Vision to Perfecting the Supply Chain

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Vision to Perfecting the Supply Chain
C. John Langley Jr., Ph.D Professor of Supply
Chain Management
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Key Trends Impacting CPG and Grocery Industry
Supply Chains

• Store Growth, Consolidation, and Market
  Leadership
• Lengthening Supply Chain Issues
• Dynamically-changing global sourcing strategies
• Fundamental changes to markets for transportation
  service
• Port congestion likely disruptions to supply
  chain activity
• Increased length coupled with demands for
  increased velocity
• Rapid Commoditization of Products
• Strategic Role of Returns and Reverse Logistics
• Increasing Emphasis to Create Value and Savings
  Through Improved Supply Chain Practices

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Key Trends Impacting CPG and Grocery Industry
Supply Chains (contd)

• Continued Growth and Development of Capable
  Outsourcing Alternatives
• Increasingly Critical Role of Information
  Technology
• Need for integrated supply chain solutions
• Meaningful implementation of RFID functionality
• Visibility and coordination of supply and demand
• Quest for appropriate network design, redesign,
  flexibility, and customization
• Increasing Demands of Consumers
• More value for the money
• Availability and selection
• Service demands

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Quest for the Perfect Order
Try Not to Create The Perfect Storm

• Right Product
• Right Quantity
• Right Place
• Right Time
• Right Price
• Defect-Free
• Clean Invoice
• Fast Payment

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The Pursuit of the Perfect Order Requires All
Supply Chain Players to Work Together
Store
Distribution Centre
Warehouse
Manufacturer
Supplier
Automated Receipt, Shipping, and increased
through-put capacity
Reduced truck turn around time. Less invoice
queries
Automated Receiving Reverse logistics Asset
management
Improved accuracy and visibility of
shipments Product recall/ Product tracking
Accurate receiving
Intelligent sub-assemblies Improved
manufacturing through-put
Automated put away and picking for increased
capacity and accuracy
Increased Picking accuracy
Increased shelf availability through splitting
back and front store inventory to show need
for shelf filling Shrink reduction
Automated checkingfor less errors(crucial for
mixed pallet loads). Product recall/tracking
Increased picking Accuracy. Supportasset (e.g.
RPCs, dollies) management. Product
trackingReverse Logistics Shrink reduction
Automated Shipping (reduced cost and Increased
capacity)
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Source Capgemini LLC.
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Quantifying the Conceptof Perfect Distribution
Where could we be?
Profit
What is our goal?
What is the net value?
What has to be done?
Where are we?
Time
Today
Optimized
Source Dr. Martin Savelsbergh, Georgia Tech.
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• Perfect Distribution
• Full truckload of product
• from closest supply plant
• to every customer
• with every delivery
• However costs typically exceed what would be
  suggested by Perfect Distribution

Perfect Distribution
Source Dr. Martin Savelsbergh, Georgia Tech.
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13.2
Multi-Stop Trips
The question is . How much of this gap can we
close?
5.0
Product Supply
4.5
Less than Full Truckload

Multi-stop trips sometimes required 6-7 is
attributable to the size of the tanks 1-2 due to
uncontrollable events 1-2 probably recoverable
using current planning tools techniques 3-5
probably recoverable using improved planning
tools techniques
77.3
Perfect Distribution
Product not always supplied from closest
plant 2 due to production costs 1-2 due to
uncontrollable events 1-2 probably recoverable
using improved planning tools techniques
Do not always deliver full truckload on every
trip 1-2 due to uncontrollable events 4
probably recoverable but at a cost
Source Dr. Martin Savelsbergh, Georgia Tech.
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Perfect Distribution Revisited

• What size would the gap be if we did NOT assume
  all tanks were large enough for full load
  deliveries?
• Answer Not as much as was anticipated and
  this is a very significant finding.

Source Dr. Martin Savelsbergh, Georgia Tech.
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The Ten Promises of Supply Chain Management

• Core Competencies
• Outsourcing a Strategic Alternative
• Security and Visibility
• Global Mindset and Capabilities
• Change and Reinvent

• Value for the Consumer
• Efficiency, Effectiveness, and Differentiation
• Shareholder Value
• Demand and Supply Planning
• Leverage Tools and Technology
• Seamless Integration

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Promise 1Value for the Consumer
Supply Chain Management Promises to
Create Value and Satisfaction for the Consumer
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A Shift in Customer (Buyer) Demand Toward
Integration and Customization
Highly Customised Solutions
Customers
Level of Customisation
Basic Services
Stand Alone Services
Highly Integrated Solutions
Level of Integration
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Promise 2 Efficiency, Effectiveness, and
Differentiation
Supply Chain Management Promises to
Create Efficiency, Effectiveness, and
Differentiation from Competitive Supply Chains
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Supply Chain Value Creation Involves Three
Product/Service Forms

• Core Product/Service Form
• Efficiency
• Effectiveness
• Differentiation

• Tangible Product/Service Form
• Transportation
• Warehousing
• Cross-Docking
• Freight Forwarding
• etc.

• Value-Added Product/Service Form
• Visibility
• Information Technology
• Order Fulfillment
• Network Solutions
• etc.

