Consumer Insights Monitor, analyze and act upon what is said on blogs and social networks about your brands, company and competitors Develop smarter supply chains. SCOR Metrics Blueprint (Cognos 8 BI) Leverage best practices and KPIs from Supply Chain Operations Reference model Assortment Planning Blueprint (TM1) Model category / item-level sales and margins, complete and reconcile top-down / bottom-up plans Product Profitability Blueprint (TM1) Determine profitability by associating all direct and indirect costs for products and/or attributes Build smarter operations. S&OP Blueprint Suite Model, plan and measure a consensus driven Sales & Operations Planning process Headcount and Cost Center Planning Blueprints Model, plan and measure headcount and cost center plans. Financial Workbench & Scorecard Blueprint Coordinate planning and measurement across the chain 9/20/2011

25 IBM Cognos SCOR Metrics Blueprint Fully developed model wrapped around best practices from Supply Chain Council Comprehensive Metrics Approach: Over 550 metrics Predefined Metrics database Metrics relationship and hierarchy Impact Diagrams Upstream & downstream Drill to root cause analysis Standard performance reports and analytics Alerts Dashboards to drive Insight into Underperforming Metrics Defined metrics ownership and responsibility Drives accountability & Collaboration Assign and track corrective projects Automates the strategy management and scorecarding process Links strategy to execution 25

26 IBM Delivers Flexible, Configurable Approach To Supply Chain Management Functional View Based Upon Execution Criteria: Plan, Source, Make, Deliver, Return Provides integrated end-to-end process visibility Attribute View That Aligns With Key Supply Chain Initiatives: Focus on both customer facing and internal performance factors Reliability, Responsiveness, Agility, Cost Reduction, Asset Management Provides focus and actionable insight into most pressing executive supply chain needs Provides a Metrics Driven Approach that links to the IBM Cognos Procurement Analytic Application Deeper analysis and drill down to Procurement Analytics for Spend Analysis, Vendor Analysis, and Contract Analysis. Provides a pre-defined datamart and analysis for drill down for the Source Metrics 26

27 Driving Smarter, More Efficient Supply Chains Through Analytics Business Leadership Track Paul A. Hoy, CPIM WW Business Analytics Industrial and Distribution Sector Executive 2011 IBM Corporation

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