Global Trends in Supply Chain
Achieving High-Performance through effective
Global Operations
Jaume Ferrer
Managing Partner SC Practice Europe
SCM is facing old and new
challenges!
Rising competition at home and in new markets
Increased customer and
Innovation
product complexity
and Time-to-Market
Agility in response
to changing market needs
Continuous improvement
Serving Emerging Markets
is not enough
Rising costs of Raw Materials
Could I please ask the audience if
anyone knows these brands?
Agenda
Introduction
Trends & challenges in Global Operations, Accenture Survey 2005
Key Strategic Enablers of High Performance in SCM
Examples of effective Global Operations models
Key success factors in Low-Cost Country Sourcing &
Manufacturing
Case examples
Conclusions
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Sales & Supply base
outside mature markets will be over 40%
in 3 years in most cases
Source: Accenture Global Operations Survey, 2005
Most important new
emerging markets
Source: Accenture Global Operations Survey, 2005
Key Strategic Enablers
Companies are rethinking their Supply Chains to achieve trade-offs between
efficiency and adequate market response through a combination of global/regional
consolidation "upstream" and market & customer-focused strategies "downstream
Upstream Leverage &
Harnessing of Efficiencies
Supplier
Transport
Plant
Downstream Flexibility
and Adaptability
Central
Warehouse
Transport
DC
Customers
Innovation & Time-to-Market
Effectiveness
Key Strategic Enablers
There are a number of key strategic enablers within each objective
Upstream Leverage
& Harnessing of
Efficiencies
Global sourcing (including Low-Cost countries)
Supplier collaboration (e.g. design to cost, CPFR)
Global/Regional manufacturing consolidation (including LCC
manufacture and outsourcing)
Fulfilment partnerships (cross BUs/with other companies)
Global/Regional sales & operations planning.
Global/Regional vs. Local Supply Chains
There has been increased adoption of Central SC Planning Hubs
Regional SCP Hubs
Company 1
Implemented regional
SCP with DP in
countries by BU
Company 5
Implemented regional
SCP with DP in
countries (in one
Crossi-BU Hub)
Company 6
Implemented Regional
SCP for long term
timeframe and kept short
term SCP in countries
Operating Principles;
Improved service (through inventory and
capacity allocation rules based on genuine
market priorities)
Improved asset utilization through adequate
capacity planning (plant, DC and transport)
Improved total cost of Ownership through
adequate balancing of trade-offs between costtypes and product availability (cost of stockout)
Enablers to other Benefits;
Enable procurement savings via consolidated
requirements planning visibility
Foundation for manufacturing and distribution
network consolidation.
Key Strategic Enablers
There are a number of key strategic enablers within each objective
Upstream Leverage
& Harnessing of
Efficiencies
Downstream
Flexibility and
Adaptability
Customer collaboration (e.g. demand signal, planning &
replenishment, VMI)
Supplier collaboration (e.g. planning & replenishment, new
product design)
Market/channel specific SC configuration (e.g. food service,
convenience).
Emerging market manufacturing and distribution alliances.
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Key Strategic Enablers
There are a number of Key Strategic Enablers within each objective
Upstream Leverage
& Harnessing of
Efficiencies
Collaborative product design and introduction to market
Downstream
Flexibility and
Adaptability
New product S&OP (commercialization and industrialization)
Product complexity management
Local Market-sensitive product development.
Innovation &
Time-to-Market
Effectiveness
11
Biggest challenges
in global operations
Source: Accenture Global Operations Survey, 2005
12
Required capabilities for global
operations
Global /Regional Integrated Sales and
Operations Planning
Sourcing and Distribution Network to
deliver quality, at target cost and leadtime (por each product)
Customer and Supplier SC
Collaboration agenda
Global Logistics partnerships
Supplier recruitment, certification and
alignment (metrics, process, IT)
Emerging market sourcing and
distribution strategy
13
Which Operations Model to Adopt?
14
Product characteristics call for specific
Operations Strategy Models (often within
the same industry)
Operations Strategy
Industry (examples)
Networks (Global Scale Dense
Scale)
Utilities, Refinery, Metals, Chemicals,
Telecoms, High turn consumer goods,
Renewable Energy, Financial Entities,
Hotels chains,
Low-cost country sourcing
Textile, Auto/Electronics assembly,
Furniture,
Rapid customer response (Short life
cycle)
Fashion, Consumer electronics, food,
convenience, hotels.
Know-How Clusters
Biotech, Systems Engineering,
Custom-made Industrial Equipment,
Jewelry, Fashion
Supplier Clusters (capacity based)
Industrial equipment, Aeronautical,
Auto-supplier, Automotive, Ship
building manufacturers
Risk Hedging
Supply Constrained materials:
Electronic Equipment, Food,..
