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Leading Collaborative Supply Chain Transformations

William B. Lee, Ph.D., CFPIMPresident, William B. Lee International

Tish PatelSenior Consultant, SAPPresident, Houston APICS Chapter

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William B. Lee, Ph.D., CFPIM

Current: Educator, Consultant, and Board Member• Books: Creating Entrepreneurial Supply Chains: A Guide

for Innovation and Growth, 2012; Leading Effective Supply Chain Transformations: A Guide to Sustainable World-Class Capability and Results, 2010; (both with J. Ross Publishing)y ( g)

• Articles: “Creating Entrepreneurial Supply Chains,” Supply Chain Management Review, May/June 2012.

• APICS E&R Foundation: Board of Directors• APICS Body of Knowledge Committee: Member

Previous• Rice University: Professor, Director of Energy Programs, and Dean of Executive

Education

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• APICS International Board of Directors and Member of Leadership Team• Freeman Companies: Board of Directors and Chair, Compensation Committee• Deloitte: Senior Partner, Director of Supply Chain Consulting, Director of Change

Management Consulting, and National Partner for Education and Research• Oliver Wight Management Consulting: President and Board member

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Tish PatelCurrent• President, Houston APICS Chapter

(A Platinum Chapter)• SAP, Senior Consultant, Manages Global PMO Office• Six Sigma Black BeltPrevious• Over Twenty Years of Broad Experience in Global Supply Chain and 

IT Integration Projects• HP, Set Up Large Control Tower Operations in China; Compaq 

Computers and AT&T Mobility, Created and Led Large Supply Chain and Logistics Projects; Also Worked in Oil and Gas, Life Sciences, and Consumer Products

• Education: BBA, University of Houston, International Marketing, Organizational Behavior and Management

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Transformative Ideas Are Not Always Obvious!

“Duh, what do we need

“I have an idea!” do we need

that for?”an idea!

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One Company That Needs a Transformation!

“By next Friday, December 31, we’ll have almost 10,000 units on the back lot!

I thought we were in amake-to-order business?”

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C ll b ti ? T f ti ?

What Do We Mean By …

Collaboration? Transformation?

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Some Best Practices for You to Think About from this Presentation

1. Be on the lookout for collaborative transformationalcollaborative transformationalneeds and opportunities.

2. Stimulate innovation.

INNOVATION

Gro

wth

Emerging Technology

3. Use collaborative transformations and innovation to foster profitable growth.

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Time

Learning Objectives

COLLABORATIVE and INNOVATIVE TRANSFORMATIONS

How to recognize and assess opportunities and needs:– In the existing situation.– For collaborative transformation.– For enhanced innovations.

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Agenda

1. Introduction to supply chain transformations2. Why are we interested in transformation?3. How do we know that we have needs and opportunities?4. How can we convince the organization?5. How can we develop transformative ideas?6. How can we manage the risks?7. How can we reap the payoff?8. A final word

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1. Introduction to Supply Chain Transformations

“It is not the biggest, nor the strongest, nor the most intelligent that will survive. It is the 

species most adaptable to change.”‐‐ Charles Darwin ‐‐

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Earlier Supply Chain Transformative Innovations

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CEMEX: Innovation, Growth, and Transformation in a Fragmented Industry

• CEMEX – founded in 1906 in Mexico• Now one of the world’s largest building 

materials companies• 2011 sales = US$15.1B• Entrepreneurial supply chains• Innovative culture and practices, particularly information technology

CEMEX is engaged in a rigorous transformation … 1. Flattening the organization … decentralizing authority … and nurturing 

world‐class human resources …2. Building a solid balance sheet3. Reshaping product/market portfolios …

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SOURCE: CEMEX 2011 Annual Report

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CEMEX Information Technology Example

• Different types of customers have different requirements for on‐time, reliable delivery– External– Internal– Internal– Contractual

• Transformative collaboration among plants, logistics, and customers– Satisfy individual customers instead of general customers– Use one‐on‐one, team‐based, collaborative approach– Commit to deliver a customer’s concrete pipe on Monday, aggregate 

on Tuesday, concrete block on Wednesday, concrete on Thursday, and decorative concrete on Friday

– Help customers better serve their customers in both time and cost

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CEMEX Information Technology Example

… my aggregate on Tuesday, … my concrete

I want my concrete pipe on Monday,

on Tuesday,

Wednesday,

… my concrete block on 

Wednesday,

… my concrete on Thursday, and

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… my decorative concrete on Friday.

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Who Wudda Thunk It?

• Can an industry such as cement and its derivative products (ready‐mix concrete, concrete blocks, concrete pipe, etc.) be th tti f i ti ?the setting for innovation?

• Who would have suspected that a basic industry such as this could be the focus of significant collaborative supply chain transformations.

• Look at CEMEX’s Web site: www.cemex.com to get more information on the company. It’s really informative.

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2. Why Are We Interested In Transformation?

