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TRB Symposium Embracing Global Complexity to Drive Competitive Advantage in a Networked Economy

TRB Symposium Embracing Global Complexity to Drive Competitive Advantage in a Networked Economy. October 21, 2013. Robert Handfield, PhD Director, Supply Chain Resource Cooperative Bank of America Distinguished Professor. Agenda. The study How is complexity increasing?

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TRB Symposium Embracing Global Complexity to Drive Competitive Advantage in a Networked Economy

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  1. TRB Symposium Embracing Global Complexity to Drive Competitive Advantage in a Networked Economy October 21, 2013 Robert Handfield, PhD Director, Supply Chain Resource Cooperative Bank of America Distinguished Professor

  2. Agenda • The study • How is complexity increasing? • Strategies to deal with complexity • Final Thoughts

  3. Trends and Strategies in Logistics and Supply Chain Management: Creating End to End Strategies for a Networked Economy Prof. Dr.Robert B. Handfield Prof. Dr.Hans-Christian Pfohl Prof. Dr.-Ing.Frank Straube Dr.Andreas Wieland • Partners • Prof. Sidong Zhang, Prof. JiazhenHuo (Tongji University) • Prof. Paulo Fleury, Prof. Cesar Lavalle (Univ. Rio), • Prof. Ravi Shankar (IIT Delhi) • Prof. Victor Sergeev (HSE Moskau) • JosMarinus (ELA, President) • Prof. Paulo Resende(FDC Cabral, Brazil) • Professor Hauzhe Chen, (ECU, USA) • Professor Meng Lu, (DinaLog, The Netherlands)

  4. We began by interviewing 60 globalSupply Chain Officers…. 4

  5. Then completed a multi-lingual survey of 1700 executivesacross the global …

  6. We found the world is becoming avery complex place indeed!

  7. #1 TREND: INCREASED CUSTOMER EXPECTATIONS low high

  8. Complexity is Occurring in Many Forms • Local content requirements are driving companies to work with new suppliers and new manufacturing environments (e.g. complete knockdown production in emerging countries) • Growth of markets in Brazil, Russia, India and Chinaare also the most complex to navigate due to unpredictable regulations, transportation infrastructure, and risks • Part numbers and product designs offer more customized options driving part proliferation and inventory control challenges • Greater concern over multi-tier network disruptions (Thailand floods, Tsunami) as well as control over supply networks • Increasing volatility and unpredictability in demand combined with currency, commodity, and financial risks Synchromodality is a tool to give your customers a very reliable flow to allow you to decide at the last minute to switch a shipment and use the train, barge or road, when there is a hiccup.

  9. #1 LOGISTICS OBJECTIVE - Meeting Customers Requirements for Customized Logistics Solutions

  10. Cost pressures are also increasing!

  11. Network Innovation Complexity • Product networks are becoming more complex, as organizations need to create more diverse sets of product/service bundles customized to local market requirements. • Explosion of new channels, fragmenting existing sales channels and distribution requirements • E-commerce is driving smaller packages to more customers • Customized inbound logistics requirements that are customer-specific, and which vary by region and country • Product bundling with other channel participants to create innovative new market opportunities It is not just growth of production volumes, but the doubling or tripling of volumes in existing plants, new production plants in BRIC”s, a dramatic increase in the number of models, ,more part numbers, and diverse channels….

  12. How are companies embracing complexity?

  13. Talent Management, End to EndIntegration and Integrated Planning is the focus low high

  14. Aligning People, Process, Technology andNetwork Strategies to Embrace Complexity NETWORK Horizontal/Vertical Cooperation Outsourcing/Insourcing TECHNOLOGY Technology Investments PROCESS Governance Process Standards Integrated Planning End to End Integration Network Adaptation Network Cooperation Technology Investments Global Network Visibility Cost to Serve PEOPLE Talent Management Rapid Decision-Making Process Standards Integrated Planning Network Adaptation Corporate Responsibility Green Logistics Government Cooperation

