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The Value Proposition of Supply Chain Management

The Value Proposition of Supply Chain Management. Cost is one of the major drivers to extend the traditional enterprise. 60% of variable costs of an organization are driven by decisions that are external to the organization. Tier 2 Suppliers. Tier 1 Suppliers. Manu- facturer. Wholesaler

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The Value Proposition of Supply Chain Management

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  1. The Value Proposition of Supply Chain Management

  2. Cost is one of the major drivers to extend the traditional enterprise. • 60% of variable costs of an organization are driven by decisions that are external to the organization. Tier 2 Suppliers Tier 1 Suppliers Manu- facturer Wholesaler or Distributor Retailer or Dealer Consumers • “The Power of Business to Business Integration”Benchmarking Partners, December 1998 2003

  3. The past efforts have not been without considerable rewards. — North American Annual Total Logistics Cost Change in Percentage — 50% 30% • Logistics expense • includes: • Finished Goods Transportation • Warehousing • Order Entry/ Customer Service • Administration • Inventory Carrying Cost @ 18% $/CWT 10% -10% %of Sales -30% -50% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 Source: Council of Logistics Management 1997 Annual Conference Proceedings, Logistics Costs and Customer Service Levels (Herbert W. Davis & William H. Drumm) $/CWT = Dollars per hundred weight. 2003

  4. Yet, supply chain cost reduction still represents a significant business opportunity …... • Supply Chain Spend as a Percentage of Revenues Size of Gap in Billions $ 34 $ 37 $ 34 $ 20 $ 15 $ 8 $ 4 $ 10 $ 162 Best in Class Average 1 2 Source: Logistics Management, April 1997 2003

  5. The supply chain must continue to drive shareholder value. VALUE THEORY holds that to increase the value of a company, you must increase cash earnings in excess of its full cost of capital in a sustainable fashion 2003

  6. SCM has contributed to increased shareholder value by impacting traditional value levers. — Impact of SCM — • Greater customer service (i.e., higher market share, greater gross margins) Revenue Profitability • Lower cost of goods sold, transportation, warehousing, material handling and distribution management costs Costs Shareholder Value • Lower raw materials and finished goods inventory • Shorter “order-to-cash” cycles Working Capital Invested Capital • Fewer physical assets (i.e., trucks, warehouses, material handling equipment, etc.) Fixed Capital 2003

  7. 94% 98% The improvement of SCM has significant strategic and financial impacts on bottom line activities. Strategic and Financial Impact Financials / Metrics. • Shareholder Value Creation • Customer Service Level Increase • Supply Chain Variability Reduction • Inventory Reduction • Cycle-time Compression • In-stock availability • Lead time • Ability to tailor to specific customer needs • Fixed • Purchase Cost • Variable Manufacturing • Trans/Distribution • Obsolescence/Markdown • Administrative/Transaction • Manufacturing • Distribution Centers • Inventory CustomerService ROA Costs Assets 2003

  8. Best in Class companies enjoy significant advantage over their competitors. Total Supply-Chain Mgmt. Cost Cash-to-Cash Cycle Time 14% 120 Best 13.1 Median 12% 100 105 11.6 10% 87 80 8% Revenue 60 Calendar Days 7.0 6% 6.3 40 4% 37 31 20 2% 0% 0 1996 1997 1996 1997 “For a company with annual sales of $2 billion and a 60% cost of sales, the difference between being at the median in terms of performance and being in the top 20% is $176 million in working capital.” 1997 PRTM Study 2003

  9. 100 100% Best Median 94 94 90% 90 80% 80 81 78 70% 70 71 66 60% 60 Days of Supply 50% 50 40% 40 35 34 30% 30 20% 20 10% 10 0% 0 1996 1997 1996 1997 Best in Class companies enjoy significant advantage over their competitors. Total Days of Supply On-Time Delivery Performance U.S. Dept. of Commerce estimates that manufacturers have cut inventories by 9% in the 1990’s saving about $82 Billion [Fortune 3/3/97]. 2003 1997 PRTM Study

  10. Industry leaders have demonstrated the significant value that successful supply chains can create. Point of Sale Data and Flow Through Distribution Investment in Distribution Network “Retail Direct” Strategy 3000% Above Average 250% Above Average 500% Above Average For period 1988-1996; Source Strategic Supply Chain Alignment, 1998 2003

  11. Supply Chain Opportunities for EHT Industry The 1997 Andersen Consulting Global Electronics Study (GES) showed that total inventory in the U.S. technology industry supply chain was around $0.5-1.5 trillion and turned less than 10 times per year. Inventory Turns 50 times per year • Still, there are potential Inventory Reduction Opportunities • 10-30% Inter-enterprise Postponement • 10-30% Intra-enterprise Postponement • 40-65% Direct-to-Customer Sales • 10-25% Joint (Collaborative) Planning Source: AC-Stanford-Northwestern’s CDDN Study, also 1996 U.S. Census data 2003