“Investment must be rational. If you can’t understand it, don’t do it ” (Warren Buffet)

Transformation

don’t do it.” (Warren Buffet)

BNSF

NetJets

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“Breakout” Example from Transformation Project

XBakersfield

San Francisco RDC

Las Vegas RDCX

XCoverage

Areas Coverage Areas BeforeBakersfield “Transformation”

XBakersfield

Los Angeles RDC

X

XSan Francisco RDC

X

Coverage Areas

XNew Bakersfield “Breakout”

RDC

Los Angeles RDC

Las Vegas RDC

X

X

Coverage Areas AfterBakersfield

“Transformation”

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What Is a Control Tower?Provides a centralized and standardized control mechanism for proactively managing, executing, and reporting “events” in the supply chain.Decisions and actions are real-time driven, based on an end-to-end view of what should happen what is happening and whatend view of what should happen, what is happening, and what will happen.

Simplify Operations

Leverage Processes

Manage Events with Real-Time Visibility

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Optimize Costs

Provide Supply Chain Data

Report and Analyze with Standard Metrics

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Example Capability with Control Towers

“We need 10 containers from Chi Shi

CHINA

TRANSPORTATION MANAGEMENT

SOFTWARE

CO

NTR

OL

TOW

ER

China.  Ship through Long 

Beach.”

X

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No, wait! Divert No, wait! Divert shipment to Seattle.

X

Scope and Functions of a Control Tower….

Strategicg

Tactical

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Operational

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Important Control Tower Elements

OPPORTUNITIES AND NEEDS

CUSTOMERSSUPPLIERS

PROCESSES

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TECHNOLOGIES PEOPLE

3. How Do We Know We Have Needs and/or Opportunities?

“If all you have is a hammer, everything looks like a nail.” (Anonymous)

PLAN

MAKE DELIVER SOURCE MAKE DELIVER SOURCEDELIVER SOURCE MAKE DELIVER SOURCE

OURCOMPANY

CUSTOMERSSUPPLIERS

ValueCash

Information

ADAPTED FROM: www.supply-chain.org

Product and Process Development

“Competition is no longercompany to company

but supply chain to supply chain”

Return

Information

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4. How Can We Convince the Organization?

“Give me a place to stand and with a lever I will move the whole world ” (Archimedes)n

ConsequencesInformation About

“Give me a place to stand, and with a lever I will move the whole world.” (Archimedes)

the whole world. (Archimedes)

My

Org

aniz

atio

n

My Behavioral

Performanceon the Job

My Beliefs About ConsequencesOf My Behavior

The Value of the Consequences

to Me

My ConfidenceThat I Can

Perform the

My DecisionsAbout How to

Behave+ =+

Information About the Consequences of my Behavior

The Environment Within Which I Exist

Of My Behavior to MeBehavior

Behave

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Why We Fail at Transformative Projects

Many Companies Have Rationalized Their Supply Chains

Supply Chains Have Operated Neither More 

Efficiently nor ff l

Focus Has Been on Pressuring Suppliers, not on the Supply h

ACTIONS …ACTIONS … BUT …BUT … BECAUSE …BECAUSE …

Supply Chains Effectively Chain Processes

Hundreds Have Restructured Their Supply 

Chains

Supply Chain Restructuring Efforts Have not Met Original 

Targets

Focus Has Been on the Supply Chain 

Organization, not on the Supply Chain Processes

Billions Have Been Spent to Automate Inefficient 

Supply Chains

Information Systems Have Proven to Be Less Than Totally Effective 

Focus Has Been on the Information Technology, not on the Supply Chain 

Supply Chains Initiatives Processes

And we could go on and on and on …

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Neil Armstrong lands on the moon, July 20, 1969

Kennedy’s “Man‐on‐the‐Moon” Speech Convinces a Nation of a Transformative Idea 

< 7 years later

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President Kennedy makes his “man-on-the-moon” speech at Rice University, Houston, September 20, 1962.

“That’s one small step for a man, one giant leap for

mankind.”1. Current situation2. Vision3. Path forward

5. How Can We Develop Transformative Ideas?

“Where there is no vision, the people perish.”(Proverbs 29:18, King James Version of the Bible)

Visioning will provide an opportunity to:g p pp y

• Think “outside the box” and view the company’s supply chains differently.

• Standardize the supply chain processes and practices whenever possible.

• Improve work flows and methods.• Identify radical new supply chain designs.

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• Look for opportunities to improve customer service.

• Consider new technologies and practices.

