GLOBAL SUPPLY CHAINS HOW TO OPTIMIZE THROUGH KEY PARTNERSHIPS. Jeffrey D. Tew, Ph.D. Chief Scientist Cincinnati Innovation Center, TCS

Transcription

1 GLOBAL SUPPLY CHAINS HOW TO OPTIMIZE THROUGH KEY PARTNERSHIPS Jeffrey D. Tew, Ph.D. Chief Scientist Cincinnati Innovation Center, TCS 2 nd Supply Chain Leaders Forum 2013 CBS, 29 th August

2 Global Supply Chains Some Eye Opening Facts and Trends Coopetition in International Business - Yadong Luo, Copenhagen Business School Press DK,

3 Global Supply Chains Some Eye Opening Facts and Trends Data is becoming more complex sophisticated analytics is needed to make sense of it. Analytics Sophistication Use structured and unstructured Data Numeric Text Image Audio Video Captured Detected Inferred Made consumable and accessible to everyone, optimized for their specific purpose, at the point of impact, to deliver better decisions and actions through: What happened? How many, how often, where? What exactly is the problem? What actions are needed? Descriptive Analytics What could happen? Simulation What if these trends continue? Forecasting What will happen next if? Predictive Modelling Predictive Analytics How can we achieve the best outcome? Optimization How can achieve the best outcome and address variability? Stochastic Optimization Prescriptive Analytics 3

4 Global Supply Chains Some Eye Opening Facts and Trends A A typical day in today's global supply chain highlights the need for "flexibility" Fuel Price Spikes Global Weather Warnings Regulatory Change Labor Stoppages Oops! Quality Issues Order Volatility Natural Disasters 4

5 The Proliferation of Volatile Supply Chain Data Demands a Different Approach Volume ---- Velocity ---- Variety INCREASING Purchase Orders Intelligent buildings Late shipments Overnight Batch Processing Tracking Outbound Shipments Invoices Hub Inventory Statistical Process Controls Tracking Inbound shipments Customer Records Warranty Claims Real Time Data Order Drops End User sell through Warranty Returns Channel Pulls Inventory status 5

6 The Importance of the Supply Chain is Continuing to Increase Top Supply Chain Companies Report (IBM, The Smarter Supply Chain Future, 2010) 22% Increase in performance 22% Increase in sales 10% Better lead times 3% Cost reductions Companies that excel in supply-chain operations perform better in almost every financial measure of success. Where supply-chain excellence improves demand-forecast accuracy, companies have a 5% higher profit margin, 15% less inventory, up to 17% stronger perfect order ratings, and 35% shorter cash-to-cash cycle times than their peers. Companies with higher perfect-order performance have higher earnings per share, a better return on assets, and higher profit margins roughly 1% higher for every three percentage-point improvement in perfect orders. Source: AMR Research Inc, 2011 User interest in supply chain analytics solutions is driven by a need to better understand supply chain performance. With the limited analytics in supply chain applications, which are focused on the application user, it is difficult for other supply chain players, as well as management, to get a clear picture of performance and to identify areas of underperformance. This is where general BI and spreadsheets have been used extensively to try to fill this performance management gap. However, although effective up to a point, these technologies have not provided a consistent, near-realtime performance management environment, with tight integration into the underlying supply chain business applications. Source: Gartner Research - Supply Chain Analytics: Driving Toward Product Performance Management,

7 A Recent Survey (2011) Enterprise Executive Supports This Top challenges cited expose demand volatility, driving a need for visibility to create value Top challenges 7

8 The Myths of Global Supply Chain Debunked Every supply chain has a steady state. (True or False?) The supply base is constant. (True or False?) The market or customer base is constant. (True or False?) Most supply chains are designed. (True or False?) Most supply chains meet customer expectations. (True or False?) Most supply chains are designed to deliver optimal performance. (True or False?) Most supply chains are designed to minimize operating cost. (True or False?) Most supply chains are designed to handle variation. (True or False?) Supply Chains are most often used as a strategic advantage. (True or False?) 8

9 The Myths of Global Supply Chain Debunked Every supply chain has a steady state. (False) The supply base is constant. (False) The market or customer base is constant. (False) Most supply chains are designed. (False) Most supply chains meet customer expectations. (False) Most supply chains are designed to deliver optimal performance. (False) Most supply chains are designed to minimize operating cost. (True) Most supply chains are designed to handle variation. (False) Supply chains are most often used as a strategic advantage. (False) 9

10 What Level of Supply Chain Performance do Your Customers Expect? They want the product or service provided now. They expect that delivery is available from multiple channels. They expect that access is ubiquitous and instantaneous for both purchasing and fulfillment. They do not want to pay for heightened service. They want choice in products (e.g., they want what they want). They expect best price. They expect seamless and easy reverse support. 10

