The Top 6 Supply Chain Breakthroughs 2018 - SCM World...THE TOP 6 SUPPLY CHAIN BREAKTHROUGHS MARCH 2018 For instance, mantras like “good corporate citizen,” “working five years

The Top 6 Supply Chain Breakthroughs 2018

REPORT MARCH 2018

This document is the result of primary research performed by SCM World. SCM World’s methodologies provide for objective, fact-based research and represent the best analysis available at the time of publication. Unless otherwise noted, the entire contents of this publication are copyrighted by SCM World and may not be reproduced, distributed, archived or transmitted in any form or by any means without prior written consent by SCM World.

Patrick leads the research coverage on S&OP and integrated business planning. His research encompasses: analytics and business acumen; digital demand and omnichannel; information visibility; flexibility pricing; and profit optimisation. He specialises in the retail sector.

With over 10 years of experience, Patrick has a diverse background spanning the hi-tech, mining and retail industries. Prior to joining SCM World, he was Director, Inventory Management at CVS Health, where he led the management of supply and demand across many consumer packaged goods categories. Patrick’s experience also includes roles in supply demand management at Apple, and inventory and production planning at both Rio Tinto and Dell.

Patrick holds a Bachelor’s degree in Industrial and Operations Engineering from the University of Michigan, and a Master’s degree in Business Administration from Duke University. He resides in Barrington, Rhode Island.

Author

Patrick Van HullVice President, Research, SCM World

http://www.scmworld.com/power-of-the-profession-opinions/beth-morgan/

http://www.scmworld.com/power-of-the-profession-opinions/patrick-van-hull/

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Executive Summary 6

The Power of the Value 8

Arrow: Arrow’s Lean Sigma Drones: a Higher Perspective on Supply Chain Innovation 13

Intel: Combatting Modern Slavery in the Supply Chain 17

Merck (MSD): Delivering a Competitive Advantage for Msd Through Economic Inclusion & Supplier Diversity 20

Proctor & Gamble: Doing Well by Doing Good – P&G’s Approach to Citizenship 24

Pfizer: Using Smartphones, Science and Partnerships to End a Neglected Tropical Disease 30

Schneider Electric: Outside In: Building a Customer Centric Logistics Platform Tailored to Customer Buying Behaviors 36

Conclusion and Recommendations 44

References 46

About SCM World 47

Contents

© 2018 SCM World. All rights reserved.

THE TOP 6 SUPPLY CHAIN BREAKTHROUGHSMARCH 2018

Awarded in February 2018, the fourth year of the SCM World Power of the Profession Awards again recognized breakthrough successes in the supply chain community.

This year’s Supply Chain Breakthrough Award acknowledged the success of initiatives that harnessed the power of technology to solve real business problems, sought continuous improvement processes that built upon already high expectations, and created a sense of purpose for the people engaged by the company, internally and externally.

Success in this category was recognized through awards in each of three subcategories:

• Customer Innovation of the Year recognizes supply chain initiatives that have created a more valuable customer experience and achieved a positive, quantifiable impact on customer loyalty.

• Business Win of the Year recognizes supply chain initiatives that have contributed outstanding top-line business performance, profitable growth, savings, and/or given a distinct competitive edge.

• Social Impact of the Year recognizes supply chain initiatives that achieved a positive, quantifiable impact on society, local communities and/or initiatives environment.

The overall Supply Chain Breakthrough is awarded to the initiative that most impressively demonstrates success across all three subcategories. The six finalists for this prestigious award are featured within this report, with those demonstrating supply chain talent breakthroughs highlighted in a separately published report.

The six influential initiatives recognized for reaching the final round in the 2018 program are summarized below:

• Arrow Electronics’ Lean Sigma Drones program is an employee-driven initiative that utilizes innovative technology to increase productivity in warehouse operations.

• Intel is Combatting Modern Slavery in the Supply Chain by taking a leadership role in establishing labor practices and holding suppliers accountable.

• Merck (MSD) transformed its culture and operations through Economic Inclusion & Supplier Diversity to drive both social progress and business success.

• Pfizer integrates Smartphones, Science and Partnerships to End a Neglected Tropical Disease by equipping underserved communities with needed resources.

Executive Summary

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• Proctor & Gamble’s approach to citizenship is aimed as Doing Well by Doing Good, blending transparent business dealings with the support of worthy causes.

• Schneider Electric started with the customer’s voice in mind to Build(ing) a Customer Centric Logistics Platform that is tailored to Customer’s Buying Behavior.

As the culmination of a multi-tier judging process that evaluated yet another record number of nominations, a panel of esteemed supply chain executives and academics awarded the Customer Innovation of the Year to Schneider Electric, the Business Win of the Year to Proctor & Gamble, with Pfizer’s initiative recognized as the Social Impact of the Year.

For demonstrating excellence across customer innovation, business win, and social impact, the honor of the 2018 Supply Chain Breakthrough of the Year went to Pfizer.

Congratulations to all for their successful and inspiring initiatives!

The Power of ValueValue chain is a common extension of the traditional supply chain nomenclature to show that work goes beyond executing tactical plans and functional silos – there’s the potential for value to be created in each action. What is valuable depends on who you ask and what they do, but for each of this year’s Supply Chain Breakthrough Award finalists, their submissions are examples of how extended value propositions guide each company.

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The achievements of our awards f ina l is ts prov ide ev idence of how empowered organizat ions can combine customer innovat ion, business win and socia l impact.

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For instance, mantras like “good corporate citizen,” “working five years out,” and “a mission to save and improve lives” give insight into the mindsets that motivate breakthrough initiatives. Ideally, the development of strategy follows very closely after core values and guiding principles, and with the supply chain profession escalating from the shop floor to the boardroom, we’ve seen closer alignment of overall business and supply chain strategies.

Our 2017 Future of Supply Chain report1 found that across the entire community, 48% of respondents agreed that “absolutely, supply chain is understood an equally important part of business success,” with another 37% stating that supply chain is aligned, but “as an enabler of product or sales-drive strategies.” However, even with 85% of the community validating supply chain as a strategic partner, the industries of the 2018 finalists (fig 1) felt even stronger about the alignment. In fact, three of the four industries represented out-paced the overall community’s enthusiasm for supply chain as an equally important part of business success.

By aligning functional and overall business strategies, the work being done becomes about more than just the task at hand. The achievements of our awards finalists are evidence of how empowered organizations can combine customer innovation, business win and social impact.

Bringing these elements together proves that companies do right for both the brand and the business. For example, at every level of the organization (fig 2), the majority of community respondents saw investing in initiatives like sustainability to be an opportunity to both create a positive image and enhance brand equity, and also reduce costs and increase efficiency.

Does executive management appreciate the alignment of business strategy and supply chain strategy?

1. Synchronization of strategy

Source :SCM World Future of Supply Chain 2017 % of respondents | n=578

Not really. Supply chain is understood primarily as a cost center that affects margins.

No. Supply chain is strictly seen as function meant to service the business.

Yes, but only only as an enabler of product- or sales - driven business strategies.

Absolutely. Supply chain is understood as an equally important part of business success as sales & marketing or R&D/product development.

Industrial

Hi-tech

Healthcare & Pharma

CPG

61 26 12

5

11

7

37

44

34

54

43

56

4

3

3

2

11

How respondents judged their board’s motivation for investing in sustainability

2. Doing right for the brand and the business

Source : SCM World Future of Supply Chain 2017 % of respondents | n=1,240

Satisfy government regulations

Ensure no disruption of supply

Increase sales revenue

Fend of shareholder or external PR concerns

Reduce costs and/or increase efficiency (e.g. through better use of energy, raw materials)

Create a positive customer image and enhance brand equity

SVP/EVP/Board Level

VP/Director

Manager/Head

Other

76

60

48

33

36

31

79

67

50

38

30

31

80

69

48

41

37

27

75

66

57

39

31

31


Compounding the opportunity presented by bringing together the strategic development process and engagement of people is the power of technology to create a sense of the possible. As shown annually in the Future of Supply Chain study, digital technologies ranging from big data analytics, Internet of Things, and drones to cloud computing and machine learning, all have disruptive and impactful potential within supply chain.

