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Supply Chain Trends - From Sourcing to Distribution

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Ashutosh Karandikar

on 8 January 2013

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Transcript of Supply Chain Trends - From Sourcing to Distribution

Sourcing Distribution Manufacturing The process of converting raw materials, components, or parts into finished goods that meet a customer's expectations or specifications. An inlay between the producer of a product and the seller of that product. Supply Chain Trends - From Sourcing to Distribution A systematic and fact based approach for optimizing an organization's supply base and improving the overall value proposition Trends Trends Trends Thank you ! Globalization Best Practices to implement a Global
Sourcing Strategy Executive Commitment to global sourcing Benefits Overview The term global sourcing is commonly used to refer to the practice of sourcing the world market for services or goods, and crossing geopolitical boundaries to do so. Global sourcing is not limited to products. Increasingly,services are also being sourced on an international basis, which is more commonly referred to as global outsourcing. Cross functional teams and international offices Integration through information technology Availability of needed resources and data on existing contracts, supplier performance & capability matrix, etc. Well defined process, timing and role clarity Lower Costs
Greater access to new technologies and emerging markets
Better Quality
Guaranteeing the availability of available resources Risks Decrease in earnings due to hidden costs
Quality Problems
Increased transport
Lower responsiveness and lost sales
Cultural and time differences
Exchange Rate Fluctuations Best Practices in Achieving Supply Chain Resiliency Conduct crisis simulation tests External benchmarking of supply chain breakdown and lessons learned Joint planning with channel partners Internal benchmarking of supply chain breakdowns Supply Chain Resiliency Collaborate with local governments and competitor firms on contingency planning Quick Facts Lean Production/Manufacturing Lean production is simply about getting more from less. The aim of lean production is to reduce the quantity of resources used in providing goods and services for consumers. At the same time, it is about making the organization more efficient. Lean production involves eliminating waste and therefore using less labor, materials, space and time. This in turn reduces costs. Overview Lean production is based on a number of efficiency concepts, such as: Continuous improvement – a culture whereby all employees are constantly involved in making improvements to quality Emerging Technologies Many manufacturers are poised for growth in 2012 and beyond, having invested in improving cross-channel digital experiences for their customers. Recent data reveals that as manufacturers look toward 2012 initiatives, mobile Websites and apps, social presence, and even transactional capabilities will be key initiatives. Looking ahead, the manufacturer customer experience will be guided by the same principles as the business to consumer (B2C) experience—with relevance, customization, and personalization at the core.

Although there have been growing investments in technologies such as Web Analytics, E-Mail Marketing, Product Information Management (PIM) solutions in the past decade, next wave of investment might be focused towards Mobile Apps, Social Presence and Transactional B2B and B2C capabilities. Overview Backshoring "Outsourcing", a trend that began in 1990s, moved manufacturing to developing nations with lower labor costs, making up for the lost time and extra expense of shipping raw materials to and product from these countries to US and European consumers. A recent trend that has emerged by the end of the past decade has the been of "Backshoring" or "Onsourcing", which means bringing manufacturing back from the developing countries.

Recently, a few companies have announced they would move manufacturing operations and jobs back to the US. For example, NCR is moving the manufacturing of ATMs from a plant in Brazil to Columbus, GA so that its designers and engineers in its nearby innovation center can more easily monitor operations and perform proper QA/QC. Overview Time based management – an approach that aims to reduce the time wasted in business operations. This usually requires a multi-skilled and flexible workforce. Just-in-time production – materials are received just as they are needed, eliminating the need to maintain large stock levels Core Values Simplicity Consistency Responsibility Why invest in Lean Production? According to research conducted by the Lean Enterprise Research Center (LERC), fully 60% of production activities in a typical manufacturing operation are waste – they add no value at all for the customer.
Lean manufacturing enable you to deliver higher quality products at significantly lower costs. Now that is something to get excited about! Technologies of Future MobileWebsite/Applications Leveraging Product Content & Data Across Channels Conversion Rate Search Engine Optimization Developing More Robust Product Information Content/Offer Targeting Multichannel Integration Robust Self-Service Average Order Value/Basket Sizing Some Key Technologies Robotics: In the past, large American food product companies like General Mills and Kraft Foods, as well as the automotive industry, have been the biggest user of complex robotic systems. But, today’s robots are smaller and cheaper they are really specialized electromechanical devices run by software and remote control designed to perform specific tasks in the manufacturing of products for a variety of industries. These robots, cost-effective for lower production volume than those used in the food and automotive industry, are enabling more companies to utilize this technology.