  12. 5 All the Time 4 3 2 1 0 Lower Higher Lower Higher Lower Higher Lower Higher Lower Higher Lower Higher Lower Higher Not at All Lower Performers Supplier Owned Or Managed Inventory Third Party Logistics (Warehousing) Third Party Logistics (Transportation) Third Party Logistics (Information Management) Electronic Information Systems to Manage Channel Fill Rates and Replenishment Customer Access to Internal Systems to Track Order Configure to Order Strategy Higher Performers Source: Manufacturing Manager Responses (4/2/97 data) 4C-15 The material contained in this presentation is confidential and proprietary to Andersen Consulting. Higher performing global electronics companies integrate more extensively across the supply chain. - Inter-Company Supply Chain Practices - 2003

  13. - Benefits Summary - Suppliers Semic. Storage Assemblers Retailers Distributors CompressedSupply Chain Inv. Margin Value Inv. Margin Value -- -- 10%-70% 10%-100% -- -- -- 10%-70% 10%-100% -- -- -- .7%-4.7% .5%-4.9% -- 5.3% 2.0% 2.2% -- -- -- -- $70-$470M $10-$102M -- $69M $18M $145M -- -- Inv. Margin Value 10%-25% 10%-25% 10%-25% 10%-25% 10%-25% Collaborative Planning .6%-1.4% .6%-.7% .7%-1.8% .5%-1.2% .7%-1.6% $9-$23M $4-$9M $70-$181M $10-$26M $26-$64M Design for Responsiveness Andersen Consulting’s CDDN Study Substantial value creation has been identified for computer supply chain. 2003

  14. Typical Levels of Supply Chain Benefits: Benchmark Improvement Delivery performance 16 - 28% Inventory reduction 25 - 60% Fulfilment cycle time 30 - 50% Forecast accuracy 25 - 80% Overall productivity 10 - 16% Lower S.C. costs 25 - 50% Improved capacity 10 - 20% Source:AMR & PRTM Supply chain breakthrough has realized in significant benefits. • Breakthrough areas: • Integrated Demand and Supply Planning • New business models and portfolios of best relationships • Strategic Sourcing and eProcurement • eCustomer linked to Demand Chain 2003

  15. SCM ERP ROI (times) 5 to 15 1.5 to 2 Payback in 2 to 3 Period months years Supply chain planning High Hard Nut to Crack Low-Hanging Fruit ERP Achieving internal efficiencies is important, however, the external integration can make the difference between market leadership and failure. High returns from external integration can be achieved even when internal integration is not very sophisticated. It isn’t necessary to wait until your internal integration efforts are complete to begin external integration initiatives. Customer Value Ticket to Entry Narcissistic Warehouse mgmt. Global financials Low Short Long Time to Produce Net Value , 1998 S o u r c e : G a r t n e r G r o u p (Ken Ross, Extricity Software, Inc.) Which should come first? SCM or ERP? 2003

  16. 供应链管理的价值

  17. 成本是扩展传统企业的主要推动力之一. • 机构的60% 可变成本由机构对外的决策所支配 第二层 供应商 第一层 供应商 制造商 批发商 或 分销商 零售商 或 经销商 顾客 • “The Power of Business to Business Integration”Benchmarking Partners, December 1998 2003

  18. 过去的努力不是没有回报 — 北美每年总的后勤成本变化百分比 — 50% 30% • 后勤开销 • 包括: • 产成品运输 • 仓库费 • 定货手续/ 客户服务 • 管理 • 仓储成本 @ 18% $/CWT 10% -10% %of Sales -30% -50% 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 Source: Council of Logistics Management 1997 Annual Conference Proceedings, Logistics Costs and Customer Service Levels (Herbert W. Davis & William H. Drumm) $/CWT = Dollars per hundred weight. 2003

  19. 然而 , 供应链成本降低仍存在巨大的商业机会... • 供应链消耗占销售收入的百分比 Size of Gap in Billions $ 34 $ 37 $ 34 $ 20 $ 15 $ 8 $ 4 $ 10 $ 162 最好平均 1 2 Source: Logistics Management, April 1997 2003

  20. 供应链一定会推动股东的利益. 价值理论 为了让企业增值，必须以能够持续经营的方式将收入提高到超过总成本 2003

  21. SCM 通过对传统价值杠杆的影响，为增加股东的价值做出贡献 —SCM 的影响— • 更强大的客户服务 (如，更高的市场份额, 更多的毛利) 收入 收益性 • 更低的商品销售、运输、仓储、材料处理及分销管理成本 成本 股东 价值 • 更低的原料及产成品的库存 • 更短的 “定单变现” 周期 营运 资本 投资 资本 • 更少的实物资产 (如, 卡车, 仓库, 原料处理设备,等) 固定 资本 2003

