Supply Chain Innovation

Driving Innovation
November 2017
For the Supply Chain Leader Who Wants to Rise Above

Supply Chain Insights LLC Copyright © 2017, p. 2
I Am A Social Scientist

A Skeptic

A Bit of a Curmudgeon…

A Fortune-teller of Sorts….

I Write for the Supply Chain Leader

This Morning I Was Melania Trump

Sadly, I Was Hacked

Today’s Reality

A Leaky Boat Tossed by Many Winds
Amazon Effect 3G EFFECT
Digital
E2
E

Trade Complexity Is Increasing as Growth Slows

Third Industrial Revolution Productivity Impact
Stopped in 2004

Risk Drivers

What I Believed

Only 12% Of Companies Are Driving Improvement and
Performance Better Than Their Peer Group at the Intersection
of Operating Margin and Inventory Turns.

The Supply Chain Is a Complex System with
Increasing Complexity.

• Improvement
• Performance better than Peer Group
• Resiliency
• Balance
• Strategy to Action
What Defines Supply Chain Excellence?

2006
2016
6.6
6.8
7.0
7.2
7.4
7.6
7.8
8.0
0.08 0.09 0.10 0.11 0.12 0.13 0.14 0.15
InventoryTurns
Operating Margin
Food
Best
Scenario
Food
0.11, 7.38
Average (Operating Margin, Inventory Turns)
Source: Supply Chain Insights LLC, Corporate Annual Reports 2006-2016 from YCharts
Shifts in the Food Manufacturing Market
Operating Margin vs. Inventory Turns (2006 - 2016)

2006
20162006
2016
5.4
5.9
6.4
6.9
7.4
7.9
0.08 0.10 0.12 0.14 0.16 0.18 0.20
InventoryTurns
Operating Margin
General Mills Food
Best
Scenario
Food
0.11, 7.38
General Mills
0.16, 6.96
General Mills Versus Food Averages
Operating Margin vs. Inventory Turns (2006 - 2016)

2006
2016
2006
2016
4.5
5.0
5.5
6.0
6.5
7.0
7.5
8.0
0.08 0.10 0.12 0.14 0.16 0.18 0.20
InventoryTurns
Operating Margin
Hershey Food
Best Scenario
Food
0.11, 7.3
HSY
0.16, 5.62
A Look at Hershey
Operating Margin vs. Inventory Turns (2006 – 2016)

A Closer Look at P&G

Comparison of Toyota and Honda
Operating Margin vs. Inventory Turns (2006 – 2015)

What Makes a Difference?

Correlations

A Closer Look at Supply Chain Excellence

A Closer Look at the Methodology

Top Performers

Improvement IS Fast When You Have a Lot to Lose

Manage Costs Like a Decathlete

Managing Costs

Efficient Is Usually Not Effective

Fads Get Us Nowhere

Best Transformations Require Wings and Feet
Aspirational Leadership
and Process Innovation
Grounded
in Goals

Driving a Digital
Transformation

What Is Next-Generational Thinking?

Current Supply Chain Process Thinking
Rows and Columns:
Transactional Data
Fixed Hierarchies with
Structured Data
One-to-One Enterprise Linear Flows
Descriptive and Predictive Analytics

• Autonomous Supply Chain: Automation of supply chain processes through
cognitive learning and artificial intelligence eliminating labor and reducing the
need for people to touch data.
• Value Chain Uberization: A platform to enable shared resources across a
community.
• 3D Printing: Localization of manufacturing through the sharing of digital images
using additive manufacturing.
• Internet of Things: The use of machine-to-machine streaming data to improve
supply chain outcomes.
• Multi-Tier Networks and Redefinition of B2B: The building and execution of
multi-tier networks for data sharing, collaborative workflows, and improved
decision making. This includes a discussion of blockchain, network canonicals,
and interoperability.
• Cloud-Based Computing. The promise of cloud is federation and
democratization of data, in both private and public clouds, with the promise of
lower cost of ownership.
• Listening: The use of unstructured data–social sentiment, warranty, and quality
data–to improve organizational productivity and outside-in processes to be
market-driven. Market-Driven Value Networks is a more mature definition of
demand-driven.
What Does Digital Transformation Mean for
You? There Is No One Definition

Trend #1: Outside-In
Processes

Today’s Reality

Opportunities
at the Intersection
of the Social and Interest Graph(s)
in eCommerce

The Long Tail of the Supply Chain

Traditional Approaches of ERP/MRP/DRP Amplify
the Bullwhip Effect

Bar codes were first used at Marsh Supermarket in 1968

Use of Downstream Data

POS Cost Profile by Year
2006 - 2009
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
W
K
1
W
K
3
W
K
5
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K
7
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9
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11
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35
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K
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W
K
51
WMT Week
BaseIndex
2006 2007 2008 2009
Claritin Case Study: Spring and Allergies
• 40% of Annual POS done in 16 spring weeks
• Every Year the Season Flows Essentially the Same In Aggregate
– WM Store and DC build strategies the same across the country
Source: IRI

