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PwC | Strategy&
Contents
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Analysis/ Making the decision
• Key shifts & guiding principles
• Drivers & options for SC Operating Model design
Learning from others/ Best Practices
• Key lessons learned
• CPG & retail examples
Creating a path forward
• Approach
• Configurator and benchmarking
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November 12, 2020
PwC | Strategy&
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PwC | Strategy&
Key shifts cause a rethinking of today’s supply chain operating model and how to make it future ready
FROM TO
Disconnected, partially manual physicalsupply chain based on old channelLogistics
Omni channel setup and smart logistics with automated warehouses, effective TMS, omnichannel order mgmt. etc.
PlanningDisconnected demand and supply planning based on cumbersome alignment processes
Closed loop and integrated planning synchronizes in real-time and integrates supply chain partners
SegmentationOne size fits all supply chain or staticsegmentation by product category or channel
Dynamic SC segmentation to enhance customer centricity and balance service levels, costs and margins
Centralization with focus on cost andefficiency
New digital capabilities and talents bundled in hubs (e.g. for data analytics) enabling efficient deployment
Enablement
Limited transparency across supply chainTransparency &
sustainability
360-degree view of products, supply chains, customers and finance enabling a digital twin of the supply chain
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Non-exhaustive
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The development of Supply Chain Organizations should be based on a clear set of guiding principles
Guiding principles
Clear accountabilities
• Clear and unambiguous accountabilities
• Decision rights reside with only one function
• Reduce complexity and duplication of tasks
Think customer back
• Design processes customer back and reflect local requirements
• Create leverage and synergy for non-key tasks by scaling along similar ‘jobs to be done’ (center of gravity)
• Make deliberate decisions of functional focus vs. value chain (process) focus
Capability focused
• Design around entities that have clear and unique added-value and remove non-added values
• Enhanced pivotal roles acting as driver and leader of key processes
Structure follows strategy
• Investments, resource deployment and capabilities should match geographical and business growth ambitions
Maximum agility and empowerment
• Light layering; maximal spans of control and minimal layers
• No roles should be dedicated purely to “coordination” or “liaison”
• Tight metric system to drive performance
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Before designing the future operating model, several key drivers have to be analyzed Drivers for SC Operating Model design
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Current and future product portfolio (share of global, regional and local brands)
Current and future time to market (lead times, freshness, shelf life, etc.)
Current and future go-to market channels (B2C, B2B sales, online, distributor, etc.)
Current and future production / supplier network
(requirements, technology dedication, global, regional, local sites)
Current and future geographical presence
6 Current and future regulatory and legal implications (e.g. tax optimized operating models)
7 Current and future sustainability goals (e.g. future real estate requirements, environmental foot print)
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Supply Chain
Enabling
Functions
Supply Chain
Segmentation
Based on the key drivers numerous options and combinations are possibleOptions for SC Operating Model
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No Segmentation By Categories By Channels
Dynamically by
customer
expectations
Global Regional Cluster Local
Functional
responsibility
E2E planning and
functional execution
Separated demand
& supply
responsibility
Integrated supply
chain responsibility
Global / Regional
Center of
excellence
Global / Regional
Center of scale
On Local or Cluster
levelHybrid
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Center of
gravity SCM
Supply Chain
Archetypes
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Some companies tend to be more decentral in their supply chain model in response to local flavors and freshness
Center of gravity SCM
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Global/
Corporate
Regional
(e.g. EMEA)
Cluster (e.g.
GSA)
Local (e.g.