Within this report, each finalist will share how their ability to combine people, process, and technology enabled them to create value for their customers, their business, and society. Among the key themes highlighted are:

• Transparency in business dealings to support good causes, protect the environment, and provide an appealing place to work.

• Empowerment of employees to seek out both big and incremental actions that build upon continuous improvement efforts to create efficient and effective processes.

• Digital technologies have the power to disrupt the supply chain with real and lasting change.

• Partnerships lead to operating efficiency improvements and also identify how combined capabilities can be used to develop impactful innovations.

• Keeping the customer or patient’s voice in mind leads to both sense and respond capability development.

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Arrow’s Lean Sigma Drones: a Higher Perspective on Supply Chain Innovation

Arrow’s Lean Sigma Drones project is a fun, employee-driven initiative that has provided the company with actionable new insights on process-improvement efficiencies within its dispersed global warehouse operations—a core component of Arrow’s global high-tech supply chain. Arrow drones capture high-definition video of warehouse processes from a birds-eye view, which employees review alongside an Arrow Lean Six Sigma (LSS) Black Belt to collaboratively identify areas for improvement.

Innovation

Utilizing rapid-improvement LSS methodology, the drone project has increased the utilization and understanding of LSS practices among Arrow employees. In addition, it has increased productivity for targeted processes by 82 percent and reduced 6.6 million walking steps in warehouse operations annually, or the equivalent of 3,300 miles— in just six months.

Impact

Arrow Electronics is always on the lookout for innovative ways to improve its global supply chain services and better meet the needs of its customers and suppliers around the world. In early 2016, employee feedback pointed out that higher vantage points were beneficial for viewing warehouse processes and identifying areas for improvement. The idea to deploy flying drone technology inside Arrow’s warehouses was born.

Challenge


The Business ChallengeArrow employees around the world are trained and empowered to look for both big and incremental actions they can take to create more efficient and effective processes. When employees are actively empowered and encouraged to create value for customers, everyone benefits—customers benefit from improved efficiencies, cost-savings and satisfaction, while employees report higher levels of engagement and satisfaction. And, both of these benefits positively impact a company’s bottom line. For example, eliminating just a few walking steps along a single warehouse picking route adds up over time, ultimately leading to faster and more accurate customer orders.

Arrow Electronics’ innovative drone project is the direct result of active, ongoing employee-engagement in continuous process improvement throughout the company’s entire global supply chain and business operation. Every year, Arrow warehouse teams from around the world compete in an annual Lean Sigma Global Logistics Olympics that helps to integrate continuous process improvement methodologies into day-to-day tasks, and awards teams for coming up with innovative new process efficiencies.

In early 2016, employee feedback pointed out that higher vantage points could help in viewing warehouse processes and identifying areas for improvement. In fact, many warehouse managers were already using stairwells and raised platforms to gain a better vantage point into process improvements and efficiencies. Innovative Arrow warehouse employees conceived the Lean Sigma Drone idea and took it to management. Within a year, a formal project had taken flight.

Customer InnovationThe Arrow Lean Sigma Drones project is using innovative and exciting new drone technology to drive ongoing, continuous improvement throughout the company’s entire supply chain —demonstrating the power of technology to achieve real and lasting change.

Utilizing drones and a self-developed “Fly in Circle” process, Arrow employees are now able to observe existing warehouse processes from a birds-eye view. From this new vantage point, employees can see more than they ever could before—and all in high-definition.

Arrow’s proprietary, rapid-improvement methodology, “Fly-in-Circle” was derived from the well-known lean technique, “Stand in Circle,” in which employees are asked to “put their Lean goggles on” and observe their work from a whole new perspective, capturing descriptions of waste they observe in real-time. Building upon existing process-improvement strategies that Arrow employees were already trained in and familiar with, enabled a quick and easy adoption of the new project. Additionally, Arrow made it easy for its logistics and operations teams around the world to request a “Fly in Circle” demonstration via an internal website.

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Arrow’s global business operations team initially beta-tested the Lean Sigma Drone program at six Arrow warehouse locations (Reno, Nevada; Phoenix, Arizona; Columbus, Ohio; Hong Kong; Malaysia and Singapore) in late 2016 and into 2017. This initial beta test helped management standardize the process and infuse long-term, sustainable learnings into the process before rolling it out company-wide.

Business Win Instead of top-down initiatives or less-engaging classroom-based instruction, Arrow promotes immersive education that integrates learning in an employee’s day-to-day activities. Specifically, every “Fly in Circle” drone experience connects on-the-ground Arrow employees, supervisors and managers with Arrow Lean Six Sigma Black Belt experts for hands-on learning and engagement. Black Belts sit with teams to review the drone videos, helping them to visualize Lean flow and waste concepts. The entire team then works together to perform a root-cause analysis, brainstorm counter-measures and identify process improvements aimed at eliminating waste. This hands-on, immersive engagement helps to create—and ultimately perpetuate—sustainable, lasting change.

The “Fly in Circle” drone experience helps Arrow’s employees to increase efficiency and productivity for targeted processes. This project proved that even seemingly small, incremental changes can make a real impact. For example, the number of walking steps along warehouse picking routes is tracked and tallied throughout every “Fly in Circle.” A few steps saved on one warehouse team picking route may not seem like a big deal; taken together, however, they add up to 6.6 million steps saved, which translates into even greater efficiencies around warehouse energy-usage reductions and overall environmental impact.

The project has enhanced supply chain efficiencies at Arrow in numerous ways since launching less than one year ago, including:

• An 82 percent increase in productivity for targeted processes.

• The reduction of 6.6 million walking steps annually, or the equivalent of 3,300 miles.

• 28 Arrow employees developed in Lean Sigma tools and concepts during the program’s first six months.

• A reinvigorated excitement for Lean Sigma and the relentless pursuit of perfection throughout Arrow’s global business and supply chain operations.

• Made Lean Sigma fun!

In March of 2017, Arrow’s Lean Sigma Drones project was named “Innovation of the Year” at the Lean & Six Sigma World Conference.


More broadly, innovative and employee-driven programs like the Arrow Lean Sigma Drones are helping to make continuous process improvement a way of life at Arrow, and that mindset is ultimately what contributes to long-term customer service and satisfaction. Employees at every level of the company are empowered to identify and rectify waste and inefficiencies, and to try out innovative ways of doing “business as usual,” an integral part of Arrow’s forward-looking culture and commitment to working five years out.

Arrow celebrates except ional employee-dr iven ideas, l ike the Lean Sigma Drones pro ject , through the company’s formal internal communicat ion channels in order to encourage more innovat ive and “outs ide-the-box” th ink ing.

Social Impact Arrow celebrates exceptional employee-driven ideas, like the Lean Sigma Drones project, through the company’s formal internal communication channels in order to encourage more innovative and “outside-the-box” thinking. Arrow’s global business operations and supply chain leadership teams also challenge employees to take chances and try new things; without that appetite for innovation and its inherent risks at the senior-most levels, breakthroughs like the Lean Sigma Drones project would likely never see the light of day.

Impact is paramount to any Arrow initiative, and both quantitative-survey and anecdotal feedback indicates that the Arrow Lean Sigma Drones project is both improving talent capabilities and business impact. Employees feel educated and empowered to apply lessons learned during their “Fly in Circle” experience in their day-to-day tasks. And, the efficiencies that the project generated in its first six months alone are encouraging indicators of additional business impacts once the program is rolled out globally.

