2017 Research in Review - report - 19 DEC

2017 Research in Review
A Closer Look at Supply Chain Excellence
12/19/2017
By Lora Cecere
Founder and CEO
Supply Chain Insights LLC

Contents
Research Methodology
Disclosure
Open Content Research
Executive Overview
The Race for Supply Chain 2030
Revenue Management
Supply Chain Finance
State of Supply Chain Talent
Recommendations
Summary
Primary Research: Reports Used to Compile This Report
About Supply Chain Insights LLC
About Lora Cecere
Endnotes
3
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4
6
7
10
16
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Research Methodology
The team at Supply Chain Insights is committed to delivering thought-leading content for the supply
chain leader. Our goal is to be the first place that visionaries turn to gain unique insights to drive
supply chain excellence.
This report is a compilation of quantitative research published by Supply Chain Insights during the
period of January through December 2017.
Disclosure
Your trust is important to us. In our business, we are open and transparent about our financial
relationships. In this research process, we never share the names of respondents and/or give
attribution to open comments collected in the research.
Our philosophy is “You give to us, and we give to you.” We collect data from a private network of
qualified participants and openly share the results. The participants of our research always receive
the final reports; and, if interested, we share insights from the studies with the respondents of our
quantitative surveys and qualitative interviews in a complimentary one-hour phone call with supply
chain teams.
This report is written and shared using the principles of Open Content research. It is intended for you
to read and share freely with your colleagues and through social channels like LinkedIn, Facebook
and Twitter. When you use the report all we ask for in return is attribution. We publish under the
Creative Commons License Attribution-Noncommercial-Share Alike 3.0 United States and our citation
policy is outlined on the Supply Chain Insights Website.
Open Content Research
This report is shared using the principles of Open Content research. It is intended for you to read,
share, and use to improve your supply chain decisions. Please share this data freely within your
company and across your industry. All we ask for in return is attribution when you use the materials in
this report. We publish under the Creative Commons License Attribution-Noncommercial-Share Alike
3.0 United States, and you will find our citation policy here.

Executive Overview
In boardrooms today, terms like digital and digitization are bandied about like popcorn hopping from a
kettle from a street vendor on a hot summer day. As the words fill the air, they lack clarity. They are
not actionable. One is the reasons is there is no common industry definition.
In this report, we define the digital supply chain as one that redefines the atoms and electrons of
today’s supply chain processes. Digitization is not digitalization. Although both can improve
automation, they are not the same. What is the difference? When we digitize a process, we translate
a physical state into a digital signal. This can be used to improve automation but is not necessarily
digital. In contrast, digitalization takes this signal into a process as an input and translates it and
perhaps a myriad of other inputs through process logic into a digital output. This takes many forms.
The list of how the signals can be used in supply chain processes are endless. In this report, we
contrast the functional focus of today’s traditional supply chain leaders with what is possible with a
digital supply chain vision.
The digital supply chain starts with the confluence of technologies outlined in Figure 1.
Figure 1. Confluence of Technologies Driving Supply Chain Process Advancement

The digital supply chain makes much of traditional supply chain thinking obsolete. This is very
uncomfortable for supply chain teams. Here we start with the vision of Supply Chain 2030, then share
the current state of functional processes while wrapping up with some recommendations on how to
shift from a functional, traditional focus to design Next-Generation processes.
Figure 2. Shift in Supply Chain Processes

The Race for Supply Chain 2030
Supply Chain 2030 lies before us. It is less than fifteen years ahead. Technology innovation abounds
driving digital innovation. Autonomous vehicles, blockchain, machine learning, the Internet of Things
(IoT), the collaborative economy, and robotics are some of the drivers.
While investments today are focused on improvements using data visualization, mobility, and demand
sensing, the shift is to a more automated supply chain fueled by insights from real-time data and
cognitive computing. This transformation will change the fundamentals of supply chain processes as
we know them today. As a result, we must learn from the past, to unlearn, to relearn. The challenge
for all is unlearning.
Digital manufacturing will combine wearables, robotics, and the Internet of Things to reduce labor and
make manufacturing teams more productive. Maintenance will be based on sensing and streaming
data of potential equipment failure, as opposed to maintenance based on mean-time failure,
production planning will be based on actual line speeds, and production schedules based on data-
driven planning. Additive manufacturing will redefine service parts and the sourcing of many of them.
Figure 3. Top Trends Today versus Excitement for Supply Chain 2030