Germany)
BeverageCosmetics / household Fashion Food
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Trendtowards regional
Illustrative
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Separated demand and supply responsibility Integrated supply chain responsibility
Four generic Supply Chain archetypes are existing in theCPG industry
Supply Chain archetypes for Consumer Goods companies
OTC: Order-to-Cash; DTF: Demand-to-Fulfil; PTD: Produce-to-Demand; PTP: Purchase-to-Pay
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Functional responsibility
Warehouse
E2E planning and functional execution
CPG SupplyChain
Architypes
PTP PTD OTCDTF
Sales
Plan&
Deliver
Plan
FulfilMake
PTP PTD OTCDTF
Sales
Plan&
Deliver
Plan
Fulfil
PTP PTD OTCDTF
Plan & Deliver
numerous derivates possible (e.g. VMI)
Plan
Fulfil
Make
PTP PTD OTCDTF
Plan & Deliver
Plan
Fulfil
Make
A B
C D
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Illustrative
Make
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Differentiated supply chain brings significant benefits in terms of customer service, cost, inventory and sustainability
Supply Chain Segmentation benefits
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• Driving more volume and value through key channels by being more responsive
• Supporting innovation and opportunistic business
• Anticipating and driving value through advanced supply chain offerings
• Segmenting complexity and getting good at handling it
• Extracting benefits from stability where it exists
• Focusing overhead attention where it’s needed
• Avoiding discounts, write-offs, reverse flow costs
• Releasing working capital from stable flows
• Avoiding short shelf live losses for volatile flows
• Increasing basis for customer preference
• Becoming easier to do business with
Growth
Profit
Cash-flow
Customer
Satisfaction
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Dynamic segmentation based on customer expectations and product characteristics enables highest flexibility in your SC
Dynamic segmentation – overview
Supply side – segmented by product category
Demand side– segmented by customer
channel
Integrated planning on volume and financial level (tactical and operational planning)
Portfolio & NPI
implementation
Operational
sourcing & contract
manufacturing
Manufacturing
Supply planning
Portfolio & assortment planning
(incl. NPI)
MRP MPSCapacity
planning
Transport &
warehouse mgmt.
Order mgmt. &
customer service
Order fulfilment planning
Distribution Inventory Demand
• Provide configurable/tailored
offering to customers –
managed through modular E2E
supply chain segments
• Highly customer centric
enabling differentiated
customer interaction models
(e.g. differentiated OTIF)
• Decoupling of front-end and
back-end SC activities
Decoupling
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Characteristics
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Functions can be centralized into center of excellence (CoE) or center of scale (CoS) resulting in different benefits
Decision criteria and benefits
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CoS• Routine, rules-based, highly
repetitive and transactional
processes
• Performed for multiple functions
• Significant transaction volumes
CoE• Specialized processes requiring
expertise in specific disciplines
• Demand from business is based
on portfolio/program
• Highly advisory in nature
Transfor-
mation Value
Improved Decision Making
Capital Investment & Tax Implications
Forecast accuracy & Productivity
Process Cost Efficiency
Speed of Implementation and Quality Loops
Improved Service Delivery
Compliance And Control
Scalability
Overhead Cost Efficiency
Which
functions to
centralize as
CoE or CoS?
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Global Regional Cluster Local Example recommendation
Develop
Supply chain strategy and organization
Decide globally, set-up CoESC network design
…
Source
Strategic procurement in-/direct material Decide globally, set-up CoE
Operational procurementDecide regionally, set-up CoS
…
Plan
S&OP/Long-term pl.Decide globally / regionally as CoE, consolidate at global level
Demand planning/sensing/shaping
…
Make
Production logistics/Call offsSet-up plans for regional distribution
Production execution/VAS
…
Deliver
Order ManagementDecide regionally as CoS
Customer Service
Warehouse managementExecute on cluster / locally
…
Optimize
Supply chain performance Decide globally as CoE
Customer collaboration Execute regionally / locally close to BU
…
Enable
Training/up-skilling/HR Decide globally as CoE
Master Data Dynamic segmentation by category on supply side and by channel on demand side…
Large CPG and manufacturing companies have been reorganizing its functions to be more centrally focused
Decision criteria
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As-Is To-BeTendency towards more centralized set-up
Reduced number of planning sites significantly to only a few centers globally
Has consolidated large majority of its indirect and direct sourcing functions in GBS and established CoEs
Global center spanning full SCM with local logistics execution
Example4
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Key lessons learned from successful players in the field Summary
• Generally, most companies adjust their operating model on a regular basis, with more fundamental
shifts occurring every 5-8 years in an attempt to continuously improve
• CPGs are organized in various forms of matrices to encourage constructive tension, with some more