0.0
0.5
1.0
1.5
2.0
2.5
3.0W
K
1W
K
2W
K
3W
K
4W
K
5W
K
6W
K
7W
K
8W
K
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52
WM WEEK
POSBASEINDEX
Profile CA-40 MID-N SOUTH NORTH PAC
Wal-Mart Demand Flow
• Utilized store level data to develop 5 regional profiles based on
average 5 year POS
– Worked with Walmart to develop Store and DC Build and Exit
Strategies Based on Profiles
– Implemented Throughout Entire Allergy Category at Walmart
– Drove Growth by 5%

The Need to Listen

Supply Chain Insights LLC Copyright © 2017, p. 52 5
CUSTOMER PATH ANALYTICS

Supply Chain Insights LLC Copyright © 2017, p. 53 5
KINETIC HEAT MAPS

Improving Product Visibility

Trend #2: The Autonomous
Supply Chain

Data Needs to Move Securely Through Value
Networks In…
Clouds Streams Pools

Need for New Forms of Analytics

Autonomous
Supply Chain
Cognitive Computing
Machine Learning
Text Mining and
Pattern Recognition
Predictive and
Prescriptive
Analytics
Building the Autonomous Supply Chain

Evolution of Cognitive Computing

Redefining
Time

1.5M sku locations
~ 95% slow or intermittent
Seasonal demand (at the item level) is identified down to a specific
location.
Simplified for clarity In reality, looks more like this
•365 days
•150+ local climates
•Avg 3,000 items / location (165M)
•15 year lifecycle changing amplitude
Lennox International

•Replace
•Compressor
•Engines
• Dealer gets service event
• We get parts sales
• Customer has non-event
• Customer - Dealer & Brand loyalty
Your compressor shows that it will fail
within the next 30 days. What day would
be good for us to come replace it?
Redefining Service

Internet of Things

Rich user interface in full HD
Evocative sound track with
burring grinder and tinkling
of spoons
Memorable flavours and
fragrances
Cutting edge reliable /
ultra efficient computer
processing hardware
Stunning curved design by
Italian automotive designers
Irresistible aromas of Costa’s
coffee shops
Innovative coffee-making
system providers
Redefining Replenishment

Transforming Inbound Logistics
Mobile Device Apps
AIS Vessel Location
Sensors

Improved On-Time
Delivery

Trend #4. Digital Manufacturing

What Is Digital Manufacturing?
Additive
Manufacturing
Paperless Processes Robotics

AGCO Manufacturing Redefinition

Evolution of 3-D Printing Organs

Ultimate Ear

The adoption of distributed and open technology
by the ecosystem of technology providers and
business users to drive inter-operability in value
networks to improve business outcomes.
What Is the Network of Networks?

What Does Not Work

Future View

Write once and use company and contact information many times.Community Directory
• Reduce onboarding through once source of data.
Blockchain redefines visibility and track and trace.Traceability
• Confluence of Blockchain and Spark/Internet of Things Redefine Lineage.
Bitcoin and Blockchain disintermediate traditional banking.Supply Chain Finance
• Emergence of the supply chain digital wallet.
• An alternative to EDI.
Cognitive computing eliminates the need for master data
management and standards.Interoperability
• Data is mined through patterns and translated for context through cognitive computing.
Shift from standards to process canonicals.
What Could Change?

Example: Shipment case study
Maersk and IBM analyzed the shipment of avocados from Mombasa
to Rotterdam
We followed the shipment from Mombasa to Rotterdam and tracked the actors, people and information exchanges. The
findings illustrated the complexity and costs inherent in today’s global supply chain
200
100
30
1
0 50 100 150 200 250
Information exchanges
People
Actors
Avocado Shipment

The case for GTD
80
TODAY
 Inconsistent information across organizational boundaries and “blind spots”
throughout the supply chain
 Complex, cumbersome, and costly peer-to-peer messaging
 Manual, time-consuming and expensive, paper-based processes
 Risk assessments often lack sufficient information
 Clearance processes subject to fraud
 High administrative cost of handling a container shipment
TOMORROW
 Instant, secure access to end-to-end supply chain information
 Single source of the truth
 Assurance of the authenticity and immutability of digital documents
 Trusted cross-organizational workflows
 Better risk assessments and fewer unnecessary interventions
 Far lower administrative expenses and elimination of costs to move physical
paper across international borders
Exporter Authority Authority
Authority Authority
Forwarder
Carrier
ConsigneeAuthority
Terminal
Exporter Trucker Rail
Authority Authority
Forwarder
Carrier
Consignee
Terminal
Global Trade Digitization