Employee feedback—a critical metric for Arrow—has been 100% positive. One Arrow network engineer who participated exemplified that positive response: “I just wanted to thank you for inviting me to the “Fly in Circle” process improvement meeting last week. When I first learned that the meeting was going to be about observing a shipping process through the ‘eyes’ of a drone flying overhead, I had my doubts. After watching the video, my doubts were removed. I found myself wondering why something like this had not been attempted before. The perspective that was gained from watching the process from overhead was amazing. This bird’s eye view led to a lot of positive discussion and subsequently changes are already being implemented to improve the process that we were observing.”

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Combatting Modern Slavery in the Supply Chain

Intel took a multi-level approach to deliver sustainable change on the issue in its own supply chain, in the high-tech sector, and in other industries. It established labor practice requirements to hold its suppliers accountable, worked with other technology companies to set consistent and lasting expectations, and co-founded a multi-sector initiative to ensure that the rights of vulnerable workers are respected and promoted.

Innovation

Since 2014, Intel has been combatting modern slavery in its supply chain to deliver the promise of gainful and fair employment. It has influenced suppliers through policy reform, engagement and audits, resulting in the repayment of over $4 million in fees and lost wages to more than 6,000 exploited migrant workers, and helping another 14,000 who were experiencing one of a number of contributing factors to forced or bonded labor. Intel has demonstrated leadership to other companies and industries attempting to tackle this problem.

Impact

Modern slavery, otherwise known as “forced” or “bonded” labor, involves foreign contract workers who are required to pay extortionate fees to hiring agents for employment, having to surrender their passports on arrival, and often finding that the jobs they contracted for are not the ones they are expected to perform. In 2013, Intel discovered that it had a problem with these issues at some suppliers in Southeast Asia that required taking action to protect its brand and reputation.

Challenge


The Business ChallengeIn 2013, Intel detected forced and bonded labor among its suppliers in countries such as Malaysia, Singapore and Taiwan. While these issues had not impacted the company’s business, they posed a reputational risk, since negative press arising from labor violations in high-tech supply chains is not unusual. Audits of Intel suppliers showed that 6% of key findings were related to forced or bonded labor, but further investigation suggested that the actual number was likely higher. Indeed, between 2012 and 2016, the number of audit findings increased from 15 to 116. Workers at some suppliers had paid large fees to recruiters to get their jobs, many were not in possession of their passports, a number were housed in sub-standard facilities, and some had seen changes to their contract terms. In effect, they had become indentured with little opportunity to work their way out of this bondage. Contracts for a large number were also not written in a language they could read, setting the stage for easy exploitation.

When Intel puts its name on a product, the company considers it a contract with customers for all that the brand represents, including a commitment to responsible manufacturing. To protect the Intel brand and act in accordance with Intel values, the company decided to take proactive steps to address the issues at its suppliers.

Customer InnovationIntel’s customers ask for data on its sustainability programs as part of their supplier selection and risk management processes. Sustainability is led by Intel’s procurement organization, which has a dedicated project manager and cross-functional team to support its work. Its supplier risk assessment includes forced and bonded labor, and Intel applies the same audit methodology to its own factories, publishing detailed statistics and working to identify and close any gaps.

Since 2014, Intel has co-hosted workshops with other companies, including several prominent customers, in Southeast Asia on how to combat forced and bonded labor. These sessions enable suppliers and their agents to hear from as many as six customers at once about the importance of worker rights and fair labor practices, while learning about best practices to address the risk.

Suppliers that don’t meet Intel’s expectations are put on formal get-well plans. Failure to quickly resolve forced or bonded labor issues – for example, by repaying unwarranted recruitment fees – results in the company being named in Intel’s annual CSR report, which is widely reviewed by major customers. Continued failure to take action has led to suspension and even termination of business, although Intel’s approach is to motivate suppliers to comply by holding out the opportunity of resuming their eligibility for future contracts.

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Several prominent Intel customers have noted that its leadership on this and other corporate responsibility issues lowers the company’s risk profile, assures them that they can buy its products without being on the end of negative press coverage or other repercussions. Intel’s efforts have directly led to product design wins.

Business Win Intel has long set the expectation, trained and then tested its suppliers on cascading its Code of Conduct to its own suppliers. Today, however, suppliers are asked to share stronger evidence of compliance. Since 2017, Intel has required a subset of its supply base to risk-assess the journey of foreign and migrant workers from their homes, and develop action plans to address any issues. Communication around Intel’s expectations, scrutiny of supplier performance, and penalties for non-compliance have all increased.

Through identifying and addressing root causes, Intel has resolved a larger number of issues each year – closing all cases found in 2012, and 73 in 2016. This systematic solution model lends itself to long-term repeatability, increasing the odds that the issues it resolves do not return. Limiting new business to firms that meet Intel’s expectations, and publicly naming both its good and bad suppliers, has also led to stronger supplier commitment and corrective actions. Poor labor practices tend to be disproportionately associated with low-cost suppliers. By working with them to remove these practices, Intel has lowered its costs, improved multi-sourcing opportunities and increased its ability to meet customer needs.

Social Impact Since 2014, Intel has influenced suppliers to repay nearly $4 million in fees to over 6,300 workers who had previously paid agents to get their jobs. In total, an estimated 20,000 foreign migrant workers, primarily from Nepal, Indonesia, Vietnam, the Philippines and China, have benefited from the remediation work Intel has driven.

By taking a stand early to forbid the charging of fees and holding of passports, Intel set the bar for other companies and industries to measure their progress. As a leader in this area, Intel is frequently asked to speak, advise and comment on plans as others evolve their methods. The company’s approach has been designed to “lift all the boats” – not just its own expectations and performance – and it has played a leadership role in its sector through the Electronic Industry Citizenship Coalition. More broadly, Intel co-founded the multi-industry Responsible Labor Initiative, which is having a positive impact beyond the countries and companies that are directly part of its own supply chain.

Intel also works with non-profit organizations in related areas. For example, it partners with the National Center for Missing & Exploited Children (NCMEC) in the battle against human trafficking. This initiative brings together technologies like artificial intelligence, deep learning and enterprise data management to more quickly identify and locate missing children and ensure their safe return.


Delivering a Competitive Advantage for MSD Through Economic Inclusion & Supplier Diversity

By fully incorporating economic inclusion and supplier diversity principles and behaviors into its culture and how it does business, MSD has delivered innovations that have reduced costs, increased efficiency and enabled the company to deliver accessible and affordable medicines to its patients. It has actively involved small and minority-owned suppliers in the process of developing new ideas and innovations to solve key business challenges.

Innovation

From 2014-2016, MSD increased its small business spend by 42% and its diverse supplier spend by 74%, to $1.4 billion. Supplier partnerships have delivered lower costs, greater supply assurance and innovation to MSD, while helping these firms to create new jobs and expand their businesses. An independent impact assessment found that MSD’s program created more than $2.6 billion in economic value.

Impact

Providing business opportunities to small and diverse suppliers enables them to develop their capabilities, create new jobs, generate tax revenues for local communities, and ultimately makes healthcare more accessible. While Merck, known as MSD outside the United States and Canada, was doing a reasonable job of including such firms in its procurement process, it believed much more was possible. In 2014 it set out to transform its approach to the issue.

Challenge

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The Business ChallengeMerck passionately believes that a world-class economic inclusion and supplier diversity (EI&SD) strategy is a fundamental driver of positive social progress and business success. The more opportunities it provides for small and diverse suppliers, the more it can assist these companies in building the foundational and technical capabilities to be commercially successful. This in turn drives the creation of new jobs, many of which go to under-represented populations, elevating individuals’ socioeconomic status, generating additional tax revenues for local communities, and ultimately making healthcare more accessible.

At a macro level, however, unemployment among minority groups was restricting access to critical healthcare for some of the most vulnerable people within the communities MSD serves around the world. At a micro level, business stakeholders were focused on inventing breakthrough medicines, vaccines and services; they looked to the global sourcing and procurement group to engage and develop suppliers capable of, and mutually invested in, delivering accelerated value and innovation for the company.

