Melnyk SCC Madrid Presentation Rev3.pdf - Supply Chain Council

Making Supply Chain ManagementTruly Strategic:A Blueprint for ActionMadrid, Spain21-23 October 2012© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 1 | 31 October 2012

PresenterSteven A. Melnyk, Ph.D.Professor of Operations & Supply ChainManagementThe Eli Broad College of BusinessMichigan State Universitymelnyk@msu.edu© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 2 | 31 October 2012

Outcome• The upcoming Sea Change now taking place• 5 steps for making supply chains strategic• Questions© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 3 | 31 October 2012

REMEMBER!• Today’s supply chain is a result of actions takenin the past• Tomorrow supply chain will be the result ofactions that we take today© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 4 | 31 October 2012

Comparing Supply Chains• Today’s supply chain› Strategically-Decoupled, Price-Driven› Focused- Driven by the supply chain disruptions/risk, leadership within thesupply chain, managing the timely delivery of goods and services.› Measured by three critical indicators- Price- Delivery- Quality› Not linked to strategic objectives© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 5 | 31 October 2012

Tomorrow’s Supply Chain• Strategically-Coupled, Value-Driven• Global• Highly adaptive• More complex performance measurement› Cost savings› Cost avoidance› Asset utilization/Relationships› Revenue growth• Strategic in nature› A corporate capability and asset› A necessity and an opportunity.© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 6 | 31 October 2012

TODAY’S REALITYWhat do peoplereally think of supplychain management?© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 7 | 31 October 2012

How do others View SCM?• Boeing 787 delayed again› Suppliers blamed• How the Supply Chain stoleChristmas› Mattel orders massiverecall due to supplierproblems (Nov. 2007)• Japan, tsunamis and the IPad› NBR March 24, 2011© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 8 | 31 October 2012

Cloak of Invisibility?• How can you convince topmanagement of the value ofSCM?• You only hear about supplychains when something goeswrong!• The only good supply chain isthe one that you never hearabout!© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 9 | 31 October 2012

MAKING SUPPLY CHAINSTRULY STRATEGIC© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 10 | 31 October 2012

Making the TransitionBusiness Models Rule!Outcomes not OutputsAvoid single outcome solutionsManage the MetricsBuild Linkages to the Top© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 11 | 31 October 2012


Which would you pick?In terms of innovation, what has the biggest impact onaverage year sales increase and average impact onstock price?* Innovative Product* Innovative Process* Innovative Customer Experience* Innovative Business Model© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 13 | 31 October 2012

Which is best?Innovation TypeAver. Stock Return2004-2007Aver. Revenue Growth2004-2007Process 1.4% 1.6%Product 3.1% 2.1%Customer Experience 2.5% 5.1%Business Model 16.6% 7.2%© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 14 | 31 October 2012

The Business ModelValue© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 15 | 31 October 2012

Importance of the Critical Customer• Pepsi versus Coca Cola• Pepsi focus:› Distributors› Retailers• Coca Cola focus› End consumer© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 16 | 31 October 2012

Coca Cola’s Response© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 17 | 31 October 2012

Coca-Cola Freestyle in Action© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 18 | 31 October 2012

Tesco Rethinks Shopping in South Korea© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 19 | 31 October 2012

Supply Chain’s ContributionCustomer needsnot metCustomer needspoorly metBetter, faster,cheaperBestBetterGood© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 20 | 31 October 2012

Changing Realities• 1990s› Company against company• 2000› Supply chain against supply chain• 2012› Business model against business model© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 21 | 31 October 2012

SUPPLY CHAINS ARE STRATEGIC … ONLYIF USED WITH A BUSINESS MODEL© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 22 | 31 October 2012


The USCG and Haiti© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 24 | 31 October 2012