11 How can a 3rd Party Supply Chain Partner optimize Your Global Supply Chain? Bring new technologies to the table. Optimize coordination between external and internal partners. Provide deep market insights either through technology or through market experience. Focus on the right objectives. Provide access to on demand capacity for increased supply chain flexibility. Help identify and grow the domestic talent in new markets. Help manage the supply base (e.g. identify new suppliers). 11

12 How can a 3rd Party Supply Chain Partner optimize Your Global Supply Chain? TCS POINT OF VIEW 12

13 What is it? Understanding Optimize Optimize = Address the mismatch between demand and supply Matching supply to demand Lower cost, greater stability, better quality Why is it required? Key driver: Change (expected or unexpected) Demand Changes Triggered by business Supply Changes Triggered by environment and technology How is it done? Levers: Right-size, Right-source, Reengineer, Standardize, Share 13

14 Demand Changes Optimize Examples Merger and acquisition Variation in workload Reduction in SC budget Reengineer (e.g., SC rationalization and simplification) Right-size and right-source (e.g., Construction of a hybrid SC) Standardize, right-size/source, reengineer, share (e.g., Optimize people, process and technology) Supply Changes Emergence of new products and service providers (e.g., OMNI Channel Distribution) Reengineer (e.g., Technology and services transformation) 14

15 Optimization Challenges Understanding demand: Lack of end-to-end transparency Silo-based understanding Silos: Business vs. SC vs. Infrastructure; CTB vs. RTB Supply diversity: Too many, rapidly changing solution options Characterized by constraints, costs, benefits, risks, side-effects No-one-size-fits-all; Difficulties in deriving a custom solution Heavy reliance on tacit knowledge, intuition and experience People dependent; Variable quality; Low agility 15

16 Optimizing Supply Chains 1 Understand demand Combine TCS end-to-end services understanding with analytics 2 Characterize supply Learn from vast experience in traditional supply-chain management Standardized catalogue of products and services 3 Automate optimization planning Virtual prototyping of SC (e.g., Discrete Event Simulation Models) 16

17 1 Demand Characterization: End-to-end View Take a Page From Our IT Playbook -- Combine TCS end-to-end services experience with analytics Top-down Service Modeling (Business IT Operational Services) Everything-as-a-service (Hierarchical service composition) Facebook for IT (Entity-relationship models and analytics) 17

18 2 Supply Standardization Models Supply Management Distribution Forecasting Manufacturing Key idea: Learn from vast knowledge about traditional supply-chain management Optimized Cost Structures Planning Optimized Network Finance Collaboration Demand Shaping Market Insights Transportation S&OP Optimized Pipeline Inventory Operations Database of technology product and services options Characteristics (e.g., compatibility, quality) Pricing, support and warranty information Financial engineering options Challenge Continuous evolution of supply options 18

19 3 Automating Optimization Planning Another Page From Our IT Playbook -- TCS etransform TM platform: Automated, fit-forpurpose derivation of optimization plan Key Idea: Virtual prototyping of IT (like manufacturing) Benefits Speed and accuracy of planning Evolvability: Rapid adaptation of optimization plan to accommodate emerging conditions 19

20 What is Required to Make it Happen? A clear vision for the to be a working common template for the future! The right people develop or hire people with the right skill set and experience! Strong network of strategic and operational partners create a dynamic and creative environment! Open, accurate, and instantaneous information exchange one true message! Collaborative culture can t we all get along? Aligned metrics (for business units and personnel) measure and reward the behaviors you want and that are aligned with the vision. Coordination and common view among operations, finance and IT one company equals one mission! Constant review and improvement it s a journey! 20

21 Additional Reading Supply chain vs. supply chain: the hype and the reality. by James B. Rice, Jr. and Richard M. Hoppe (MIT) Supply Chain Management Review, Sep/Oct (Examines both sides of the argument, with their take on where it works and where not). Is it Supply Chain Versus Supply Chain? An editorial in Supply Chain Digest by Dan Gilmore. a company s fundamental supply chain design is in fact the primary competitive weapon it has. Design also strongly impacts the ability of the supply chain to respond quickly to market/strategy Best value supply chains: A key competitive weapon for the 21st century by David J. Ketchen, Jr., et al, Business Horizons (2008) v51 pp has a nice graphic. Book: Competing Through Supply Chain Management, by David Frderick Ross, Springer, Vertical and Horizontal Cooperation in a Supply Chain. A related facet of competition. "New Co-opetition Approach for Supply Chain Applications... by Harald D. Stein, Romualdas Ginevicius. Emerging trends in supply chain architecture by W. T. Walker. International Journal of Production Research, Vol. 43, No. 16, 15 August 2005, A focus on velocity in SC. (attached) -> has a small discussion and also a nice competitive framework on p 13 on Time Based Competition. 21