IBM Institute for Business Value
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2 Agenda CSCO demographics Assembling the pieces Orchestrating the customer-activated supply chain Sharpen visibility and insight Partner for innovation Become customer-activated The future state of supply chain
3 This installment focuses on the responses of 201 CSCOs in 32 countries North America 35 Western Europe 50 Central and Eastern Europe Japan 32 South America 7 Middle East and Africa 25 Asia Pacific
4 Our CSCO respondents represent a wide range of public and private sector organizations, covering more than 16 industries Communications sector 5 % 13 % Distribution sector Financial Services sector Industrial sector 34 % 201 interviews Public sector 34 % 9 %
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6 Agenda CSCO demographics Assembling the pieces Orchestrating the customer-activated supply chain Sharpen visibility and insight Partner for innovation Become customer-activated The future state of supply chain
7 Assembling the pieces of a customer-activated supply chain involves activities on three dimensions Partner for innovation Become customer-activated Sharpen visibility and insight Integration and visibility Synchronize entire supply chain Optimize every element for rapid market response Business intelligence Adopt advanced analytics and modeling tools Use real-time data to predict demand Collaborative execution Increase level of partnership Use collaborative digital strategies Innovative initiatives Treat risk mitigation as integral part of the CSCO s job Create agile and social networks Customer influence Collaborate more actively with customers Incorporate customer input in product/service portfolio Customer experience Understand the customer Shift oversight to the customer experience
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9 Agenda CSCO demographics Assembling the pieces Orchestrating the customer-activated supply chain Sharpen visibility and insight Partner for innovation Become customer-activated The future state of supply chain
10 Sharpen visibility and insight Many CxOs, CSCOs included, think their supply chain is effective and efficient a strategic asset both for delivering on the customer promise and for fueling growth CSCOs are working hard to integrate their entire supply chain ecosystems and sharpen visibility Future state: managing the supply chain complexity requires superb business intelligence and insights
11 Many CxOs see the supply chain as effective and efficient strategic for delivering on customer promise and fueling growth CSCOs and CEOs agree on the effectiveness of their supply chain CEO CFO CHRO CIO CMO CSCO Client satisfaction 53 % 47 % 47 % 50 % 51 % 51 % Operational efficiency and effectiveness 48 % 40 % 47 % 40 % 43 % 47 % Revenue growth 43 % 35 % 44 % 39 % 41 % 42 % Product/service development 35 % 30 % 28 % 30 % 31 % 33 %
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13 CSCOs are working hard to integrate their entire supply chain ecosystems and sharpen visibility Effective integration and visibility across the supply chain 74 % 2 5 Years 22 % Today
14 The challenge is how to integrate the whole supply process end-to-end with more visibility. CSCO Consumer Products, Argentina
15 Optimization across the global supply chain is seen as a major goal, but most CSCOs are struggling to create a holistic view Most CSCOs are still struggling to optimize their supply chain flows In 2010, 70 percent of CSCOs predicted that their supply chain flows would be optimized within five years. Today, only 9% say they have succeeded, but expectations are even higher than before % 80 % 12 % 70 % Level of optimization today Expected level of optimization in 2 5 Years Supply chain flows 1. Product 2. Information 3. Decision 4. Work 5. Financial
16 Most CSCOs haven t yet mastered the ability to predict demand by combining real-time data Combining real-time information with predictive demand In 2010 it was expected that predictive demand would be implemented in the next 5 years (69 % ), but today only 16 % already have % 75 % 17 % 69 % Level of predictive analysis today Level of predictive analysis in 2 5 years
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18 The greatest challenge in the next three-to-five years will be embracing technology to enhance visibility across the entire supply chain to allow for real-time decision making. CSCO Industrial Products, Singapore
19 CSCOs expect to use advanced analytics and modeling much more extensively in the future Future state of supply chain Advanced analytics to inform decisions Modeling to optimize all flows 16 % 92 % 9 % 80 % Level of implementation today Level of implementation in 2 5 years
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21 Taking action: Sharpen visibility and insight Synchronize, synchronize, synchronize. Make your supply chain tightly integrated and more visible to respond to variable market conditions. Create a single view of supply and demand, centralize planning, share documents electronically and streamline your processes.
22 Taking action: Sharpen visibility and insight Optimize your flows. Combine advanced analytics with modeling tools to optimize your product, information, decision, work and financial flows. Evaluate the trade-offs between costs and service levels. Utilize resources, including capital, personnel, equipment, vehicles and facilities, more efficiently. Assign the best resources to each task at the best possible time.
23 Taking action: Sharpen visibility and insight Create a forward vision. Use real-time market and customer-related data to predict and manage shifts in demand. Monitor the social sphere to identify what s hot and what s not. When interest in a particular product or service suddenly surges, demand often surges as well.
24 Agenda CSCO demographics Assembling the pieces Orchestrating the customer-activated supply chain Sharpen visibility and insight Partner for innovation Become customer-activated The future state of supply chain
25 Partner for Innovation CSCOs have substantially increased the degree to which they plan and execute in collaboration with their partners Managing risk is now an integral part of the CSCO s job, requiring a balanced partner strategy Future state: information and insights will be shared on a large scale with supply chain partners to encourage innovation
26 CSCOs have substantially increased the degree to which they plan and execute in collaboration with their partners Collaborative planning and execution with partners % 96 % % 89 % Level of collaboration today Level of collaboration in 2 5 years
27 As we fuse the physical network with the digital network, we must rely upon collaborative teamwork with partners for rapid consumer responses. CSCO Retail, United States
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30 Managing risk is now an integral part of the CSCO s job, requiring a balanced partner strategy CSCOs plan to focus more on integrating security and process controls to manage risk % 92 % 23 % 74 % 2010 and to get compliance strategies and practices in place with external partners % 97 % 37 % 79 % 2010 Level of implementation today Level of implementation in 2 5 years
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32 Taking action: Partner for innovation Connect the dots. Collaborate more extensively with your value chain partners, including suppliers, service providers, contract manufacturers, carriers and customers. Focus, collectively, on optimizing your operational and financial performance.