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Promise 3 Shareholder Value
Supply Chain Management Promises to
Drive Shareholder Value
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Supply Chain Success Impacts Corporate Financial
Performance
Revenue Growth
Income Statement
Balance Sheet

• Accenture/Stanford/Insead Research Indicates

Source Accenture/Stanford/Insead Research, 2003.
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Promise 4 Demand and Supply Planning
Supply Chain Management Promises to
Integrate Demand and Supply Planning
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Supply-Demand MisalignmentThe Need for Demand
Management
Channel Orders

• True End Customer
• Demand

• Channel Fill and
• Phantom Demand

Units Per Period

• Over-Supply

• Real
• Shortage

Production
Launch Date
End of Life

• Returns/
• Cancellations

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Promise 5 Leverage Tools and Technology
Supply Chain Management Promises to
Leverage Available Tools and Technologies to
Meet and Exceed Supply Chain Objectives
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Supply Chain Visibility is Essential to Becoming
Demand-driven
ForecastsSuggested Orders
Seamless Supply Chain Visibility
Suppliers
Mfg. Plant
Mfg. DC
Store
Consumer
Retail DC

• Accelerate the Supply Chain
• Gain a Competitive Advantage
• Real Time Visibility
• Replace Inventory with Information
• Lower Supply Chain Costs
• Improve Forecast Accuracy and Increase Perfect
  Orders

Source Logility, 2005
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RFID Initiatives and Issues

• Standards Drive to World-Class Standards
• Measuring and Quantifying Value from RFID
• Cost Issues
• Benefits
• Technology Development
• Tag/reader interoperability
• Overcoming RFID limitations with liquids and
  metals
• Integration of RFID with corporate information
  systems
• Response to Consumer Privacy Concerns
• Impact on Supply Chain Event Management

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Promise 6Seamless Integration
Supply Chain Management Promises to
Seamlessly Integrate Through Collaboration
Across Processes and Organizations
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Effective Supply Chains Should Strive for Full
Collaboration
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Promise 7Core Competencies
Supply Chain Management Promises to
Understand Core Competencies and Build Brand
Equity for all Supply Chain Participants
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Core Competencies Three Questions Each Supply
Chain Organization Should Ask Itself

• Example Functions Being Questioned for Core
  Competency
• Manufacturing
• Transportation
• Warehousing
• Information Technology
• Order Management
• Integrated Logistics Services
• Business Process (BPO)

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Promise 8 Outsourcing a Strategic Alternative
Supply Chain Management Promises to
Meaningfully Consider Outsourcing as a Key
Logistics Strategy
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3PL Customer Perceptions ofProvider Roles
3PLs Mostly thought of as Tactical Service
Providers
Source 2004 3PL Study, Georgia Tech, Capgemini,
and FedEx.
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Next Generation of Logistics Outsourcing Models?
Source 2004 3PL Study, Georgia Tech, Capgemini,
and FedEx.
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Promise 9Security and Visibility
Supply Chain Management Promises to
Achieve Security and Visibility Throughout the
Supply Chain
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Security Requirements Increase Complexity and
Need for Information Visibility

• Security Assistance Act of 2002
• Customs-Trade Partnership Against Transportation
  Terrorism (C-TPAT)
• Food Drug Administrations Bioterrorism Act of
  2002
• 24-Hour Advance Container Manifest Rule
• Security Objectives
• Enable All Parties to Participate in Process
  Improvements
• Eliminate Duplicate Efforts
• Enhance Supply Chain Security

Source CLM, 15th Annual State of Logistics
Report, June 7, 2004.
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Promise 10 Global Mindset and Capabilities
Supply Chain Management Promises to
Develop and Rely Upon Global Mindset and Global
Capabilities
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Global SCMKey Areas of Greatest Need

• Managing the Geographic Evolution of Supply Chain
  Activities
• Need to take advantage of core competencies of
  specific geographies
• Focus on lowest net landed cost for the
  customer/consumer
• Transformation or Redesign of Best or Proven
  Practices to Global Supply Chain Setting
• Recognize challenges unique to global objectives
• Achieve end-to-end process integration and
  shipment visibility
• Design for supply chain agility
• Involvement of capable facilitators to achieve
  desired success
• Leverage Global Supply Chain Strategies to
  Significantly Impact Overall Business Strategies

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Promise 11Change Management
Supply Chain Management Promises to
Change, Reinvent, and Transform Every Day if
Necessary
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Ten Impediments to Getting Change from Supply
Chain Management

• Not understanding customers needs
• Lack of synchronization and collaboration
  upstream/ downstream in supply chain
• Absence of visibility throughout supply chain
• Too much focus on meeting objectives of
  individual supply chain organizations
• Lack of integrated information technologies

• Continued existence of functional silos within
  supply chain organizations
• Insufficient senior executive attention to
  logistics and supply chain issues
• Reluctance to search for and implement
  innovative, creative customer-focused solutions
• Challenge of dealing with supply chain complexity
• Inability or unwillingness to change

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Elephants Boundariesare Set When They are Babies
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Stakes Chains Limit the Baby Elephants
Movements and Set His/Her Boundaries
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When the Environment Changes How Will You Break
Boundaries to Prevent Extinction?
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Getting Change from Supply Chain Management
Concluding Thoughts of a Few All-Stars

• If you cant change, you will find it impossible
  to improve (Jack Nicklaus to
  Sergio Garcia at 2002 Battle at Bighorn)

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Questions
For further information, www.tli.gatech.edu
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