  15. PEOPLE: Having the Right People Empowered to Act and Deal with Logistics Complexity, Corporate Sustainability, and Ability to Learn New Technologies is Fundamental. Globalization & complexity .20 .18 NETWORK Horizontal/Vertical Cooperation Outsourcing/Insourcing TECHNOLOGY Technology Investments Customer Expectations .18 .20 PROCESS Governance Process Standards Integrated Planning Increased Risk and Disruption .23 .25 Cost Pressure .11 .19 PEOPLE Talent Management Rapid Decision-Making P1 – Talent Management P2 – Rapid Decision-Making Sustainability Pressure .36 .25 New Technologies .36 .26 Talent Shortfalls .38 .27 Correlation with TM Correlation with RDM

  16. Talent Management

  17. Top Performers Engage More with Universities

  18. Wanted: Rational, Long-term, Global Specialists

  19. PROCESS: Globally Integrated Adaptable Processes With Technology Embrace Volatile Environments NETWORK Horizontal/Vertical Cooperation Outsourcing/Insourcing TECHNOLOGY Technology Investments New Technologies .32 .37 .42 PROCESS Governance Process Standards Integrated Planning Networked Economy .23 .25 .20 Increased Risk and Disruption .34 .35 .28 PEOPLE Talent Management Rapid Decision-Making PR1 - Global Process Standards PR2 - Integrated Planning PR3 - Network Adaptation Volatility .19 .22 .18 Poor Logistics Infrastructure .34 .26 .26 Talent Shortfalls .34 .26 .28 Globalization & Complexity .22 .25 .21 Correlation with PS Correlation with IP Correlation with NA

  20. Driving Decision Agility One of the biggest challenges is how to balance consistency in execution yet still tapping into the creativity and flexibility that I’d want if I was running that operation. And so we have been in search of that right balance and there is no easy answer to it. If we get our minds right on how things should work and how they work best and we teach that across our enterprise, our leaders will be more apt to approach similar problems from a similar mindset. We define the processes that must be in place, and the policies that must be followed, and finally the playbooks that act almost as a user guide on how to think through the overall requirements and get them done! We then have a global SIOP function to optimize global requirements across regional requirements, especially around our global product lines. But we recognize that they will be interpreted and acted on differently at a regional level. So we are structured regionally to drive the deployment of our global strategies, to optimize freight flows, and deal with regionally-specific issues.

  21. Growth in New Technology

  22. Analytics and Big Data Investments

  23. NETWORK: End to End Integration and Adaptation Enables Aligned Actions Across Your Global Business Partners NETWORK Horizontal/Vertical Cooperation Outsourcing/Insourcing Sustainability Pressure .59 .44 .37 Correlation with CR Correlation with GL Correlation with GC TECHNOLOGY Technology Investments Government Regulation .33 .22 .39 PROCESS Governance Process Standards Integrated Planning N3 Corporate Responsibility N3 Green Logistics N3 Government Cooperation New Technologies .47 .23 .39 PEOPLE Talent Management Rapid Decision-Making Networked Economy .38 .18 .27 Increased Risk and Disruption .32 .22 .27 N1 - End to End Integration N2 - Outsourcing /Insourcing N3 - Hor/Vert Cooperation Cultural Issues .27 .24 .28 Talent Shortfalls .29 .15 .30 Sustainability Pressure .32 .21 .32 Correlation with E2E Correlation with OS Correlation with HVC

  24. Sustainable Footprints Remain Critical Sustainability is part of our product roadmap from product development to green logistics and customer application. We don’t view it as a trend, we view it as a right to operate, just like safety. Crop Cultivation Blending Chemicals Production Printing Packing Transportation Warehousing Disposal Environmental Footprint of a Product The environmental footprint of a product accumulates all carbon emissions along the supply chain.

  25. Final Thoughts: People are the Foundationfor Agile and Resilient Supply Chains • “…most important thing is to work on the capability of our people and increase competencies…” • “…put a lot of importance on continuous training….and we see a high regional variation in turnover…” • “….education is high in India, but practical application of knowledge to daily situations and problems in the workplace is not good…” • “….we can’t afford to lose good people, so we try to take care of them as they are in demand in Brazil…” • “…strengthened ties to elite Chinese universities and a selective hiring process…” • “…in Russia we hire for their mindset and willingness to learn, not their supply chain experience. Then we bring them to our Western locations and train them how to do business….” • “….we have to move people out of traditional functional silos so that they are able to speak to people outside of supply chain…” • “…you need a backbone cadre of B players who are solid but who have low turnover…they will deliver reliably 90% performance. Once you have that base, you can deal with the volatility of human capital.”

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