Achieving the Multiplier Effect with Advanced Analytics and the SCOR® Model

1. Achieving the Multiplier Effect
with Advanced Analytics and the
SCOR® Model
Arnold Mark Wells CPIM
2 March 2012

2. The End-to-End Analytics Team
Superior performance through data-driven analysis
Previously worked at top industrial / consulting firms
 Hewlett-Packard  McKinsey & Co.  Procter & Gamble
 Philips  Bain & Co.  QVC
Recognized as thought leaders
 Over 20 published articles:
 Harvard Business Review  OR/MS Today
 Sloan Management Review  Interfaces
 Patents in many cutting-edge areas:
 Supply chain risk management  Financial-operational flows
 Joint capacity-inventory optimization  Supply contract structuring
Analytical work from end-to-end along the supply chain
 Supply Chain Strategy  Forecasting  Inventory Optimization
 Network Design  Supply Planning  Risk Management
 Capacity Planning  Pricing  Service Parts & Support
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3. What Are Analytics?
A continuum with four basic categories
Reports Dashboards
 Periodically run  Frequently updated displays of performance metrics
 Pre-aggregated, pre-sorted  Displayed graphically, role-specific
 Limited user interactivity  Measure performance based on pre-aggregated data
 Examples: SAP Business Warehouse Reports and Business  Some user selection and drill-down capability
Objects Crystal Reports, IBM Cognos Reporting, etc.
 Can leverage hierarchies of metrics such as SCOR® Model
 Examples SAP Business Objects Xcelsius, SAP SC
Performance Management, IBM Cognos Dashboards, etc.
Data Analysis Advanced Analytics
 Interactive software applications  Simulation
 Dynamically aggregate, sort, plot, and otherwise explore  Optimization and other approaches
data, based on metadata.
 Multi-criteria decisions which require the application of
 Fast visualization of data statistics and mathematical modeling and solving
 Examples: SAP Business Objects Web Intelligence and  Simple visualization of complex analyses.
Business Explorer, IBM Cognos Analysis, etc.
 Examples: forecasting and planning applications, simulation
software, network optimization applications, optimization
libraries and solvers, etc.
Source: “On Analytics”, Arnold Mark Wells, Friday Forethought (http://wp.me/p1NcfT-T), 1 September, 2011
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4. Where Is the Value?
Advanced analytics will deliver more value
Executive Report: Analytics: The new path to value
MIT Sloan Management Review/IBM Institute for Business Value
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5. How Do Analytics Relate to Metrics?
From the Supply Chain Council
Metrics quantify results and measure the success of an
organization’s programs, operations, and investments. For
example, project metrics inform the organization [of] whether
the project is on time, on budget, and meeting goals. Supply
chain metrics define and quantify the performance of the
supply chain.
Analytics . . . Analytics focus on predicting what will happen
next and then optimizing the related business decisions.
Source: SCC White Paper, Driving Sustained Improvements with Supply Chain Metrics and Analytics,
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6. Metrics and Analytics
Stated more simply . . .
SCOR ® tells us what to do (process model and best practices)
and what to measure (cascading metrics). That is the starting
point and an important piece of a successful infrastructure.
Analytics tells us how to do things better and how to measure
most relevantly
© 2012 End-to-End Analytics, LLC Confidential and Proprietary 6

7. The SCOR ® Model and Analytics
Leverage and focus
P. Trkman, et al., The impact of business analytics on supply chain performance, Decision Support Systems (2010), doi:10.1016/j.dss.2010.03.007
© 2012 End-to-End Analytics, LLC Confidential and Proprietary

8. SCOR ® Model
Process model and best practices plus cascading metrics
© 2011 End-to-End Analytics, LLC 8 Mar 14, 2011

9. The House of Value
Foundation, Value Pillars, Business Performance
Business
Performance
Competitive Advantage and
Sustainable Value Add
Cascading Metrics
Better Decisions
Process Model &
Best Practices
in Less Time
Value SCOR ®
Pillars Model
Business Model
Competency
Infrastructure
Foundation
© 2012 End-to-End Analytics, LLC Confidential and Proprietary

10. Today’s Discussion
How advanced analytics fit with SCOR ®
Business
Performance
Competitive Advantage and
Sustainable Value Add
Cascading Metrics
Better Decisions
Process Model &
Best Practices
in Less Time
Value
Pillars
Business Model
Competency
Infrastructure
Foundation
© 2012 End-to-End Analytics, LLC Confidential and Proprietary

11. SCOR ® Matrix
Metrics and Performance Attributes
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12. Example: Perfect Order
One level drill-down
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13. Example: Perfect Order
Two level drill-down
© 2011 End-to-End Analytics, LLC 13 Mar 14, 2011

14. Example: Upside Flexibility
Many factors require analytical decisions
© 2011 End-to-End Analytics, LLC 14 Mar 14, 2011

