1 / 27

Demand Driven Supply Networks Gaining Competitive Advantage through the Future Supply Chain

Demand Driven Supply Networks Gaining Competitive Advantage through the Future Supply Chain. Kevin O’Marah Vice President, AMR Research, Inc. April 4, 2005. Theme. Profitable growth requires a Demand Driven Supply Network. Agenda. What’s wrong with today’s supply chain?

nysa
Download Presentation

Demand Driven Supply Networks Gaining Competitive Advantage through the Future Supply Chain

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Demand Driven Supply NetworksGaining Competitive Advantage through the Future Supply Chain Kevin O’Marah Vice President, AMR Research, Inc. April 4, 2005 Source: AMR Research, 2004

  2. Theme Profitable growth requires a Demand Driven Supply Network

  3. Agenda • What’s wrong with today’s supply chain? • What is a Demand Driven Supply Network? • How does DDSN drive profitable growth?

  4. What’s wrong with today’s supply chain? • Orders – 20+% are filled imperfectly • Inventory – $1.2 trillion in the chain now • Markdowns – 78% of merchandise sold • New Products – 75% failed • Engineering – 70% of hours wasted

  5. 90% Deliver 20% More Perfect Orders… Leaders 68% Laggards Leaders 54 Days …Hold a third less inventory… Laggards 72 Days 21% Leaders …and have lower costs equal to 5% of revenue Laggards 26% Benchmarking finds leaders:

  6. ROI on SC applications

  7. You can’t push a chain

  8. 21st Century - PULL 20th Century - PUSH “keep the factory full” “give them what they want” Physical asset based Intellectual asset based Vertically integrated Networked Technology driven Opportunity driven Demand pull is driving the 21st Century

  9. What is DDSN? A system of technologies & processes that senses & reacts to real-time demand signals across a supply network of customers, suppliers, & employees

  10. 21st Century 20th Century Demand Point a Given Demand Management Deterministic Optimization Probabilistic Optimization Innovation an Externality Embedded Innovation What’s Different?

  11. How does DDSN drive profitable growth? Start with the “Moment of Truth”… ….and work backwards.

  12. Aerospace & Defense Moment of Truth

  13. Consumer Electronics Moment of Truth

  14. 100% 90% 80% 70% 60% 50% 40% Demand Visibility 10% 20% 40% 50% 60% 70% 80% 90% 100% Perfect Order Demand Driven Efficacy Source: AMR Benchmark Analytix, 2003

  15. SCMCosts PerfectOrder (Strong) (Strong) (Strong) Perfect Order SCM Costs (Weak) (Weak) (Weak) Automotive Suppliers Consumer Products Industry Tradeoffs Source: AMR Benchmark Analytix, 2003

  16. SCMCosts PerfectOrder (Strong) (Strong) (Strong) SCM Costs SCM Costs Perfect Order Perfect Order SCM Costs SCM Costs Perfect Order Perfect Order SCM Costs Perfect Order (Weak) (Weak) (Weak) Automotive Suppliers Consumer Products Excellence is about Balance Source: AMR Benchmark Analytix, 2003

  17. The Benefits of Balanced Excellence • 60% better profit margins • 65% better EPS • 2-3X the ROA Source: AMR Benchmark Analytix, 2003

  18. Best Over All Transp Cust Svc Purch WH/DC Mfg Company A Company B Company C Company D Action: Aim For Balance in the Details SCM Costs Source: AMR Benchmark Analytix, 2003

  19. Level Of Service Cost DDSN Inverts Cost Service Level Tradeoff Dell, P&G, Best Buy T1 Auto $250MM CPG Source: AMR Benchmark Analytix, 2003

  20. “I Think I Can Sell…” Supply Plan, Source, Make, Deliver Demand Attract, Sell, Service “Here It Is, Sell It” Product Define, Design, Promote, Supply, Support “Here’s a New Product – Figure Out How to Make It” Isolated Business Processes

  21. DDSN: 21st C. supply chain Supply Demand Product

  22. DDSN Pioneer • 0.6% drop in materials costs/ week • 92% of product shipped w/in 5 days • Avg supplier lead time is 45 days • 0.05% of materials were E&O (waste) “Buy to plan, build to order” Source: Dick Hunter, America’s VP Manufacturing Operations, Dell, at Stanford Supply Chain Forum, May 2002

  23. DDSN Pioneer • Design-to-shelf time: 3 weeks • New items per year: 10,000 • 80/20 local manufacture on main floors (fashion) 20/80 on basics • 5M sq foot warehouse – 9X Amazon’s “In fashion, nothing is as important as time to market” Sources: Business 2.0 Magazine, May, 2002; AMR Research

  24. DDSN leaders’ edge is huge

  25. Operations and Innovation drive value Higher Cash Flow, p/e Leader Operational Excellence (Perfect Order, Total SCM Cost) Laggard Laggard Leader Innovation Excellence (Time to Value, Return on R&D)

  26. Summary • Profitable growth requires DDSN • Pull – Don’t Push • Start at moment of truth and work backwards • Margin, growth and share value are all impacted by DDSN

  27. Thank You! Kevin O’Marah komarah@amrresearch.com

More Related