category/brand-led (P&G, L'Oréal, Pepsi, Nestlé) some more geography-led (Unilever, Reckitt
Benckiser, Heineken) and others more function-led (Mondelēz)
• However, all companies have defined a clear center of gravity across their organization; functions are
only duplicated where necessary
• CPGs have realigned their operating model in the past years (Unilever, P&G, Heineken, Mondelēz) to
optimize scale (“more global”) and to increase local market responsiveness (“more local”)
• There is no single optimum model – a spectrum of options exist, varying with factors like company
strategy, heritage and culture, market position, scale (globally and in-market) and channel mix
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PwC | Strategy&
How other companies are applying these good practicesBest practice examples
Global FMCG and pharma company
Value Chain and centre of Excellence
• E2E Supply Chain organisation including a global Supply Chain centre of excellence (CoE) and a CoE for strategic procurement
• Core supply chain activities clustered in value chains
• Country clusters for execution and customer services
1 Global consumer goods company
Process-driven operating model
• Strong customer orientation• E2E process-driven Supply
Chain organisation including clear roles and responsibilities
• Mapping of organisation and process view to secure E2E accountability and steering
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Home furnishing retailer
Centralized supply chain with strong SC communities
• Set up of central CoE with strong analytics capabilities
• Implementation of proactive demand sensing and auto replenishment
• Central steering of capability roadmap / connected portfolio
• Strong involvement of users during development through SC communities
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Multinational specialty consumer
goods companyMultinational SC organisation
• Single global product supply responsibility, with category-dedicated organizational set-up
• Mature GBS enables GBUs and regions across multiple functions
• Highly tax optimized model
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Regional steering SCM responsibilities
Global consumer goods company –
Unilever
• Supply chain is managed regionally; strategy on global level; demand planning on local level; with category-specific SCs being installed
• Regional CEO is country CEO of biggest country (double roles installed)
6Global beverage & food manufacturer
Central planning hubs supporting local markets
• Set up of 5 central planning hubs supporting local markets
• Streamlining expertise and capabilities centrally
• Innovations enabled by cross-functional CoEs
• Customer excellence and agility through local customer teams
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Creating a path forward• How to make it happen
• How to create a case for change
November 12, 2020
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Designing and implementing a tailored operating model can be approached in 4 stepsSuggested approach and next steps
September 15, 2020
Strategy&’s SC
Ops model
configurator
Diagnose Design Pilot ImplementI II III IV
• Identify strategy &
opportunities
• Choose initial options from
configurator
• Detail and validate feasibility
of options
• Prioritize options and design
target operating model design
• Select pilot based on defined
strategy and prioritized
options, e.g. geographic
region, supply chain function
etc.
• Measure and realize first
successes fast
• Secure organization’s
engagement and buy-in
• Adapt and make
improvements to target design
• Identify customizations of
design for specific regions /
functions
• Roll out and stabilize
Change management
Engage Plan for Change Enable Change Scale Change
• Detailed as-is capturing and
structural diagnosis of current
organization, e.g.:
Center of gravity
Organization core &
business alignment
Roles & responsibilities
HC baselining
Spans and layers
What is your future time to market
(lead times, freshness, shelf life, etc.)?
Up to 1 week
Generate Results
18PwC | Strategy&
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PwC | Strategy&
We invented the Supply Chain Management concept and developed proprietary SC benchmarking based on SCOR®
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We invented the Supply Chain
Management concept and
developed our proprietary SC
benchmarking based on SCOR®
Our thought leadership is well
recognized across all areas within
Operations
We are a recognized, global leader
in Operations Consulting
• Strategy& invented the term “Supply Chain Management” more than 30 years ago
• Strategy& (PRTM) developed and introduced the Supply Chain Operations Reference model (SCOR®) to the public domain
• Through our subsidiary, The Performance Measurement Group (PMG), we regularly conduct leading Supply Chain management benchmarks
Exemplary analyst recognitions
Supply Chain Management
Consulting Services
IDC MarketScape Leader
Supply Chain Strategy & Planning
Consulting
ALM Intelligence Leader
Operations Digital Strategy
Consulting Services
IDC MarketScape Leader
Supply Chain Management
Consulting IDC ALM Intelligence
Leader
Differentiated
Supply Chains
Enterprise-wide operations
excellence
Connected and autonomous
supply chain ecosystems
Innovation & development
excellence
Competitive
manufacturing
Sustainable supply chain
management
Plan
DeliverMakeSource
PwC Strategy& capabilities: Overview
November 12, 2020