GTD is an industry platform that connects and provides benefits to the supply
chain ecosystem
GTD
Platform
Customs
Systems
Logistic actors
internal systems
Supply Chain
Visibility Systems
Port Community
Systems; Terminal
Operating Systems
Transportation
Management
Authorities
Trade
Associations
Ocean
Carriers
Shippers /
Supply Chain
Actors
Supply Chain /
Transportation
Management systems
Ports and
Terminals
Freight
Forwarders
1 Shipping Information Pipeline (SIP)
Provides end-to-end supply chain visibility that
enables all actors involved in a global shipping
transaction to securely and seamlessly
exchange shipment events in real time
Paperless Trade
Digitizes and automates paperwork filings for
the import and export of goods by enabling
end users to securely submit, stamp and
approve documents across national and
organizational boundaries
2
GTD is built on an open technology stack and is underpinned by Blockchain technology
GTD is a trade platform for containerized shipping
connecting the entire supply chain ecosystem

Supply Chain Insights LLC Copyright © 2017, p. 82© 2017 Bristlecone Inc.
82
Challenges in India’s Dairy Cold Chain
How does this affect Businesses?
India, the world’s largest milk producer
ends up wasting about 20-50% of total
produce
93% of companies’ supply
chain is invisible
India’s operating cost of cold storage is High:
USD 60 per cubic metre vs USD 30 in the West
Lack of risk mitigation leads to
high value food wastage and recurring
losses
Lack of cutting edge Tech in supply
chains
causes you to lose out on
the competitive advantage
Social, ethical and environmental issues
in supply chains leads to loss in
Market Capitalization & Brand reputation

SECURED INFORMATION SHARING

Planning Maturity: Large CPG Company
Application Channel Sell Deliver Make Source Suppliers
Strategic
Planning
6-18 months
Partner
Planning
Network Design Strategic
Sourcing
Tactical
Planning
12-52 weeks
Sales and Operations Planning Commodity
Council Buying
Strategies
Requirements
Planning
Joint
Value
Creation
Forecasting Inventory
Configuration
Tactical
Supply
Supplier
Development
Transportation
Planning
Material
Orchestration
Operational
Planning
3-12 weeks
Demand Sensing (MDS
and DS)
Inventory Planning
DRP/Load
Planning
Deployment
Production
Planning
MRP Supplier
Sensing
Internal Visibility Supplier Visibility
Executional
Planning
0-3 Weeks
Customer VMI
Trade Promotion Execution
ATP
Supplier VMI
Transactional
Data
Transactions
Planning Master
Data
Planning Master Data

Shifts in Planning Architecture

Probabilistic Approaches

Baby Boomers, Vendors, Academics, and Remote
Employees Are Most Satisfied with Their Jobs

Today’s Challenges

Where Are You Willing to Invest?
Early Adopter Late Adopter
Cognitive, Machine Learning,
Blockchain, Internet of Things,
Wearables, Drones, Autonomous
Vehicles
Cloud, Concurrent Planning,
Descriptive Analytics, Production
Planning, Inventory Management,
Transportation Planning
2 Options:
Little
Choice in
Between

• Remove the handcuffs. Eliminate the expectation of well-
defined ROIs.
• Develop a stage-gate process for process innovation.
• Embrace small scrappy teams.
• Partner with technology innovators.
• Manage the hype cycles.
Have the Talk with Your CFO

Wrap-up
• Embrace New Technologies at
the Right Time.
• Focus on Capabilities. Build
with the Goal in Mind.
• Manage the Supply Chain as a
Complex System.

Time to Take a Different Path?

About Lora Cecere
• Founder of Supply Chain Insights
• “LinkedIn Influencer”
• Guest blog for Forbes
• Author of 5 books: Bricks Matter (2012), Shaman’s Journal (2014),
Supply Chain Metrics That Matter (2014), Shaman’s Journal (2015),
Shaman’s Journal (2016), Shaman’s Journal (2017)
• Partner at Altimeter Group (leader in open research)
• 7 years of Management Experience leading Analyst Teams at
Gartner
and AMR Research
• 8 years Experience in Marketing and Selling Supply Chain
Software at Descartes Systems Group and Manugistics (now
JDA)
• 15 Years Leading teams in Manufacturing and Distribution
operations for Clorox, Kraft/General Foods, Nestle/Dreyers
Grand Ice Cream and Procter & Gamble.
Contact Information:
• Email: lora.cecere@supplychaininsights.com
• Blog: www.supplychainshaman.com (15,000 pageviews/month)
• Forbes: www.forbes.com/sites/loracecere
• Twitter: twitter.com/lcecere (8,700 followers)
• LinkedIn: www.linkedin.com/in/loracecere (238,000 followers)
• LinkedIn Influencer: www.linkedin.com/today/author/446631

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