Nanotechnology: We are just beginning to see advances in nanotechnology that will affect manufacturing in the next decade.Today, engineers and scientists are developing new types of materials, such as carbon nanotubes, ceramic-matrix nanocomposites, and new carbon fibers. These new materials are stronger, lighter, more energy-efficient, and more durable than current materials in use. Economic Argument for Backshoring Above graphic compares the Total Cost of Ownership (TCO) of manufacturing a stainless steel gear sourced in China to one sourced in US. Although the direct product cost in China ($1.75) is lower than that in US ($1.89), addition of non-price TCO such as packaging, freight, etc. makes manufacturing in U.S more favorable. TCO analyzes the entire cost a company incurs when purchasing and using a particular manufactured part. According to a study conducted by IPC, Electronics manufacturing operations with a total value of at least $2.5 billion are expected to be brought to North America in the next three years. Quick Facts Original equipment manufacturers (OEMs) and Electronics Manufacturing Services (EMS) have largely been responsible for operations returned to North America from overseas since 2009, accounting for more than 90 percent of the value and number of jobs brought back. Companies cite quality control as the primary reason for bringing operations back to North America from overseas. However, being closer to customers is also one of the driving force for companies establishing new operations in North America. Backshoring Overview There are a number of threats to the supply chain today - natural disasters, accidents, international disruptions, all compound the impact of long, global supply chains, ever-shrinking product lifecycles, and volatile and unpredictable markets.

Supply chain resiliency involves identification, assessment, and prioritization of risks followed by coordinated and economical application of resources to minimize, monitor, and control the probability and/or impact of unfortunate events or to maximize the realization of opportunities. Key Drivers - Sustainability Initiatives Sustainability Why Sustainability?
In The Words of Nike Overview Sourcing of materials that takes into account social and environmental responsibility to minimize resource depletion. Following are results of an online survey of 344 C-level executives conducted by UPS.

Key challenges to supply chain in low-cost countries: "As we work to maximize the positive impact of our influence, we also seek to help the contract factories and others in our value chain understand and take seriously their own impacts. We collaborate to address the issues central to our industry, issues that matter to Nike: worker rights and protections, living conditions for workers, wages and the environmental impacts of manufacturing processes. This approach has created clear baseline standards, improved oversight and helped some factories to move beyond compliance, especially in environmental performance and worker safety." Best Practices in Strategic Sourcing Strategic Relationships Perform spend analysis to identify key spend items Quick Facts Overview Developing and managing strategic relationship and partnerships with key suppliers with an aim to improve operations and processes, share best practices and drive down costs Manage effective dialogue and communication at all organization levels Develop joint processes for product design, development, requisitioning, invoicing and delivery Develop common purpose with strategic suppliers and agree on objective performance measures Analyze supplier base and determine the mix of strategic, preferred and commodity suppliers Strategic Partnership Technology Investments A partner program, is a business strategy that vendors use to encourage channel partners to sell the vendor's product and associated services. A channel partner is a person or organization that provides services or sells products on behalf of a software or hardware vendor. Value-added resellers (VARs), managed service provider (MSPss), consultants, systems integrators (SIs), original equipment manufacturers (OEMs) and distributors may all be called channel partners. Many companies, including CA, Microsoft, AMD, IBM, SAP and Oracle, have formed channel partnership programs to work more closely with the distributors for their products.

Channel partnerships provide an opportunity for companies to promote certain products or services. In return, channel partners receive access to product and marketing training, discounts, technical support, lead generation tools and beta versions of releases. Overview Case Study - Symantec Symantec provides its Partners with superior value, market differentiation and sustainable revenue opportunities through several programs that reward partners for their total contributions. This enables partners to drive revenue and increase customer satisfaction, with minimal investment. Be rewarded for what you do. Best Practices for a Successful Partner Program Define success metrics with partners, how the relationship will evolve over time, how collaboration and competition will be managed Do not follow a standardized approach for all partners Do not enter a partnership without an astute understanding of the underlying economics and key business drivers of their partners Do not out-source core business functions to your partners Overview Customer service, company growth and return on investment (ROI) are among the primary reasons for investment in distribution technology. The emerging technologies for distributors include Business Intelligence
Pricing Analytics & Tools Mobile Technology Cost savings, improved efficiencies and accuracy/speed are the most important operational factors driving automation investments
Technologies that manufacturing and warehousing professionals believe will make a difference in their facilities include RFID, voice picking, automated storage, robotics and software.
Warehousing/distribution respondents indicate that order accuracy is the most important performance indicator in evaluating their facility’s performance, followed by on-time delivery and order fill rates.
Manufacturing respondents indicate that on-time delivers, order accuracy and throughput are the top three performance indicators.
Seventy-four percent (74%) of respondents indicate they are planning or considering an automation project
The most important factors impacting their operations over the next 12 months are customer demand levels (79%), customer requirements and mandates (70%), operational excellence goals (66%), internal cost constraints (63%) and new product requirements (46%).
Quick Facts Source: Material Handling Industry of America Report from October, 2012
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