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Seven Habits of Highly Successful Supply Chains S.C. International Trade Conference May 30, 2007.

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Presentation on theme: "Seven Habits of Highly Successful Supply Chains S.C. International Trade Conference May 30, 2007."— Presentation transcript:

1 Seven Habits of Highly Successful Supply Chains S.C. International Trade Conference May 30, 2007

2 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Today’s Supply Chain Realities  Global Supply Chain  Synchronization  Agility  Competitiveness  Technology  Organization Acceleration

3 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. 1.Understand and Communicate 2.Benchmarking and Best Practices 3.Leadership 4.Assess and Prioritize 5.Core Competencies 6.Partnership 7.Continuous Improvement Seven Habits of Highly Successful Supply Chains

4 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Six Levels of Supply Chain Excellence 1.Level I: Business As Usual –Organizational elements pursuing self interests 2.Level II: Link Excellence –The starting point of Supply Chain Excellence 3.Level III: Visibility –The next step in establishing a visible presence with other supply chain links

5 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Six Levels of Supply Chain Excellence 4.Level IV: Collaboration –Using visibility to do the work smarter and meet marketplace demands 5.Level V: Synthesis –A continuous improvement process to harness the energy of change 6.Level VI: Velocity –The ideal state of synthesis with speed. Faster! Faster!

6 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Six Levels of Supply Chain Excellence

7 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Synchronization Under Uncertainty Performance Scenario Factor IIIIII Forecasting Bad Customer SatisfactionGood CostHigh Forecasting Customer Satisfaction Cost Bad Low Good Low A.Proactive: Commodity Quality Forecasting

8 Copyright © 2007 Tompkins Associates, Inc. All rights reserved.  Internal and External  Where are we?  Where are we going?  It is about Supply Chain vs. Supply Chain Understand and Communicate: Then Communicate Again

9 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Benchmarking and Best Practices  Use Benchmarking (metrics) to plot Best Practices.  How are you doing in comparison to others?  Are your costs reasonable and in line with others like you?  Are you missing any breakthrough opportunities?  How can you build a consensus around a supply chain path forward?

10 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Benchmarking and Best Practices Supply Chain Consortium  Strong industry leadership  World-class tools  Right participants  Subscriber centric  Excellence in networking

11 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Leadership and Content Strong Leadership: Broad Content :  Profile  Inbound Orders  Truck Transportation  DC Operations  International  Ocean Transportation  Dedicated Fleet  Supply Chain Technology  Air Freight and Parcel  Order Fulfillment – Internet/Catalog  Demand Planning  Supply, Distribution, Inventory and Transportation Planning  Supply Chain Network Design

12 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Building Momentum Question Refinement:  2004 – 2,900  2005 – 7,600  2006 – 9,000 Right Participants:  2004 – 50 Retailers  2005 – 80 Retailers and Industry leaders  2006 – 110 Retailers and Industry leaders World-Class Tools:  Web Interview Process  Search  Online Queries  Strategic Assessment Dashboard  Peer Networking

13 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Highlighting a Few Points in a Few Areas Today Overall Supply Chain Distribution Center Practices and Trends Vendor Collaboration

14 Overall Supply Chain 14

15 Copyright © 2007 Tompkins Associates, Inc. All rights reserved.  The focus on network optimization is improving.  However, 24% of members indicate that their network design has not been reviewed in over 3 years. Overall Supply Chain - Network Design

16 Copyright © 2007 Tompkins Associates, Inc. All rights reserved.  Significant cost reductions possible. Overall Supply Chain – Performance Metrics

17 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. As supply chain networks become more efficient, the trend is toward more efficient transportation modes. Overall Supply Chain - Transportation Mode Shifts

18 Copyright © 2007 Tompkins Associates, Inc. All rights reserved.  Network design is a significant lever, but may not be optimized. The key is to have the right facility types, right number and right location.  Higher fuel prices are changing the balance between transportation and distribution center costs in designing optimal networks.  SKU rationalization is also key – the right quantities, inventoried at the right locations, and flowing through the correct parts of the network.  Accurate demand planning and forecasting is key to using the network optimally.  As companies take greater control of their inbound networks, transportation modes will shift. The burden of finding adequate capacity shifts from the vendor to the buyer. Overall Supply Chain – Learnings

19 Distribution Center Practices and Trends 19

20 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. To put this topic in context, note that the majority of DC’s are in the 201K to 500K square foot size categories. DC Operations – Size

21 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. What trends have you seen in the last 3 years? What trends do you anticipate in the next 3 years? DC Operations - Trends

22 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. If you could make changes, what changes would you make to your current DC layouts? DC Operations - Layout Wish List

23 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Best practice can yield exceptional results. Product slotting in DC’s is one example of a potential opportunity. DC Operations - Slotting Methodologies