When MSD embarked on its transformation journey in 2014, its annual small business spend was $529 million, with another $805 million going to diverse suppliers. The aim was to increase these figures significantly.

Customer InnovationAs a supplier to the U.S. federal government, each year MSD is required to submit a small business subcontracting plan to demonstrate its inclusive procurement process and explain where and why small businesses were not awarded contracts. In addition, healthcare providers often expect the company to provide proof of performance consistent with their supply chain goals for diversity and inclusion. Kaiser Permanente, for example, requires quarterly reports that show small and diverse business spend, and it publishes aggregate numbers to illustrate its own performance.

Rather than simply meet minimum expectations, the global sourcing and procurement organization committed to a strategy that was inclusive of both small and diverse suppliers. With sponsorship from the CPO and his leadership team, the EI&SD center of expertise (CoE) adopted a four-pronged approach:

1. Integration into the sourcing process – Sourcing managers were trained on the value of EI&SD and how to incorporate the correct methods of assessment into their due-diligence process. Questions were also built into the SAP spend management tool to ensure that all sourcing projects had to disclose which small business and/or diverse suppliers were included in bids and awarded contracts. Where this requirement isn’t met, the sourcing manager has to present their rationale to procurement leadership at the Source Review Committee.


2. An ambitious goal – To be the first pure-play pharmaceutical company on the Billion Dollar Roundtable, which recognizes firms that hit this level of spending with diverse suppliers. This challenged MSD to think big and kept it focused on a common target.

3. Technology investment – A supplier diversity portal allows small and diverse businesses to provide all required certifications and affidavits in one place, making it simpler for sourcing managers to identify these companies and include them in relevant projects.

4. Top-down sponsorship – By building a clear business case on the societal and commercial benefits of EI&SD, and harnessing the passionate support of its CPO, the team was able to achieve Executive Committee-level sponsorship.

This expanded scope and thorough process have dramatically increased spend with small businesses and delivered significant performance improvements that can be reported back to the MSD’s largest customers.

Business WinResearch shows that greater engagement of small and diverse businesses accelerates the innovation process for large corporations. This has certainly held true at MSD. The global sourcing and procurement organization has driven two activities to ensure that the company engages a diverse supply base proactively to deliver innovation and faster problem-solving:

1. Economic Impact Summit – Now in its third year, this annual event, led by MSD’s CPO and attended by members of the MSD Executive Committee, brings together more than 100 strategic and diverse suppliers, procurement staff and cross-functional partners to discuss company strategy and future opportunities for growth. In 2016, the “Merckathon” was launched. Running over the entire last day of the event, this tasks attendees and academics to come up with ideas to address the company’s biggest challenges, using inclusive practices and behaviors.

1. The Innovation Think Lab – Developed by MSD and delivered in partnership with the Institute for Supply Management, this is a benchmarking resource that allows professionals from across the healthcare industry to discuss EI&SD opportunities in categories that generally exclude diverse suppliers. This proactive approach is helping both MSD and its competitors to tap new sources of innovation.

One example of success for MSD was the introduction of an innovative and cost-competitive manufacturing solution for the supply of an intermediate for Stocrin, an important HIV/AIDS drug. This enabled MSD to reduce its price.

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Overall, MSD has significantly increased its annual spend with target suppliers. In 2016, it achieved $753 million of small business spend and $1.4 billion of diverse supplier spend – up 42% and 74% respectively from 2014. Small and diverse businesses were included in 36% of MSD’s bids and were awarded 26% of its multi-year contracts.

Internally, recognition of the business value generated by EI&SD was reflected in the decision of MSD’s CEO to include small and diverse business spend as a metric on the corporate scorecard. And in 2017, MSD became the first pure-play pharmaceutical firm to be inducted into the Billion Dollar Roundtable. It is one of just 27 companies to have achieved this prestigious recognition.

Cont inuous focus on del iver ing a wor ld-c lass EI&SD program ensures stronger, weal th ier, safer and heal th ier communit ies.

Social Impact Continuous focus on delivering a world-class EI&SD program ensures stronger, wealthier, safer and healthier communities. A good example of this social value is MSD’s partnership with Westnet, a minority-owned distributor of medical equipment and consumables. Channelling 70% of its North America lab supplies spend through Westnet enabled the firm to create 10 new jobs in the local community, double its warehouse capacity and add two new trucks to its fleet, while reducing both costs and out-of-stocks for MSD at critical sites.

Another example is SBM, a minority-owned provider of facilities management services. A partnership arrangement brokered by MSD’s indirect procurement group has seen SBM grow its business in North America, create 14 new jobs for local people, develop a healthy new client pipeline and expand its range of services. It now manages back office, operations, safety and performance management at a number of MSD’s most critical sites, including Kenilworth, West Point, Boston and Palo Alto.

A recent economic impact report by Implan, a third-party research firm, found that MSD’s EI&SD program has:

• Supported more than 10,500 jobs with employee compensation of more than $620 million.

• Helped to generate more than $147 million in state and local tax dollars, allowing for further funding of impoverished and underdeveloped areas.

• Delivered a total economic impact of over $2.6 billion in employee compensation, proprietor income, other property income, TOPI (taxes on production and imports) and intermediate expenditures.


Doing Well by Doing Good – P&G’s Approach to Citizenship

P&G’s supply chain is driving a diverse range of initiatives, both internally and with external partners focused on delivering positive social and environmental impacts. These include increasing the use of recycled materials in products, eliminating waste sent to landfill, reducing energy usage and using renewable energy sources and improved water stewardship. The company is also committed to reflecting the diverse profile of its consumers and stakeholders within its own workforce, and increasing its annual spend with a more diverse supply base.

Innovation

P&G’s efforts have yielded significant results, including meeting its 2020 energy reduction targets four years ahead of schedule, diverting over five million tons of waste from landfill, and powering 100% of its Fabric and Home Care operations in the United States and Canada with renewable electricity. To extend the impact of its own supplier diversity program, P&G has brokered over 200 introductions between majority and diverse suppliers.

Impact

P&G has long been committed to “doing the right thing” as a good corporate citizen. In 2017, the company expanded the scope of its sustainability report to include five areas: Ethics & Corporate Responsibility, Community Impact, Gender Equality, Diversity & Inclusion and Environmental Sustainability. This broadened scope has had a significant impact on the focus and goals for P&G’s supply chain.

Challenge

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The Business ChallengeP&G is, and wants to be known as, a company that is governed responsibly and behaves ethically, that is transparent in its business dealings, that supports good causes and protects the environment, and that provides an appealing place to work where its employees are treated well and are given the opportunity to be all they can be. By growing the company and running its supply chains responsibly, P&G earns the trust on which its business is based and builds the relationships on which its future depends.

P&G has shared an annual sustainability report since 1999. In addition to the Environmental Sustainability and Community Impact reported on in the past, the company expanded the scope of its 2017 report to better reflect all aspects of its citizenship work to include Diversity and Inclusion, Gender Equality and Ethics & Corporate Responsibility. This broadened scope has significant impact on the focus and goals for P&G’s supply chain.

Customer InnovationP&G has a long-standing history of doing the right thing and being a force for good while growing its brands and its business. One example is beach plastic. Following the discovery made last year by the Ellen MacArthur Foundation, which claims that the ocean could contain more plastic than fish (in terms of weight) by 2050, P&G committed to use recycled beach plastic for its Head & Shoulders shampoo brand. To launch this new recyclable shampoo bottle made with plastic from European beaches, P&G teamed up with partners who are experts on recycling in their field: TerraCycle and SUEZ.

TerraCycle and SUEZ spent four months recovering and recycling the first batch of plastic material. TerraCycle gathered and sorted used plastic collected with the help of more than 100 local partners. SUEZ then began transforming the plastics using a production process that guarantees the quality of the recyclable material. P&G engineers worked for more than 10 months to design a new bottle using the recycled plastic. Numerous tests were conducted to ensure its quality, solidity and reliability. The bottles used contained 25% beach plastic, proving that beach plastic waste can be reused.