  22. 94% 98% SCM 改善对有战略及财务具有巨大影响 战略及财务的影响 财务衡量 • 创造股东价值 • 客户服务水平提高 • 供应链变动性降低 • 库存减少 • 周期压缩 • 现货供应能力 • 交付周期 • 根据客户特殊要求定制的能力 • 固定 • 采购成本 • 可变制造成本 • 运输/发行成本 • 无形磨损费/减价 • 管理/交易成本 • 制造行业的资产 • 分销中心 • 库存 客户 服务 ROA 成本 资产 2003

  23. 最好的公司得益于巨大的竞争优势. 总供应链管理成本 现金周转周期 14% 120 最好 13.1 中等 12% 100 105 11.6 10% 87 80 8% 60 7.0 6% 收入 6.3 40 天数 4% 37 31 20 2% 0% 0 1996 1997 1996 1997 “对于年销售收入为20亿及60%的销售成本的企业，中等层次的企业与前20%的企业之间的运营资本的差异为1.76亿美圆。 1997 PRTM Study 2003

  24. 100 100% 最好 中等 94 94 90% 90 80% 80 81 78 70% 70 71 66 60% 60 50% 50 供应天数 40% 40 35 34 30% 30 20% 20 10% 10 0% 0 1996 1997 1996 1997 最好的公司得益于巨大的竞争优势. 按时供货 总供应天数 美国商业部门估计，制造业在20世纪90年代降低了9%的库存，节省了820亿美圆 [财富 3/3/97]. 2003 1997 PRTM Study

  25. 行业巨头证明供应链的成功带来的巨大价值 贯穿整个销售过程的销售信息及流程 分销网络 的投资 “直销策略” 高于 平均水平 3000% 高于 平均水平 250% 高于 平均水平 500% For period 1988-1996; Source Strategic Supply Chain Alignment, 1998 2003

  26. 对于高科技电子行业的供应链 1997安达信全球电子行业研究显示，美国科技企业供应链的总库存约为 $0.5-1.5 万亿，并且库存周转率低于10次/年 库存周转率为 50次/年 • 尽管如此，仍存在减少库存的潜力 • 10-30% 企业内部的延迟 • 10-30%企业外部的延迟 • 40-65% 直销 • 10-25% 协同计划 Source: AC-Stanford-Northwestern’s CDDN Study, also 1996 U.S. Census data 2003

  27. 5 总是 4 3 2 1 0 差 好 差 好 差 好 差 好 差 好 差 好 差 好 根本不 差 供应商拥有 或管理库存 第三方后勤 (仓储) 第三方后勤 (运输) 第三方后勤 (信息管理) 电子信息系统 管理渠道供应 与补充 客户访问 内部系统 跟踪定单 制订 定货策略 好 Source: Manufacturing Manager Responses (4/2/97 data) 4C-15 The material contained in this presentation is confidential and proprietary to Andersen Consulting. 优秀的全球化电子公司广泛地整合供应链 - 企业内部供应链实践 - 2003

  28. - 受益情况 - 供应商 Semic. Storage 装配企业 零售商 分销商 扁平化 库存. 利润 价值 库存. 利润 价值 -- -- 10%-70% 10%-100% -- -- -- 10%-70% 10%-100% -- -- -- .7%-4.7% .5%-4.9% -- 5.3% 2.0% 2.2% -- -- -- -- $70-$470M $10-$102M -- $69M $18M $145M -- -- 库存. 利润 价值 10%-25% 10%-25% 10%-25% 10%-25% 10%-25% 协同计划 .6%-1.4% .6%-.7% .7%-1.8% .5%-1.2% .7%-1.6% $9-$23M $4-$9M $70-$181M $10-$26M $26-$64M 快速反应 Andersen Consulting’s CDDN Study 计算机行业的价值链创造了价值. 2003

  29. 供应链的典型收益: 项目 改善 交货能力 16 - 28% 库存减少 25 - 60% 实现周期 30 - 50% 预测的准确性 25 - 80% 总生产率 10 - 16% 降低供应链成本 25 - 50% 能力提高 10 - 20% 源自:AMR & PRTM 供应链的突飞猛进实现了巨大价值. • 成功的领域: • 集成的需求与供应计划 • 新商业模型及最佳关系组合 • 战略资源及电子采购、电子客户被需求链联系起来 2003

  30. SCM ERP 投资回报率 (倍) 5 到 15 1.5 到 2 回报周期数月 2 到 3年 供应链 计划 高 Hard Nut to Crack Low-Hanging Fruit ERP 内部效率的提高固然重要，但是，外部整合会影响到企业的成功与失败。 即使内部整合不是很完善的时候，我们也可以从外部整合得到高额回报。 没有必要等到内部整合完全结束才开始进行外部的整合. 客户价值 Ticket to Entry Narcissistic 仓库 管理 Global financials 低 短 长 产生净值的时间 , 1998 S o u r c e : G a r t n e r G r o u p (Ken Ross, Extricity Software, Inc.) 哪个先开始? SCM 还是ERP? 2003

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