33 Taking action: Partner for innovation Get a handle on risk. Treat risk management as an integral part of your job. Incorporate risk-management policies and programs with increased process controls and compliance strategies. Use modeling to predict shortfalls in critical supplies, manage disruptions and reduce or eliminate out-of-stocks.
34 Taking action: Partner for innovation Pool brains. Share information and insights with your supply chain partners to encourage innovation. Incentivize everyone in the ecosystem to share skills, experiences and networks. Reward anyone who comes up with a good new idea.
35 Agenda CSCO demographics Assembling the pieces Orchestrating the customer-activated supply chain Sharpen visibility and insight Partner for innovation Become customer-activated The future state of supply chain
36 Become customer-activated Most CSCOs plan to collaborate much more extensively with their customers, recognizing the influence the customer has on their product and service portfolios and even their product pricing strategies They know they can only improve the customer experience if they get a clearer understanding of the customers Future state: CSCOs plan to become more personally involved in improving their company s ecommerce operations, managing the customer experience and pursuing new business opportunities
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40 CSCOs anticipate making numerous changes to their portfolios to reflect what customers desire Customer influence on product and service portfolio Create new products and services 84 % Alter pricing strategy 75 % Change existing products and services 71 %
41 Our goal is to provide complete transparency, while individualizing the customer experience. CSCO Transportation, United States
42 Our aim is simplification of business processes, with the focus on improving the delivery of service to our customers. CSCO Banking, United Kingdom
43 But the links between the supply chain and marketing function are still not pervasive Large parts of the supply chain are not integrated with marketing Not integrated with marketing 45 % 50 % 52% Integrated with marketing Sales planning Customer sell-through information Marketing intelligence
44 Sales and Operations Planning (S&OP) can bridge the gap to some degree most CSCOs aim to use actual demand signals Actual demand signals for collaborative S&OP % 87 % % 70 % Level of implementation today Expected level of implementation in 2 5 Years
45 CSCOs are shifting their priorities to accommodate changing customer expectations Future state areas of CSCO personal involvement ecommerce +8 % Customer experience management +8 % Sales and new business development +6 %
46 The supply chain is the execution engine that keeps the promises the rest of the organization makes. CSCO Consumer Products, Canada
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48 Taking action: Become customer-activated Invite customers to the table. Include customers in any conversations about your product and service portfolio. Ask them what new products and services they would like to see next, how they would like existing products and services modified and what pricing strategies they would prefer. Use social networks to start a dialog and get direct input.
49 Taking action: Become customer-activated Invest in customer understanding. Capitalize on the abundance of data that s now available to find out what customers expect. Look at the digital and physical paths they take, where they go click by click or step by step, their behavioral patterns, transaction histories and the feedback they provide to predict new trends, and manage your supply chain proactively.
50 Taking action: Become customer-activated Enhance the customer experience. Collaborate with customers both to improve and to personalize the customer experience and thus stimulate growth. Use real-time demand signals and dynamic resource allocation to serve individual customers accurately and effectively. And liaise with the marketing and sales functions to ensure your efforts are coordinated.
51 Agenda CSCO demographics Assembling the pieces Orchestrating the customer-activated supply chain Sharpen visibility and insight Partner for innovation Become customer-activated The future state of supply chain
52 CSCOs plan to invest heavily in supply chain transformation in the next three-to-five years, including visibility and intelligence Future investments Cost reduction/cost containment 75 % Supply chain visibility Sales and operations planning Business intelligence/analytics Inventory optimization 62 % 56 % 54 % 54 %
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54 Assembling the pieces of a customer-activated supply chain involves activities on three dimensions Partner for innovation Become customer-activated Sharpen visibility and insight Business intelligence Collaborative execution Innovative initiatives Customer influence Customer experience Integration and visibility Outperformers invest 35% more in supply chain visibility Future state: Managing supply chain complexity requires superb business intelligence and insights Outperformers invest 100% more in collaborative business intelligence Future state: Innovation will apply modern technologies to rapid business model changes Outperformers invest 48% more in customer understanding Future state: Personal involvement in ecommerce and customer experience management
55 Where are you on the path to a customer-activated supply chain? Become customer-activated Partner for innovation Sharpen visibility and insight Integration and visibility Synchronize entire supply chain Optimize every element for rapid market response Business intelligence Adopt advanced analytics and modeling tools Use real-time data to predict demand Collaborative execution Increase level of partnership Use collaborative digital strategies Innovative initiatives Treat risk mitigation as integral part of the CSCO s job Create agile and social networks Customer influence Collaborate more actively with customers Incorporate customer input in product/service portfolio Customer experience Understand the customer Shift oversight to the customer experience Outperformers invest 35% more in supply chain visibility Future state: Managing supply chain complexity requires superb business intelligence and insights Outperformers invest 100% more in collaborative business intelligence Future state: Innovation will apply modern technologies to rapid business model changes Outperformers invest 48% more in customer understanding Future state: Personal involvement in ecommerce and customer experience management
56 Recommendations Sharpen visibility and insight Partner for innovation Become customer-activated Synchronize, synchronize, synchronize Connect the dots Invite customers to the table Optimize your flows Get a handle on risk Invest in customer understanding Create a forward vision Pool brains Enhance the customer experience
57 We invite you to continue the conversation Connect with us For more information about this study and to get the full version of this report, see Access interactive content and listen to CxOs in their own words by downloading the IBM IBV app for Android or ipad
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