Logistics will be more automated through the combination of drones, autonomous vehicles, GPS,
telematics, and blockchain. Visibility will be redefined through streaming data and prescriptive
analytics.
Convention is a barrier. The opportunity is using the new confluence of technologies and redefining
supply chain processes. In the next sections, we define the current state of functional processes that
becomes the barrier for the supply chain leader.
Revenue Management
With a decade of improving functional excellence, within a company there is tension. It is caused by
the lack of alignment. Due to strong functional thinking, organizationally, the company cannot align to
execute on go-to-market tactics like price, trade promotion, and new product launch. Forecasting and
synchronization of trade activities are issues. As shown in Figure 4, within this study, the respondents
report a gap in go-to-market tactic alignment between the commercial teams of sales/marketing and
operations, between the information technology team and marketing/finance teams, and between the
customer service and marketing/operations. There is relatively greater alignment of sales/marketing
with finance and customer service/sales.
Figure 4. Team Alignment on Go-To-Market Tactics

The gaps between an enterprise-centric and a market-centric approach (the difference between an
inside-out and an outside-in focus) cannot be closed through the use of decision support for revenue
management within sales, marketing or finance. Instead, it needs to be outside-in across the
functions of sales, marketing, finance and supply chain management. This new layer of decision
support is possible through new forms of analytics.
Revenue management is the management of a group
of tactics including price, sales tactics, trade
promotion and demand-shaping activities. Despite a
slide in margins in consumer-facing manufacturing, in
business users believe their processes for revenue
management are effective (62%). The gap between
the users’ and technologists’/consultants’ views are
large. Only 23% of technologists/consultants believe the processes for revenue management at a
typical consumer products company are effective. Consumer manufacturers lag those of high-tech. In
high-tech industries, there is more discipline on revenue management and the measuring the
effectiveness of trade tactics.
Figure 5. Comparison of Business User and Technologist/Consultant Views of Revenue Management Effectiveness

The tactics to stimulate volume and improve spend effectiveness are varied, ranging from new
product launch, price management, paying retail slotting/shelving allowance, and special programs.
The largest gap is forecasting. This is due to the siloed approach to demand management. The sales
account team has a forecasting technology/process which is not coupled with the enterprise systems.
With the average manufacturing company having over 25 sales account teams, there are many
disconnected and ineffective forecasting processes. This is one of the many issues that drives the
lack of alignment between the sales teams and back office operations.
As these processes become outside-in with a greater focus on channel data, the organization will
encounter the barriers are shown in Figure 6.
Figure 6. Tactic Analysis: Usage Versus Effectiveness

Supply Chain Finance
For the supply chain leader, managing costs is job one. It is easier said than done. The supply chain
is a complex system with interrelationships between growth, inventory, cost, and complexity. Cross-
functional processes, organizational focus, and access to data are critical to align and maintain cost-
effectiveness in this complex system called supply chain. We term this model the Supply Chain
Effective Frontier. This is shown in Figure 7. When companies operate on the Supply Chain Effective
Frontier, they maximize the value of the firmi. We measure value by either Price to Tangible Book
Value or Market Capitalization.
Figure 7. Supply Chain Effective Frontier
Managing costs is a struggle for most companies. While companies have implemented Enterprise
Resource Planning (ERP), the hard work of process evolution and maturity continues. While 88% of
companies have an ERP system, only 29% can measure total cost. The implementation of ERP does
not automatically improve the ability to get to cost data and improve decisions. It needs to be part of
the design.
Cost management is closely coupled with process excellence. While we can argue about the road
from cost to value, no one will debate that managing cost is fundamental 'blocking and tackling' for
the supply chain team.