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A Capital Equipment Company’s Transformative Stage‐Gate Process

Gate 1

Gate 2

Gate 3

Gate 4

MARKETINGION

Y

Stage I:B ild

Stage II:D t i

Stage III:T t

MARKETING

TECHNOLOGY

MANUFACTURING

Stage IV:P

Stage V:M

TRAN

SFO

RM

ATI

OPP

OR

TUN

ITY

VISI

ON

ING

BuildKnowledge

Ideas

DetermineFeasibility

Experiments

TestPracticality

Projects

ProveProfitability

Production

ManageLife Cycle

Profits

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Collaborative Transformation:Link Product Development with S&OP

Concept & MarketAnalysis

StrategyAlignment

& Feasibility

ProgramDevelopment

Product& Process

Development

Product& ProcessValidation

Stable Production& CustomerAcceptance

STRATEGY ALIGNMENT & FEASIBILITYSTRATEGY ALIGNMENT & FEASIBILITY

1. Establish Bases of Differentiation2. Confirm Concept with Prospective Customers3. Identify Operating and Option Requirements4. Develop Make / Buy / Reuse Strategy5. Determine Design and Manufacturing Feasibility6. Develop Early Supplier Involvement, Sourcing,

and Cost of Operations Strategy7. Develop a Maintainability Strategy

8. Perform Rough Assessment of Organizational Development, Training, and Manpower Issues

9. Draft Critical Path Plan with Multiple Scenarios10. Develop Market Launch Plan11. Develop Plan to Incorporate Lessons Learned12. Make Program Leader Recommendation13. Assess Market Forecast14. Develop Business Case15. Develop Program Proposal16. Execute Gate Review Process

Responsible: Advanced Design

JAN FEB MAR APR MAY JUN JUL AUG SEP OCT NOV DEC JAN

Monthly S&OP and Product Development Stage/Gate Process

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p gApprove: Senior Leadership Team

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6. How Can We Manage the Risks?

“You’ve got to be careful if you don’t know where you’re going, because you might not get there.” (Yogi Berra)

CONSIDERCONSIDERTo make it easier to manage fast-moving consumer demand,

ZARA created an extremely fast global

supply chain.

Your suppliers are your suppliers because they have capabilities that

you do not have – treat them accordingly and not as adversaries to

be exploited.CONSIDER

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Boeing 787 example. Very late deliveries because of supply chain difficulties.

One Company’s Transformation Risk Management

OBJECTIVE: SUCCESSFUL SUPPLY CHAIN TRANSFORMATIONTRANSFORMATIONELEMENTS RISK ISSUES RISK MITIGATION PLAN

Implement commodity team concept Limited acceptance for commodity teams

Create three cross-disciplinecommodity teams to see how they teams work

Link supply chain objectives tobusiness objectives No unified vision between groups Create line-of-sight linkage from

supply chain to business objectives

Create sense of urgency for the speed of change

Need for cultural shift from firefighting to strategic focus for supply chains

Conduct education and training programs on need for strategic view

Ensure that supply chain metrics drive enterprise-wide behavior

Lack of linked and consistent metrics

Standardize enterprise metrics and link to supply chain metrics

Implement optimal organizationstructure

Current structure supports silo mentality

Create total enterprise supply chain organization

Implement early supplier involvement (ESI) Current ESI is limited Create incentives for Engineering to

actively implement

Upgrade demand management capability

Too much forecasting and lack of connectivity with customers

Enhance forecast accuracy metrics and use to drive connectivity efforts

Improve make-or-buy decisionprocess

Process is inconsistent and lacks reliability

Implement strategic sourcing process

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Supplier Quality Risk Assessment FrameworkConfidence in Management LOWHIGH

Moderate Risk High Risk!

Low Risk Medium Risk

RISKYSUPPLIERS

HIGH RISKSUPPLIERSal

ity N

otifi

catio

ns HIG

H

Company is notified

of a specific quality

problem in time to do something

Looking Back

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SUPPLIERSQu

Quality Escapes

LOW

LOW HIGH

gabout it

Company is not notified of a specific quality problem in time to do something about it (i.e., the item “escapes” from the supplier)

8. How Can We Reap the Payoff?Interviewer: “Tell me, Mr. Sutton, why do you rob banks?”

Willie Sutton: “Because, that’s where the money is.” (Anonymous)

Increased Revenue

Enhanced Service

Improved Quality TRANSFORMATION

Reduced Costs

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So, What Happens with the Payoff?

After SomeWork and

With Some PER

FOR

MAN

CE

Beginning Transformation

Without Any Improvement

With SomeImprovement

P

After MuchWork and With Much

Improvement

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Keeping the Improvements Going

Developing Setting

Crafting a Strategy to Implementing

andMonitoring

Developments,

Phase 1 Phase 2 Phase 3 Phase 4 Phase 5

a Strategic Vision

Setting Objectives Achieve the

Objectives and Vision

and Executing the

StrategyEvaluating

Performance, and Making Corrective

Adjustments

Revise as Needed in Light of Actual Performance, Changing Conditions,

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New Opportunities, and New Ideas

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9. A Final Word“I really didn’t say everything I said.”

(Yogi Berra)

Now, what do you think???

Collaboration? Transformation?

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Thank You for ComingThank You for Coming

l k Q i dPlease Ask Your Questions and Make Your Comments

We Have All Sorts of Ways to DealWe Have All Sorts of Ways to Deal with Them!

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Contact Information

• William B. Lee, Ph.D., CFPIM– Corresponding author– wbleephd@ymail.com– 713‐963‐8339– 5555 Del Monte Drive, Suite 1606– Houston, TX 77056‐4119

• Tish Patel• Tish Patel– tishpatel@gmail.com

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