15. Example: Return on Working Capital
Many factors require analytical decisions
Managing Revenue and Risk
• Discount terms?
• Risk?
Pricing Decisions
• By product attribute?
• By customer attribute?
Safety Stock Planning
• Service Level Policy?
• Multi-stage?
• Postponement? Sourcing Decisions
• Regional?
• Single?
• Sole?
Better Decisions in Less Time • Risk?
• Efficiency? Manufacturing Strategy
• Enterprise Tools? • Location?
• Specific Tools? • Automation?
• Focus?
© 2011 End-to-End Analytics, LLC 15 Mar 14, 2011

16. © 2012 End-to-End Analytics, LLC Confidential and Proprietary 16

17. Goals, Tradeoffs, and Options
Advanced analytics optimize tradeoffs and evaluate options
to meet goals
Goals: Targets for improved performance
Tradeoffs: Example: Long production run
means efficiency, but more
inventory and less agility
Options: Limited resources mean choosing
the best option, given constraints
in cash, capacity, demand, etc.
© 2012 End-to-End Analytics, LLC Confidential and Proprietary 17

18. How it Works
In other words . . .
Advanced Analytics
Analysis
More
Data Inputs Value
Demand
Resources
Costs, Yields, Recipes Modeling
Operational Constraints
Business Goals
Scenarios
© 2012 End-to-End Analytics, LLC Confidential and Proprietary 18

19. When Is Optimization Needed?
When the tough decisions need to be made better and faster
Facilities
Capital √ Locate
√ Invest √ Size
√ Allocate √ Focus
People
Vehicles √ Procure
√ Assign
√ Schedule
√ Schedule
√ Route
Inventory
Equipment
√ Acquire
√ Move
√ Locate
√ Make
√ Utilize
√ Buy
© 2012 End-to-End Analytics, LLC Confidential and Proprietary 19

20. Every Advanced Analysis Is Unique
Example: Strategic supply network analysis and design
Some projects are very focused on the capabilities
Experience: and configurations of the plants and need a model
that operates at that level of detail
 Multiple projects in global
hi-tech manufacturing and
distribution WIP
 Multiple projects in Raw FGI
domestic baked good
Factory
production and distribution
 One-offs in other verticals
Customer
DC
Contributors to success: Supplier
 Problem formulation
DC
 Right solution methodology
 “Why” is often is as
Other projects are much more
important “what” transportation, inventory, duty, and tax
focuses, requiring an entirely different modeling
approach
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21. New Analyses Are Emerging
Example: Forecast Reality Check for DP and S&OP
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22. Challenges with Analytical Decision Support
Analytical competence/culture is essential to useful results
Source: “What is the Analytical Competence Quotient of Your Organization?”, Arnold Mark Wells, Friday Forethought (http://wp.me/p1NcfT-33) 14 October, 2011
© 2012 End-to-End Analytics, LLC Confidential and Proprietary 22

23. Metrics and Analytics
Call to action
Comprehending the past is no longer sufficient to compete
and win
You must understand the real “now”, the likely “next” or
“nexts”, and the actions you need to take in order to
maximize results
© 2011 End-to-End Analytics, LLC 23 Mar 14, 2011

24. What’s Holding You Back?
MIT Sloan Management Review Survey – Top 3 Reasons
Executive Report: Analytics: The new path to value
MIT Sloan Management Review/IBM Institute for Business Value
None of these excuses diminish the critical need to make better decisions
faster, and none of them should delay action. A quality consultancy can . . .
1. Understand how to use analytics and where to apply them in your industry
2. Augment your existing resources for a specific objective or project
3. Consult with a collaborative character and leave your internal capabilities
enhanced through example and/or education
© 2012 End-to-End Analytics, LLC Confidential and Proprietary 24

25. A Word on Prioritizing and Accelerating
Process/Value/Symptom Matrix
SCOR ® Performance Measures – Undesirable Business Symptoms
Root Decision Processes
Source: “Finding Value in Your Value Network?”, Arnold Mark Wells, Supply Chain Digest 13 September, 2011
© 2012 End-to-End Analytics, LLC Confidential and Proprietary 25

26. Advanced Payoff for Advanced Analytics
Engage with SCOR ®, but don’t forget the analytics
© 2011 End-to-End Analytics, LLC 26 Mar 14, 2011

27. Important Decisions Are Integrated
Pricing and supply chain decisions are interrelated
Most power to raise price
with least risk
Price Leakage by Volume
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28. Thank You!
Supply Chain Expertise Analytical Know-how
Arnold Mark Wells, CPIM
Principal
End-to-End Analytics, LLC
955 Alma St., Suite B
Palo Alto, CA 94310
330 546 2404
mark@e2eanalytics.com
Superior Performance Through Data-Driven Analysis
Unsurpassed Skill Uncommon Commitment Remarkable Results
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