24 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. The benefits of automated slotting can be significant, but not all DC’s have taken advantage of the technology. DC Operations - Slotting Opportunities

25 Copyright © 2007 Tompkins Associates, Inc. All rights reserved.  Automated material handling equipment tops the wish list of DC facility upgrades.  There are several key opportunities to upgrade receiving operations including expanded use of ASN’s for unload planning and automated product receipts.  Automated slot management tools can result in significant productivity improvements, but they are not used in many DC’s.  Expanded use of crossdock and flow through operations is the ultimate key to improved performance.  Current WMS applications have left significant room for improvement. DC Operations – Learnings

26 Vendor Collaboration 26

27 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. … significant opportunities for improvement. Vendors - Where is Performance Today?

28 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. … three of the top four reasons are controlled by the retailer. Vendors - Expediting and Ordering Behaviors

29 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. The most significant improvements can result from joint initiatives undertaken with vendors. Vendors - Joint Initiatives

30 Copyright © 2007 Tompkins Associates, Inc. All rights reserved.  Penalties are a key part of many programs  Positive incentives are less pervasive  Intent – corrective action versus revenue line item  Monitoring programs are not always “transparent” Penalties and Rewards

31 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Implement a timely, accurate and transparent measurement process. Communicate results. Measurement can be two-way, but the retailer creates and maintains the process. Penalties can be effective, but they need to be reasonable (reflect the cost of non-performance), applied consistently and motivated by a desire to fix problems. Ordering behaviors need to support performance goals. Information sharing is essential – sales forecasts and future plans. Vendor Collaboration – Learnings

32 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Leadership  Leadership shapes culture  Leadership defines direction  Leadership ensures motivation

33 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Leadership Shapes Culture  Type I:Static Consistency  Type II:Dynamic Inconsistency  Type III:Dynamic Consistency

34 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Leadership Defines Direction  Vision– Where?  Mission– How?  Requirements of Success– Science?  Guiding Principles– Values?  Evidence of Success– Key Performance Indicators (KPI ) ?

35 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Leadership Ensures Motivation  How they think ► Integrity► Optimism ► Credibility► Urgency ► Enthusiasm► Determination  How they communicate  How they work  How they treat people

36 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Assess and Prioritize Structure  Area : Overall supply chain process  Topic : A focused area within process  Best Practice : Industry identified best practice for topic  Current Practice : Today’s performance for topic  Priority : Importance to pursue  Actions : Steps to be taken  Benefits : Expected results of pursuing actions  Responsibility : Who will make it happen?

37 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Area: Supply Chain Event Management Topic: Production Tracking and Visibility Best PracticeCurrent PracticePriority Production management should be facilitated by structure means to communicate and update the following with suppliers:  PO submission  Acknowledgement/confirmation  PO changes Communications with suppliers regarding PO’s are manual and maintained individually through the buyer 1 The production management platform should provide ability to communicate and update:  Predefined production milestone  Predefined inspections and testing milestones System provides tracking for pre-defined milestones 4 The production management platform should include event management and alerting capabilities to be used for:  Reminder to supplier/agent regarding ship schedule  Response to buyer regarding intent to ship  Any predefined production tracking activities Merchandising spends approximately 60% of time performing PO administrative review and updates in current system. Alerting and exception-based management capability not supported in system. 2

38 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Area: Supply Chain Event Management Supply Chain Roadmap: Actions: Benefits: Responsibilities:  Expand on inbound freight management initiative to include electronic PO transmissions, acknowledgement, confirmation and changes. Expand integration with current system to include relevant updates from inbound freight management.  Expand on inbound freight management initiative to include alert capabilities to buyers, suppliers, agents and integrated updates with the current system.  Near-real-time updates and visibility to production events based on tight integration among suppliers, inbound freight management and current system.  Merchandising to expand focus on product strategy and reduce focus on administrative elements.

39 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Core Competencies  Core Functions: –The unique business functions that allow an organization to be successful –The critical activities included in an organization’s vision statement that allow it to thrive

40 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Core Competencies: Primary and Secondary  Primary focus core competencies: Those activities and processes that differentiate an organization in the marketplace  Secondary focus core competencies: Those activities and processes that must be done well for the organization to retain market share but are not visible to customers

41 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Non-Core Competencies  What is left in an organization after you remove core competencies?  Primary non-core: Activities that, although not core, have an impact on a company’s bottom line.  Secondary non-core: Activities that need to be done, but unless they are really done poorly, they do not have an impact on an organization’s bottom line.

42 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Core Competencies Matrix

43 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Core Competencies Matrix for Chic Retailer

44 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Core Competencies Matrix for a Manufacturer/Distributor

45 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Core Competencies Matrix

46 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Organizations and Leaders Must Focus on Core Competencies  To achieve a highly successful supply chain, organizations must outsource.  However, if an organization does not have a core competency of outsourcing, the outsourcing will fail and leaders will be pulled away from core competencies.  Organizations MUST have a core competency in outsourcing.