P&G partnered with a leading French retailer to sell 150,000 limited-edition bottles beginning in June 2016. In Europe, P&G expects more than 500,000 bottles per year will include up to 25% post-consumer recycled plastic by the end of 2018. This represents more than 90% of all the bottles sold in Europe across P&G’s hair care portfolio.


Business WinThe commitment to citizenship is important for P&G because its consumers are increasingly interested in understanding more about the company behind the brands they know and trust. Studies have also shown that a consumer’s willingness to buy a product can be directly linked to a company’s reputation.

P&G’s Tide purclean brand is another example of how all aspects of citizenship touch its supply chain. Many cleaning brands faced the same challenge: how to be more sustainable without compromising performance. According to P&G, Tide purclean is the first liquid laundry detergent to solve the puzzle, as 65% of its ingredients (certified by the USDA) are bio-based, while maintaining the cleaning power of Tide.

Of course, model citizenship has long been linked to energy consumption. Last fiscal year, P&G achieved its goal of reducing energy use at its facilities by 20% per unit of production four years ahead of schedule. This accelerated progress is due in large part to its Power of 5 employee engagement program, which emphasizes how everyday actions can have big impacts. The Power of 5 campaign, along with P&G’s manufacturing sites and its conservation team, have committed to saving $100 million in three years.

Value stream mapping has also provided valuable insights to drive energy efficiencies. Based on an employee idea, staff at P&G’s plant in Cairo, Egypt, conducted a workshop focused on identifying and eliminating energy losses. Through the value stream mapping exercise, they were able to document and analyze processes and create an action plan that reduced site energy consumption by 20%.

P&G also recognizes the need to be as diverse as the people who use its products in order to understand and serve them better. Achieving this requires a culture of inclusion that values every employee’s talents and enables them to perform at their peak. P&G’s approach to diversity and inclusion has led to a range of impacts, including:

• Supplier diversity: P&G spends more than $2B a year with diverse suppliers.

• Geographic and cultural diversity: More than 145 nationalities are represented in P&G’s global workforce.

• Human rights: P&G is an inaugural member of the Human Rights Campaign’s Business Coalition for Global Workplace Fairness.

The commitment to cit izenship is important for P&G because i ts consumers are increasingly interested in understanding more about the company behind the brands they know and trust.

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• Gender equality and diversity and inclusion:

• Women represent nearly half P&G’s management roles and about one-third of its senior leadership.

• In Singapore, a gender-balanced team produces P&G’s Purifier of Water technology to provide clean water in more than 90 countries through the non-profit Children’s Safe Drinking Water Program. When the plant opened in 2012, it was primarily staffed by men. Today, 55% of plant employees are female.

• P&G India has about 30% overall plant floor diversity.

• Women represent 15% of the Saudi workforce at P&G.

Social Impact P&G’s Citizenship approach has led to large and meaningful impacts on society, local communities and the environment. It has achieved this by defining the objective (i.e. achieving targets across the five focus areas of citizenship) and then finding supply chain-related ways to deliver, such as responsible sourcing. Palm oil, for example, is a versatile crop. P&G uses a by-product of palm oil called palm kernel oil in some of its Fabric and Home Care and Beauty brands. To ensure it is sourced responsibly, P&G aims to meet is 2020 responsible sourcing goals by using a three-pillar approach – focusing on supplier management, small farmers and the influencing of industry standards – based on the foundation of collaboration and communications.

Supplier diversity has been a critical business strategy at P&G for more than 40 years, and the company remains committed to it as a driver of value creation and continuous improvement. As a member of the Billion Dollar Roundtable – a forum of companies that spend more than $1 billion a year with diverse suppliers, P&G has exceeded $2B a year nine years in a row. This is the legacy of the company’s global Supplier Diversity Network, which has strengthened thousands of minority, women, military veteran and LGBT-owned businesses, and bolstered P&G’s ability to innovate and get new products to market. To broaden its reach and impact, it launched the P&G Community of Partners at two major supplier diversity conferences. Working to involve all of its suppliers in supplier diversity, P&G made more than 200 introductions between majority suppliers and prospective diverse suppliers, representing the start of many fruitful and ongoing business relationships.


Environmental concerns are another cornerstone of P&G’s approach to citizenship, with initiatives focused on waste, water stewardship and climate issues:

• Climate: The highlight of P&G’s climate program is its commitment to reduce greenhouse gas emissions 30% by 2020 (using 2010 as a baseline). This science-based approach represents P&G’s fair share in the fight to prevent global temperatures from increasing 2 degrees Celsius. To help meet these goals, P&G is accelerating its progress on renewable energy. Its first large scale wind farm went online in December 2016 and now provides enough wind powered electricity to operate 100% of its Fabric and Home Care operations in the United States and Canada. The company’s combined heat and power renewable biomass facility in Albany, Georgia is complete and produces 100% of the steam needed and a significant portion of the total energy needed to make Bounty and Charmin. These two utility scale projects will nearly double P&G’s use of renewable energy getting the company 2/3rds on its goal to reach 30% by 2020. Another area of progress is co-generation, which uses waste heat from generating electricity to create steam, hot air, or other beneficial process within the host manufacturing sites. The company has completed three co-generation projects at sites in Germany, reducing its carbon footprint by 7,300 metric tons of carbon dioxide a year (equivalent to removing more than 1,900 cars from the streets).

• Water stewardship: P&G looks at water use within its manufacturing processes and how consumers use its products in their homes. Within manufacturing, P&G has implemented a three-tiered water risk assessment co-developed with its NGO partners that will help it to focus on efforts where they can have the greatest impact both inside P&G and within the communities it serves. Phase 1 of the assessment is complete, with approximately 30% of P&G’s sites operating within water stressed locations. The next level of conservation requires both innovation and partnerships. Accordingly, P&G is leading breakthrough water recycling work with the European E4Water consortium, including funding and operating full-scale pilot operations for new water recycling technologies at three of its manufacturing sites.

• Waste: Since its focused waste program began in 2007, P&G has diverted nearly 700,000 metric tons of trash from landfills, driving more than $1.9B in cost savings. Today, more than 70% of P&G’s sites across 23 countries send zero manufacturing waste to landfill (ZMWTL), including sites from each of its major business units and technology platforms. The company has made a new commitment that 100% of its production sites will send ZMWTL by 2020.

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Lastly, P&G has demonstrated its commitment to citizenship through a diverse range of socially-oriented programs, including:

• Working with more than 150 partners, the company delivered over 13 billion liters of clean water through the P&G Children’s Safe Drinking Water Program.

• P&G has responded to more than 20 global disasters.

• Pampers and P&G’s partnership with UNICEF have helped eliminate neonatal tetanus in 20 countries.

• P&G has improved school facilities in rural China for more than 300,000 students.

• #likeagirl: 76% now consider “like a girl” a positive expression vs. only 19% before the Always brand Like a Girl campaign.


Using Smartphones, Science and Partnerships to End a Neglected Tropical Disease

Through ITI, Pfizer donates an antibiotic used to treat trachoma. To scale up donations to match the needs of affected communities, Pfizer and its partners required a thorough understanding of where the disease was active. Through the Global Trachoma Mapping Project (GTMP), the largest disease mapping initiative ever, trachoma partners developed a smartphone-based system to create a household-level overview of where trachoma is found.

Innovation

These insights helped Pfizer scale its donation program to new levels. Over 121 million doses of the antibiotic were donated in 2016, nearly double the year before. These efforts have contributed to dramatic progress. Today, the number of people requiring treatment for trachoma is roughly half of what it was in 2011.

Impact

Since 1998, Pfizer Inc. has helped lead the global effort to eliminate trachoma, the world’s leading infectious cause of blindness. Through the International Trachoma Initiative (ITI), an independent non-profit organization, Pfizer works with more than 100 partners at the local, national and international levels to ensure that underserved communities in 39 countries (and growing) are equipped with resources to treat and eliminate trachoma. This effort requires strong, collaborative supply chains that can deliver interventions to some of the most remote areas of the world.

