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© 2013 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on gartner.com. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity."
From Out-Sourcing to Optimization: Making Sense of Processes in the
Chemical Industry
Paul Lord Research Director
Gartner Supply Chain
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Inventory: The Window Into Supply Chain
• No permission or grand strategy are needed to eliminate inventory waste
• Lower inventory does not necessarily reduce cost • Metrics benchmarking and strategic declarations
are not enough
2
Ref: “Supply Chain Research Roundup for Inventory Management, 2013 “
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Inventory Alignment and Determination Occurs at Multiple Levels
Optimized Policies to
Reduce Costs and Improve
Efficiencies
Optimized Inventory Levels
Physical Structure and Sourcing
Decisions
• Capital investments
• Mergers & acquisitions
• Sourcing relations
• Stocking levels • Stocking
locations • Service levels
Tactical
Strategic
• Inventory, transportation, policies • Product flow: Consolidation,
routing carbon footprint
Operational
Ref: “The Journey to Successful Supply Chain Inventory Management Requires a Sequenced Plan”
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Architect Decision Process Layers With Carefully Selected Frequencies & Time Horizons
Sell Deliver Make Source Strategic/Long-term Planning (2 Years to 5 Years)
Strategic Planning and Forecasting Network Optimization, Strategic Risk Evaluation
Tactical/Mid-term Planning (3 Months to 24 Months)
Sales and Operations Planning
Demand Planning
Supply Planning Inventory Configuration
Supplier Mgmt. Contract Mgmt.
Operational/ Short-term Planning (1 Week to 12 Weeks)
Vendor Mgmt. Inventory (VMI)
Distribution Req. Planning ( DRP) Inventory Policy Transportation Mgmt.
Factory Scheduling
Material Req. Planning (MRP) Sourcing
Execution (Order Duration to Shipment)
Order to Cash Manufacturing Execution Systems (MES)
Procure to Pay
Note: Planning Horizons Differ by Industry Depending on Product Life Cycle and Asset Investments
“Five Chemical Industry Supply Chain Insights From 2013”
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Supply Chain Optimization: Model-based prescriptive analytics for decision support
"Optimization is the ability to minimize cost or maximize profit subject to existing constraints such as …"
— J.Paul Dittmann, Supply Chain Transformation: Building and Executing an Integrated Supply Chain Strategy
• Conscious design tradeoffs: • Networks • Processes • Incentives
Alignment
• Without constraints, supply chain is easy…..and expensive
Constraints
• Analysis improves judgment
• Speed allows postponement
Decisions
“Supply Chain Optimization in Process Manufacturing Requires More Than Analytics”
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Value Chain Orchestration: Scaled and Sustained With Enabled Processes
Demand Supply
Product
Global
Optimized
Efficient
Strategic
Operational
Digitized
Collaborative
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Outcomes, Tactics, Features & Benefits
• Outcomes: - Profitable growth, customer delight, reliable supply,
joint value creation
• Tactics: - Standardization, Integration, Outsourcing,
Collaboration
• Features & Capabilities: - Global, Automated, Digital, Responsive, Visibility
• Benefits - Cost reduction, Working capital reduction, Service
improvement 7
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Procter & Gamble’s Burning Platform Winning the Moments of Truth
Big countries Big brands Big customers
A.G. Lafley
A.G. Lafley, Proctor & Gamble
• “First Moment of Truth” - the first interaction between a shopper and a product on the store’s shelf.
• The second moment of truth is when the consumer uses the product.
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Research Insights: Demand Fulfillment
• Desired Outcomes Are Clear - Customer Satisfaction & Experience - Reliable Supply (Perfect order)
• Tactics & Process Features - Integration, Segmentation, Collaboration, Responsive
• Metrics and Justifications for Improvement Don’t Always Align - Digitization - Productivity / Scalability
10
11
Integrated Global Supply Chain Vision & Guiding Principles
Be the reason customers do business with Eastman
The Integrated Global Supply Chain: • Is all in for safety • Is reliable and provides creative solutions to our customers • Translates market insights from customer and suppliers into
profitable business responses • Is demand driven • Is an organization that provides opportunities for professional
growth and development • Demonstrates excellent performance in revenue growth, total
cost management, return on assets, inventory optimization, and targeted levels of service
DuPont Process Performance World Class Performance Requires Eliminating Process Defects Across the Value Chain
Suppliers
Customers
Requisition to Pay Order to Cash Record to Report
Demand Mgt
Supply Mgt
Material Money
Information
Transactional Processes
BPM Supports the Elements of Value Chain Transformation
Develop and Maintain Cross Functional Standard Processes
Standard KPIs for Integrated E2E Supply Chain
Behaviors to Support Change
Standard System & Data Architecture
Standard Governance, Accountability and Centered Teams
Business Processes
Capabilities Strategy & KPIs
Systems & Information
Flows Structure
Culture (M & B)
Mindsets, Behaviors & Organizational Liquidity
Reference: “DuPont Applies Business Process Management to Deliver Supply Chain Performance Breakthroughs”
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved.
Concluding thoughts • Prioritize inventory visibility, defined supply
processes and waste reduction • Align physical networks, decision processes and
metrics/incentives • Distinguish features and tactics from outcome
and benefits • Different ‘metrics’ types….KPI’s and PPI’s
• Beware the efficiency trap…pursue strategic alignment and higher value
• Avoid isolated attention to a single process layer…. connect operations with strategy
14
© 2013 Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. If you are authorized to access this publication, your use of it is subject to the Usage Guidelines for Gartner Services posted on gartner.com. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity."
Paul Lord [email protected]
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