Some significant companies
15
European industry has a portfolio of alternative
choices. Off-shoring is an option in some activities
and industries as part of a wider operations foot-print
OFF-SHORING
ON-SHORE
1
Networks (Global Dense Scale)
2
Low-Cost Country
Sourcing
3
VE
I
AT
R
ST
U
L
IL
Rapid Customer Response
Know-How Clusters
Supplier Clusters
6
Risk Hedging
16
Balancing cost &
service is a key issue
Satisfaction with results achieved through low-cost
country sourcing program
(share of respondents in percent, neutral positions not shown)
86%
1%
Total cost
40%
33%
9%
14%
Quality
Source: Accenture Procurement Survey
Delivery
reliability
16%
14%
Satisfaction
Dissatisfaction
42%
48%
Lead times
Product
innovation
17
In any case Low-Cost Sourcing and Manufacturing requires an
integrated approach going beyond procurement and into
supplier development and integrated logistics
Category Assessment
- Review of total spend profile
- Country Profiling
- Total Cost of Ownership model
Risk Assessment
- Country risk assessment
- Industry risk assessment
- Supplier risk assessment
what to source where?
What countries to bet on?
Local Procurement Office
- Organization design
- Staffing, Recruiting, Training
- Integration to global organization
Eastern Asia
Eastern
Europe
Established Procurement office
Supplier Identification
- Supply Market Intelligence
- Supplier Search
- Qualification/On-site Audits
Short list of qualified suppliers
South and
Central Asia
Supplier Development
- Assessment of capability gaps
- Quality, 6 Sigma, Lean program
- Workshops & Training
Africa and
Middle East
Middle- and South
America
Sourcing
- Differentiated Bid Strategies
- Fact based Negotiation
- Contracting
Capable Suppliers
Selected supplier/s
Fulfillment
- Optimized Logistical Solution
- Inventory locations
- Freight sourcing
Low Cost Countries
Products delivered to own factories
Supplier Integration
- Production process qualification
- Quality & Delivery assured
- Order-to-Delivery process defined
Supplier integrated in Supply Chain
18
Lessons learned when setting up an
International Procurement Office (IPO) in
low cost markets
Focus on components with high
manual labor input and low or little raw
material dependence
What to buy?
Locate close to your
suppliers and
consider regional
capitals outside main
metropolis
Where to
locate the
IPO?
Where to buy?
Success factors to
Set-Up an IPO in Low
Cost Markets
Who to hire?
Your people and operations need to be
on par (or even better) with the people
and operations in your customers
countries
Focus on high
potential private
enterprises but need
to develop them to
achieve maximum
gains
How to market?
Build awareness and credibility,
implement solid end-to-end Source to
Delivery Process and IT
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Example:
Zara
Product development cycle time is 3-4
weeks (industry average 9 months)
NPI to stores every 2-3 weeks
> 14.000 SKUs per year launched
Two different operations models
Short life cycle fashions = On-Shore
Quick Response Design-to-Supply Model
Basic products = Off- or Near-Shore low
cost suppliers
20
Example: European Construction
Equipment Manufacturer
Challenges
Lack of supplier capacity
Difficult procurement situation in
the global steel market
Rising raw material prices and
COGS (Cost of Goods Sold)
Results
30% total savings (on landed
purchasing price)
50% potential savings on
Castings
30% potential savings on
Forgings
40% potential savings on
Non-Metallic Components
Development of Operating
Model for sourcing from LCC
suppliers
21
Example:
Nokia
World #1, 14% ROA
Frequent product introductions
Global supply chain with high flexibility
and efficiency
Global supply web
Rapid response manufacturing
Regional set-up
Quick ship logistics
22
Global operations case example:
Manufacturing company
Changing industrial structure to improve efficiency and
reduce cost while keeping full control over core operations
SPECIFIC CASE (SIMPLIFIED)
Near-shore
(low cost)
R&D (non core)
Purchasing
Body
Frame
Centralization LCCM LC CoE
Geography
LCCS
Body
Frame
SCM
On-shore
(high cost)
Parts production
(poor inhouse
Onshore due to LT methods)
and transport cost
Chassis
Core R&D Manufacturing
In house
Outsourced
Relative cost level
Low
High
Organisation
Strategic importance
Low
High
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Organizational structures are not
always aligned with market needs
Geography Organization
Country
19%
Multi-country
13%
Regional
19%
Multi
Regional
36%
Global
16%
Actual
Source: Internal
+5 years
24
Operating Models will need to
adapt to market focus
Challenge: Evolving Operating Models to reflect scope of business
3%
Country
19%
Multi-Country
13%
Regional
19%
Multi-regional
36%
10%
16%
23%
45%
Global
16%
Actual
Source: Accenture Analysis
In 5 years
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High Performance opportunities for
our economies in Europe
Drivers for manufacturing
in Europe
Customer intimacy
Lead time to customer
R&D cooperation
Off shore
production
Supply chain complexity
Production
in Europe
Automation
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Conclusions
Right Operations Model is Required before off-shoring is decided
(Selective) Off-shoring is clearly an opportunity
Meeting market growth and operations challenges require a
holistic end-to-end strategy
European potential Play to strengths in R&D, CustomerProximity, Product Complexity
A global operations model requires new capabilities
Internal and external collaboration needs are enhanced by Global
Operations
Industry-specific R&D and manufacturing partnerships with joint
agendas between private & public sector
Mental & Cultural Shift!
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Questions or Comments
Thank you
very much!
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