Challenge

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The Business ChallengeTrachoma is the world’s leading infectious cause of blindness, with 182 million people in 41 countries at risk. If left untreated, the disease can develop into a condition in which eyelids turn inward and eyelashes scrape the eyeball, causing excruciating pain, corneal ulcers and irreversible blindness. Like many neglected tropical diseases (NTDs), trachoma is both a consequence and a cause of poverty, primarily affecting remote communities with severely limited access to healthcare, clean water or sanitation. The disease is responsible for the visual impairment of approximately 1.8 million people, 450,000 of whom are irreversibly blind, and causes an estimated USD $3-6 billion in lost productivity per year across affected countries.

With a coordinated public health intervention, trachoma can be eliminated worldwide. In 1998, Pfizer and the Edna McConnell Clark Foundation founded ITI in response to the World Health Organization’s (WHO) call to eliminate trachoma globally by 2020. The public-private initiative includes more than 100 partners from around the world charged with implementing the WHO-recommended SAFE strategy for trachoma control:

• Surgery to treat the blinding stage of the disease, known as trichiasis

• Antibiotics to clear infection

• Facial cleanliness

• Environmental improvement, including better access to water and sanitation to help reduce transmission

Through ITI, Pfizer donates an antibiotic used to treat trachoma infection. Reaching those affected, however, is often a challenge. Trachoma is most often found in poor, hard-to-reach communities with little infrastructure. Delivering antibiotics to these locations requires a flexible, transparent and efficient supply chain, and the collaboration of an array of public- and private-sector partners – from governmental and nongovernmental agencies at the local, national and international levels, to community health workers and volunteers who administer the treatment to individuals.

In 2011, those involved in the effort to stamp out trachoma recognized the need to accelerate their efforts. At that point, an estimated 325 million people around the world required treatment for the disease. Pfizer and its partners sought to take the antibiotic donation supply chain to the next level – from demand visibility to delivery execution. However, doing this required a more thorough understanding of where trachoma was active. Until then, Pfizer and ITI relied on paper surveys to determine the location and scale of where trachoma interventions were needed. This system was incredibly inefficient, and often left the community two steps behind.


Beginning in 2012, the trachoma community launched the Global Trachoma Mapping Project (GTMP), which used a smartphone-based system to collect detailed data on where trachoma posed a public health problem. This collaboration involved more than 50 organizations, including ITI, WHO, national ministries of health, major funders and non-profit eye health organizations. During the initial three-year project, more than 550 teams collected and transmitted data from 2.6 million people in 29 countries. This is the largest disease-mapping project ever undertaken, and thanks to this innovative system, the partners know in real-time, down to the household level, where the disease is found. Since the GTMP’s completion, a new mobile app called “Tropical Data” has helped surveyors continue to collect and track data in countries where trachoma elimination efforts are underway.

This information informs trachoma partners where to implement interventions and conduct mass drug administrations (MDA), in which antibiotics are delivered and administered by health workers to an entire community to efficiently reduce the risk of trachoma transmission. Pfizer also relies on the data to estimate how much antibiotic to manufacture and donate each year.

Customer InnovationThe individuals affected by trachoma are often the poorest of the poor. They often live in remote villages that are only accessible via long dirt roads, or only on foot or by boat, and can be inaccessible for parts of the year due to flooding and other environmental factors. With Tropical Data, trained local volunteers and community health workers are able to collect real-time data on trachoma prevalence in these villages, which is required for program planning by national ministries of health and allows donation planning decisions by ITI.

In 2016, the information provided through Tropical Data provided the clearest picture to date of where trachoma interventions were needed. ITI is now able to direct Pfizer’s donations to the areas most in need, which has resulted in a 63% increase in the number of people receiving antibiotics from 2014- 2016. These innovations have led to a clear path toward eliminating the world’s leading infectious cause of blindness.

Because the disease survey is standardized and the data are reviewed for any anomalies which are addressed in real time, the international trachoma community trusts the quality of the data gathered through GTMP and Tropical Data. Decisions regarding the antibiotic donation, as well as financial support by donors to support community drug distribution are now made with greater ease and speed.

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Business WinIn addition to the success of the GTMP and Tropical Data, ITI has also developed and implemented the Antibiotic Shipment Tracker. This web-based tool provides partners, including those working in endemic countries, 24/7 access to real-time status of current and future antibiotic shipments, including shipment quantity, estimated arrival date, and a variety of other critical shipping milestones.

The shipment tracker reduces fragmentation and simplifies reporting by centralizing data into a single report, as opposed to data that was formerly captured across numerous spreadsheets, emails and databases, thereby greatly reducing the need for constant back-and-forth communications across multiple parties and time zones. The shipment tracker facilitates collaboration by Pfizer, WHO, freight forwarders, ministries of health and implementing partners and ultimately improves supply chain transparency – so that all partners are informed of the status of their shipment – and promotes improved program planning on the ground.

Using the Shipment Tracker means that implementing partners and donors now know when antibiotics will arrive in country, which allows them to more effectively work with the national ministries of health to plan drug distribution trainings and ensure funding is in-country and available. Once the drug is received at the national level, the ministry of health oversees the movement of the drug from the central medical stores down to the hands of the community-level volunteer distributors. Having access to national-level delivery information supports the first steps within the overall complex planning for effective program implementation.

Some drug donation programs report vast quantities of drug in-stock in endemic countries and expiring before distribution. Because of the many steps put in place by ITI and its partners, including the Shipment Tracker, there is accountability at all levels – within ITI, as stewards of the Pfizer drug donation; among endemic countries’ ministries of health, as recipients of the donation; and among implementing partners, as supporters of the drug distribution. It is expected that ministries maintain accurate inventory to vastly minimize any drug lost to expiration or other wastage.


Social ImpactThe global health landscape is constantly changing, and delivering timely interventions in the locations where trachoma thrives requires a flexible approach based on real-time insights. Through the combination of Tropical Data and the Shipment Tracker, trachoma partners are able to create a feedback loop that ensures the right resources are funneled to the right place at the right time. Compared to the old paper-based data collection method, the mobile system has reduced the time from start of survey to availability of analyzed data by an estimated 50-90%. This in turn has closed the gap between when surveys are conducted and when medications reach those who need them.

These efforts culminated in 2016, with the largest and most successful year yet for the donation program. Pfizer donated 121 million doses of antibiotic to ITI, a nearly twofold increase over 2015, and the Tropical Data technology has enabled ITI and its partners to scale up the donation program to reach almost every country that still has trachoma. Since 1998, Pfizer has donated more than 700 million doses of antibiotics to treat trachoma.

Ensuring donations of donated antibiotic reach endemic communities requires massive amounts of coordination. Pfizer must ensure that the antibiotics are transported effectively from the manufacturing plant to the distribution hub and then on to countries in need. ITI must work with the local ministry of health to ensure antibiotics clear customs quickly and are stored securely. Local non-profits, volunteers and community health workers help coordinate the actual delivery and administration of the treatment to affected individuals.

ITI manages the data collected by Tropical Data and stored securely in the cloud. The data update rapidly as new surveys take place, ensuring decisions about interventions are based on the most updated information available. Local capacity of health staff is built in all program countries, both in supply chain management for the stewardship of the donation, and in data collection and management. These skills are vital for effective health program management, and are transferable to other national health programs.

Pf izer donated 121 mi l l ion doses of ant ibiot ic to ITI, a near ly twofold increase over 2015, and the Tropical Data technology has enabled ITI and i ts partners to scale up the donat ion program to reach almost every country that st i l l has trachoma.