Interesting InsightThere is a fundamental difference between OUTPUT DRIVENSUPPLY CHAINS and OUTCOME-DRIVEN SUPPLY CHAINS.Output driven specifies both:- Desired outcome- Method of achieving the outcomeOutcome-driven specifies only the outcome- Allow more freedom for the supply chain© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 25 | 31 October 2012

Outcome-driven supply chainSix Major Outcomes:› Cost› Responsiveness› Security› Sustainability› Resiliency› Innovation© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 26 | 31 October 2012


The Single Outcome Solution• Focus on one outcome!• Be the best on it!• Attractive because it issimple and direct!• YET High Risk© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 28 | 31 October 2012

We Need to Blend Outcomes• Mix outcomes to create attractive outcomes for criticalcustomers• Some outcomes don’t mix:−Lean/Cost and Innovation• Must prioritize outcomes!© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 29 | 31 October 2012

Prioritization – Key to Blending• 1 – 2 – 31 outcome strategically critical2 outcomes strategically important3 outcomes strategically necessary© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 30 | 31 October 2012

What Are We Doing?• Differentiation• Using strategic adjectives!• Creating rich strategicsolutions© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 31 | 31 October 2012

What Are You Selling?• A component • A solution© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 32 | 31 October 2012

Other Issues• Supply chains will become more complex• Who manages the complexity?−Airlines vs. medical supply chains© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 33 | 31 October 2012


Metrics & Measures• Metrics – consist of:−−−MeasureStandardConsequence• Metrics – purpose is to:−−−CommunicateControlCoordinate© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 36 | 31 October 2012

Why Focus On Metrics?• If you want to influence thegame, make sure that youdetermine how score is kept!• How to communicate with topmanagement!© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 37 | 31 October 2012

Going from Outcomes to MetricsOutcomesAttributesMetrics• Measures/Standards/Consequences© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 38 | 31 October 2012


Closing the Loop• Audit the current capabilities−To what extent is the current system able to supportcorporate strategy and meet/exceed the criticalcustomer’s outcomes?• Staff with strategic supply chain managers• Provide a compelling argument that is valuebased,not error-driven• Recognize the importance of culture!!!© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 40 | 31 October 2012

the Supply Chain Talent AcademicInitiative (SCTAI)The Supply Chain Talent Academic Initiative (SCTAI) is aninternational not for profit consortium of industry, academia,and professional associations with a mission to increase thedepth and breadth of the global supply chain talent pool by:1. Identifying industry competency requirements.2. Assisting universities and other educationalinstitutions in building programs to meet thoserequirements.3. Marketing the supply chain profession as a career ofchoice.© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 41 | 31 October 2012

Strategic SCM in Action – A Story• A drug manufacturer located insouth-eastern USA• Past – cost-driven contractmanufacturer• New reality – major customershave outsourced manufacturing• Complaints increasing• Why?© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 42 | 31 October 2012

Analysis• Current system:• Cost focused• Many measures -- cost• Build capacity only whennecessary and after demandhas emerged.• Expediting the norm (even if itcompromises quality/security)•Strategic Analysis•Critical outcome−Security•Important outcomes−−ResilienceResponsiveness•Yet, only one metric on security(FDA required)!•Customer is not price-sensitive.© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 43 | 31 October 2012

Next Stage – SCM:BTH• Now launching the next stage› Supply Chain Management: Beyond the Horizon• Four mega themes identified.› Emergence of new Supply Chain perspectives- Humanitarian/disaster, military, event› Managing supply chain dynamics› Resource Development- Talent, suppliers, customers› Application of new tools and procedures© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 44 | 31 October 2012


Concluding Comments• Supply chains are becoming strategic• Supply chains are built around outcomes• Supply chains are becoming more complex Blended outcomes• Must address the critical challenges Right Metrics Right Capabilities Right Culture© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 46 | 31 October 2012

© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 47 | 31 October 2012It’s not that hard, dude!

Questions© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | < filename > | Slide 48 | 31 October 2012

Melnyk SCC Madrid Presentation Rev3.pdf - Supply Chain Council

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