47 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Partnerships  Supply Chain Partnership Evolution and Marriage Partnership Evolution Partnerships BETWEEN TWO PEOPLE IN A RELATIONSHIP BETWEEN PEOPLE WITHIN TWO ORGANIZATIONS Customer-Driven Organization Invincible Customer Service Cooperative Relationship Planning for Partnership Supply Chain Partnership Customer-Driven Organization Invincible Customer Service Cooperative Relationship Planning for Partnership Supply Chain Partnership Dating Going Steady Being Engaged Marriage Dating Going Steady Being Engaged Marriage

48 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Partnerships  Supply Chain Partnerships believe relationships should be based on: −Building on each other’s strengths −Growing the pipeline’s competitive strength −Integration of systems −Frequent communications at all levels of the organization −Frequent structured interactions on creating supply chain peak-to-peak performance

49 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Partnerships  Supply Chain Partnerships believe relationships should: –Not be based on antagonism, leveraging, hammering and negotiating –Be long-term based on trust and a true understanding of Supply Chain Excellence –Be based upon sharing of information, planning, scheduling, risk, rewards, problems, solutions and opportunities for creating peak-to-peak performance

50 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Partnerships  Supply Chain Partnerships believe relationships should be based on working together toward improved performance of the total pipeline on: −Quality −Lead times −New product development −Time −Inventories −Waste −Costs −Customer satisfaction

51 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Partnerships  Growing the Supply Chain Partnership –No two relationships ever develop in the same way –Relationships evolve not as cold-blooded business negotiations, but as comfortable personal bonds between individuals –A positive chemistry exists between the two parties involved in a relationship

52 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Peak-to-Peak  “Success Has Ruined Many A Man.” - Benjamin Franklin  “Each Success Only Buys An Admission Ticket To A More Difficult Problem.” - Henry Kissinger Continuous Improvement

53 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Peak-to-Peak  “We Cannot Solve Today’s Problem With The Same Level Of Thinking That Created The Problem In The First Place.” - Albert Einstein Continuous Improvement

54 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Peak-to-Peak  “It’s What You Learn After You Know It All That Counts.” - Coach John Wooden  “He Who Stops Being Better, Stops Being Good.” - Oliver Cromwell Continuous Improvement

55 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Peak-to-Peak  Peak performance is often the beginning of failure. The natural order of life is peak-to-valley-to-peak-to-valley-to- peak-to-valley.  Why not climb to the top of the mountain and instead of traveling to the valley, travel from this peak to the next higher peak, to the next higher peak, and so on? Continuous Improvement

56 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Peak-to-Peak  There will always be more problems than there are solutions. We need to install a process that anticipates and solves problems before they are problems and that continuously transforms our organization into a championship organization that is nevertheless the underdog. Continuous Improvement

57 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Peak-to-Peak  A Supply Chain Excellence organization goes peak-to- peak-to-peak, etc.  Today, there is no steady state. We live in permanent white water. Supply Chain Excellence organizations are organizations that capture the energy of change to move from peak-to-peak-to-peak. Continuous Improvement

58 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Understanding Peak-to-Peak  A Supply Chain Excellence Organization Understands: –The shift required is not from your present path to a new path, but to a process of continually changing paths –The process of continuous renewal –That because you are on top you are the underdog –The non-stop evolution to higher levels of peak performance Continuous Improvement

59 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Embrace the Seven Habits  Organizations that embrace the Seven Habits of Highly Successful Supply Chains will have a major competitive advantage over organizations that do not.  Evaluate your organization based on the Seven Habits and define a path forward.  “When you come to a fork in the road…Take It!” - Yogi Berra Call to Action

60 Copyright © 2007 Tompkins Associates, Inc. All rights reserved. Supply Chain  James A. Tompkins, Ph.D., No Boundaries: Break Through to Supply Chain Excellence, Tompkins Press  James A. Tompkins, Ph.D. and Dale Harmelink, The Supply Chain Handbook, Tompkins Press Benchmarking and Best Practices  Website Leadership, Partnerships and Continuous Improvement  James A. Tompkins, Ph.D., Revolution, Tompkins Press  James A. Tompkins, Ph.D., Future Capable Company, Tompkins Press Core Competencies and Outsourcing  James A. Tompkins, Ph.D., Steve W. Simonson, Bruce W. Tompkins, Brian E. Upchurch, Logistics and Manufacturing Outsourcing: Harness Your Core Competencies, Tompkins Press Tompkins Press  8970 Southall Road, Raleigh, NC 27616, (800) ext Reference List for Seven Habits of Highly Successful Supply Chains


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