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Extraordinary progress has been made toward the global elimination of trachoma. Through a better understanding of the disease burden and direct efforts to tackle it head on, the number of people at risk of trachoma fell from 325 million in 2011 to around 182 million in 2017. In 2012, Oman became the first country to be validated by the WHO as having eliminated trachoma as a public health problem, followed by Morocco in 2016 and Mexico, Cambodia and Lao PDR in 2017. Five previously affected countries have submitted documentation for validation by the WHO of having eliminated trachoma as a public health problem: China, The Gambia, Ghana, Iran and Myanmar.

The scaling up of Pfizer and ITI’s donation program has played a major role in these milestones. Recently, a WHO progress report noted a 63 % increase in the number of people receiving antibiotics for trachoma elimination purposes between 2014 and 2016.i

The information gathered through the GTMP and Tropical Data has also facilitated improved collaboration with endemic countries. Before mapping, for example, Ethiopia did not have a complete understanding of the scale of the disease, despite 75 million of its citizens living in suspected trachoma- endemic areas. After trachoma was mapped, the Ethiopian government was able to work with partners, including ITI, to implement an elimination program more strategically and effectively and gather financial resource commitments (both external and domestic) to fund the program. This shows how information gathered through Tropical Data empowers individuals, organizations and governments to take meaningful action against this disease.

In the spirit of collaboration, the ITI partners actively sharing key learnings and best practices from their approach with other companies and organizations. The potential of smartphone-based data collection tools, and systems like Tropical Data, likely have the potential to be effectively implemented for other diseases.

iWeekly epidemiological record, World Health Organization, 30 June 2017


Outside In: Building a Customer Centric Logistics Platform Tailored to Customer Buying Behaviors

Recognizing that a one-size-fits-all approach does not adequately meet all customer needs, Schneider Electric’s Global Supply Chain organization designs its logistics network around the key buying behaviors of its customers. Using advanced network modelling techniques coupled with a suite of digitized logistics capabilities, the company now delivers a tailored logistics capability to customers, without compromising overall scale and efficiency.

Innovation

Over the last five years, the Schneider Electric Logistics and Network Design team doubled its customer satisfaction score on delivery, improved on-time delivery to customers by 3.2 percent and secured recurrent yearly savings on logistics (DC & transportation) of €150 million per year.

Impact

Over the last 12 years, Schneider Electric’s business has more than doubled in size through mergers, acquisitions and organic growth. This resulted in a complex systems landscape, including 125 different enterprise resource planning systems (ERP) and numerous warehouse management and transport management systems. In 2013, a newly-formed Logistics and Network Design team was tasked to transform a previously decentralized, productivity-driven organization into a customer-focused logistics network that would provide tangible value to customers.

Challenge

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The Business ChallengeSchneider Electric’s rapid growth, and the need to integrate 125 different ERP systems, created numerous challenges for the Logistics and Network Design team. Specifically, the team needed to address three key issues:

• Data – With little connectivity between the various nodes, there was limited real-time visibility within the logistics network, service level expectations and feedback from customers, and the cost of delivery. Before the team could prioritize, challenge or change, they needed to establish a baseline, with the goal of capturing “the voice of the customer.”

• Customer satisfaction – Schneider Electric had little specific detail about the dissatisfaction customers expressed around delivery. In order to help define and shape the demand chain, the team needed to get closer to customers to better understand their needs, buying behaviors and key attributes and expectations. They needed a built-for-purpose operations framework that could align both supply and demand chains closely, while becoming more customer-focused.

• Internal complexity – The company had become a conglomerate of distinct “ecosystems,” with disparate processes, cultures, systems and distribution networks. There was a significant opportunity therefore, both internally and externally with the customer, to simplify and leverage these ecosystems into a single unified network – systematically reviewing the customer experience and aligning its supply chain to customer buying behaviors. This became the mission of the newly formed Logistics and Network Design team.

In addition to developing the strategy, the Global Logistics and Network Design team was also tasked with ensuring the enablement of the organization. The global team works closely with the regional teams that are ultimately responsible for execution. Supported by clearly defined roles and responsibilities, the organizational structures in each of the regions are now standardized to facilitate greater coordination and teamwork on a global basis.

Customer InnovationSchneider Electric charted a path to capture structured and unstructured data from across the supply chain to drive innovation in the delivery of its products, services and capabilities. Developing an “outside-in” culture attuned to listening and directing interaction and engagement with its customers required a cultural change – to build trust and collaboration across stakeholders in the entire demand and supply chain, comprising both the SE supply chain/front office, as well as customers and suppliers.

The company needed an agile yet structured process by which virtual teams could collect, assemble and analyze data. This would drive customer innovation aligned to insights from their current needs and future industry trends. The team undertook the following steps to achieve this:


1. Customer buying behavior research – Using customer surveys to identify “dissatisfied” customers, the team engaged in interviews, customer forums and conferences to better understand their source of dissatisfaction. The surveys did not identify buying behaviors, the attributes which drove them or the dynamics of the demand chain. A research process to complement the surveys was put in place to determine the customer’s dominant and secondary buying behaviors, and the attributes (hard/soft) that drove these behaviors and subsequently the demand chain. Based on this research, the team categorized customer supply chain needs into five types: Collaborative, Lean, Agile, Project, and Fully Flexible (see Figure 1).

1. Behavioral Research MethodologyCustomers, Business and Competitors

Customers Interviews:

• Buying Behavior

• Customer expectations

• Service sensitivities

• Demand drivers

• Lead time drivers

• Availability sensitivity

• Stockholding drivers

• Value-added sensitivity

• Planning horizon

Internal & Data Review:

• Business growth strategy

• Cost & risk imperatives

• Customer sales patterns

• Customer briefings

• Competitor Analysis

Lean

Ag

ile

Co

llab

.

Pro

ject

.

Fully

Fle

x

Demand Patterns

Customer Buying Logic

A

Supply Chain Optimization

5 Supply Chain Models

Customer Order - Plan - Source - Make - Deliver

Standard Products

Spare Parts

Equipments

Systems

SIOP

C

L

A

P

Make to Order

Configure to Order

Make to Stock

Engineer to Order

Fully Flexible

Precision Delivery

Direct Shipment

Order Grouping

On Site Delivery Storage

Track & Trace

SIOP

SIOP

SIOP

Design Service Offers and Supply Chains

xxxx xxxx xxxx xxxx xxxx

Tailored

Common Network

Serviceoffers

CA P

NetworkF

L

Transport Optimization

Network Optimization

Inventory Optimization

Source : Schneider Electric

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2. Customer Process Capabilities – Using the output of the surveys, the team designed 18 “Customer Process Capabilities” that needed to be prioritized, resourced, developed and implemented to improve delivery experiences and to drive differentiation in the market. Using the buying behavior research, these customer delivery capabilities can now be configured based on customer needs and buying behaviors.

3. Commercial Logistics Offer – Next, the team triangulated the market (customer), business (SE) and competitor analysis to gain insights into how Schneider Electric could realign its operations to deliver optimal service using the capabilities, in line with customer buying behaviors and expectations. This created a unique selling proposition for customers through the company’s “Tailored Supply Chain.”

Following the data gathering processes and an internal and external alignment process, a virtual cross-functional team developed scenario network models with clear objectives and attributes aligned to customer, business and supply chain objectives. Using supply chain optimization and simulation tools, the team evaluated these scenarios thoroughly, testing the trade-offs between service, simplification and cost efficiency. This process followed eight key steps:

• Step 1 – Establish baseline network model.

• Step 2 – Sign-off the baseline model.

• Step 3 – Run an unconstrained model.

• Step 4 – Run “to-be” scenarios.

• Step 5 – The selected scenario(s) undergo validation to test “viability.”

• Step 6 – Customer validation.

• Step 7 – Business case validation.

• Step 8 – Execution and implementation.

As a result of implementing this tailored approach to customer delivery, the company has seen a significant improvement in key performance metrics, including:

• A customer net satisfaction score of 29.4% - compared to 13.6% in 2012.

• An on-time delivery to customer rate of 95.8% - compared to 92.6% in 2012.


Business WinAs part of its initiative to develop a more customer-focused approach, Schneider Electric has taken a number of steps to rationalize and streamline its business by removing complexity from its network. The company aggressively reduced the logistics providers it works with globally from 1,450 in 2013 to 300 in 2017, of which 16 major suppliers will manage the remaining 284 by 2020.

The rationale for this reduction is Schneider Electric’s digitization strategy, calculated to create end-to-end visibility across the company’s customer delivery platform. Starting in 2013, in collaboration with 16 strategic partners, the company successfully digitized its delivery platform from the “outside in” by leveraging suppliers’ technologies, helping to minimize cost, complexity and time-to-value realization.

The company has also re-focused internal resources and effort on building a common messaging platform and standardizing message content across its systems. This platform and connectivity form the foundation of the company’s “Logistics Control Towers” where these entities, with 16 strategic partners, are tasked to predict, sense, and event manage the delivery experience for all physical product moves. This allows real-time tactical decision-making, which minimizes negative customer impact.

Building on a base of data, digitization and simplification (modelling), it was then possible to standardize, adopt and leverage best-in-breed processes and tools across the organization, documented within global standard operating procedures (GSOPs). With adoption and compliance to the GSOPs, all logistics processes are clearly focused on delivering optimal quality, service and efficiency, both internally and externally in the eyes of the customer. This is measured utilizing a metric called delivery complaint rate (DCR).

DCR, recorded monthly by entity and site, focuses clear and immediate attention on process flaws, supplier issues and other events that negatively impact the customer delivery experience. Once root causes are identified, sustainable fixes are made to the processes and communicated across the network.

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A number of metrics reflect the rate of performance improvement, including:

• Digital Delivery Capability: >80% versus <30% in 2012

• Delivery Complaint Rate: 2,000 PPM versus >2,865 PPM in 2015

• Recurrent Identified Savings: €150 Million (DC’s and transport only)

Prioritization, Governance and Execution

The global and regional teams meet twice a year in the logistics steering committee, which sets priorities, allocates resources, and ensures focus on the strategy and tasks, while also sharing best demonstrated implementations, practices, challenges and resources to enable success on a global basis.

The company’s global supply chain (GSC) organization sets out its vision in line with corporate change programs, which run from 3-5 years and are supported by the GSC strategic prioritization (or HOSHIN) process. Cascaded throughout the organization, the annual priorities are clearly communicated to every GSC employee, and supported by their own domain priorities.

Logistics performance against the HOSHIN, and of each transformation initiative, are measured through the global and regional project management offices. Disciplined in PMP, the teams utilize internally developed tools which are automated to manage projects, and measure progress and performance globally monthly and reinforced in quarterly reviews.

Global standard operating procedures are dynamic documents that cover each of the logistics domains. They articulate the vision and objectives of GSC, Logistics and Network Design, and of each domain – clearly linking each activity to customer value and our objectives. The internal Schneider Performance System (SPS) is used to measure adherence to the GSOPs, lean processes, innovation, and people management.


Social ImpactAs a global specialist in energy management and automation, sustainability is at the core of what Schneider Electric does. The two key facets of this are the company’s people and environment, both of which are integral in ensuring the success of the company’s transformation:

• People – With the move to a more digital and connected world, the company has a strong focus on ensuring its people, structure and role designs are evolving to meet these trends. Key to Schneider Electric’s success is ensuring that it is developing its people with the necessary skills, competencies and experience to operate in a more digitized and dynamic supply chain. To be productive in this increasingly fast-paced environment, the company also addresses well-being, looking not only agile and enhanced work environments, but also training, tools and guidelines to help our staff address various well-being topics.

In 2015 Schneider Electric launched its “Logistics 2.0” program to address the “people” aspects of the transformation. This includes:

1. Redefinition and standardization of logistics roles, introducing new “digital” roles focused on connectivity, driving end-to-end visibility, and enhanced roles related to customer delivery experience.

2. Development of comprehensive learning paths addressing specific logistics competencies. These detail specific education, experience and exposure opportunities.

3. Comprehensive competency reviews and individual development plans.

Twice a year, the company launches a dynamic action plan based on the results of the company’s employee opinion survey to address the needs and concerns of the logistics team. This is coupled with regular communication on the progress of this action plan.

• Environment – Optimization of the company’s network has naturally presented opportunities to reduce packaging and transport related CO2 emissions. The logistics regions/global team are measured on optimizing container utilization, engaged in local initiatives to reduce “fresh air” in last mile shipments and overall improvements in CO2 reduction. Key distribution sites are working to achieve zero to landfill, supporting a broader global supply chain initiative. Schneider Electric energy efficient products and solutions are also being introduced into the company’s sites.

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Schneider Electric’s environmental agenda is strongly championed by the company’s Chairman and CEO, and is further strengthened by support from senior management. The company has put metrics in place by which everyone in logistics is measured. In addition to bigger corporate programs to optimize the network and introduce energy efficient products into distribution centers, the local regions are encouraged to be agile and identify initiatives to drive improvements in their container load factors and remove “fresh air” from their last mile shipments. Best practices are actively shared through skills networks with peers in other regions.

Logistics & Network Design’s employee satisfaction has dramatically improved during this time, achieving its highest rate of 68% in the first quarter of 2017. Similarly, the function’s impact on the environment has also improved, with a 16% carbon dioxide reduction between 2011 and 2015, and a further reduction of 12% forecasted between 2016 and 2017.

Schneider E lectr ic’s env i ronmenta l agenda is st rongly championed by the company’s Chairman and CEO, and is fur ther strengthened by support f rom senior management. The company has put metr ics in p lace by which everyone in logist ics is measured.


The potential impact of the work being done within supply chain organizations goes far beyond any one task, extending past functional silos, and seeks to align strategies that are good for business and good for the world. The 2018 Power of the Profession awards have shown yet again that by aligning business and supply chain, companies can act with transparency, engage people, and employ technology to create real change.

By combing customer innovation, business wins, and social impact, the six finalists for the Supply Chain Breakthrough of the Year Award have proven that such change is really possible. Our three recommendations for how their learnings can be applied to your business are:

Make the job about more than work – The notion of “wanting to be part of something bigger” is often characterized as a trait of millennials, but its human nature for workers of all generations to seek value in what they do. It is felt across the supply chain community, who told us in 2015 that 76% agree or strongly agree “that supply chain’s ability to make a positive contribution in the wider world is important”. Each of the six finalists were able to create engagement for its employees by encouraging them to think beyond the scope of their immediate function in creating lasting impact.

Create a platform for possibilities – The supply chain community finds digital technologies to be disruptive and impactful, but many are still searching for applicable use cases; often leading to solutions looking for a problem to solve. By building upon continuous improvement initiatives and developing technology innovation programs, companies can create a collaborative platform by which they constantly review their current capabilities against what technology could make possible. Through such a platform, cooperative development of technology, process, and people can create the future of supply chain.

Conclusion & Recommendations

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Harmonize performance and values - Even as the role of supply chain has expanded to collaborate with nearly every type of internal and external partner, the baseline performance expectations come from its functional roots. However, these functional assessments can be contrary the publicly stated values and mission of the company. To better connect these, organizational strategy development can begin with the setting of unifying theme(s) with cascading organizational priorities over assigned time horizons. Linking themes, to priorities, to the management of the work harmonizes what a company does with why it does it.


References

1SCM World. (2017, October 31). Future of Supply Chain 2017. Retrieved from https://member.scmworld.com/course/view.php?id=8450

2SCM World. (2015, July 27). Developing Supply Chain Capability. Retrieved from https://member.scmworld. com/course/view.php?id=5646

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The Top 6 Supply Chain Breakthroughs 2018 - SCM World...THE TOP 6 SUPPLY CHAIN BREAKTHROUGHS MARCH 2018 For instance, mantras like “good corporate citizen,” “working five years