Figure 8. Current State: Use of ERP to Manage Supply Chain Costs
Figure 9. Characteristics of the Group Surveyed to Understand Supply Chain Finance

As seen in Figure 9, while 88% of respondents implemented ERP, there is process focus on Sales
and Operations Planning (S&OP), Cost-to-Serve, Supply Chain Finance, Supply Chain Centers of
Excellence, and Supplier Development. Why is effectiveness in managing costs, and getting to cost
data, so difficult? It is because most implementations focus on improving the visibility of functional
costs, not total costs.
Making a difference in process excellence comes down to leadership and grit. The road to supply
chain excellence is not easy or well-understood. As shown in Figure 10, while many companies have
multiple processes to improve supply chain finance—S&OP, Cost-to-Serve, Supplier Development
and a Center of Excellence—self-reported process effectiveness is the same probability as the flip of
a coin.
Figure 10. Analysis of Process Effectiveness
When we initiated the study, we believed companies with stronger cross-functional processes and
supply chain finance/centers of excellence would do better in managing costs. Our take? The
management of costs in the supply chain is evolving, and while these cross-functional processes offer
promise, driving improvement is a struggle for most teams. In our qualitative interviews for the Supply
Chains to Admire we see that when companies tackle these cross-functional processes as a set of
interlocking horizontal processes, there is a higher level of satisfaction and improvement in the
Supply Chain Metrics That Matterii.

Figure 11. Analysis of Process Effectiveness
A large part of the battle in managing costs lies in managing the supply chain in the face of market
volatility. The supply chain team is constantly battling ups and downs in the cost of raw materials, oil,
and labor while combating the rising cost of complexity.
In this effort, not all industries face equal challenges. Note in Figure 12 the volatility of cost of
materials/goods of different industry sectors within the consumer value chain. What can we learn?
The observation is that within each of the value chains the industry sub-groups are very different. It is
a mistake to generalize the Supply Chain Metrics That Matter across industries. The second
observation is despite the focus on continuous improvement programs, the important metric of Cost
of Goods Sold is not declining.
This supply chain segment is heavily impacted by oil and other commodity price volatility. To buffer
the impacts, companies need to consider shifts in process design to include alternate sourcing,
network design, the orchestration of changes/material usage in bills of materials, rationalization of
platforms/items, and improvements in productivity. Unfortunately, for most companies, process
maturity and the lack of access to data makes it hard to get to cost data to make these decisions at
the cadence of market shifts.

Figure 12. Increase in Material Volatility

Supply chain disruptions also play havoc in managing supply chain costs. As shown in Figure 13, the
average company struggled with five supply chain disruptions in 2016. On average, 38% of these
disruptions were sufficiently severe to impact financial reporting. For the supply chain team, there is
an increasing need to assess risk and mitigate the impacts through continuous design.
Figure 13. Supply Chain Disruptions
So, while investments in technology and process improvement focused on improving cost
management, there is much more work to do. The focus on functional costs and inside-out processes
is a barrier. Most companies are not able to make decisions on a total cost basis while orchestrating
channel price and revenue strategies with market volatility.

State of Supply Chain Talent
The turnover to the fourth decade of supply chain pioneers is nearing completion. While 70% of
supply chain employees are satisfied with the career, diversity remains an issue. In the past five
years, as a significant Baby Boomer supply chain workforce retired, the supply chain workforce baton
was passed to Generation X.
The term supply chain management was first used by Keith Oliver of Booz Allen, in the Financial
Times, to reference source, make and deliver together in 1982iii. In the 1980s we saw the first
evolution of supply chain teams. These teams were largely Baby Boomers. They were dominantly
Caucasian males. (The first decade of supply chain pioneers was 1980-1990. The second generation
was 1991-2000. The third was 2001-2010, and the fourth is 2011 to present.) Today, four decades
later, the workforce is now primarily Generation X, but it is still primarily Caucasian and male.
Diversity remains an opportunity.
In general, satisfaction in supply chain management is high. In this study, Baby Boomers are more
satisfied with their jobs, and employees of software vendors, and those with work-at-home options,
register higher levels of satisfaction. These results are shown in Figure 14.
Figure 14. Differences in Respondent Satisfaction

There are some marked differences between the generations. In their careers, Baby Boomers expect
to work for more employers and are willing to work more hours a week, than Generation X or
Millennials. The focus for millennials is shown in Figure 15.
Figure 15. What Do Millennials Want?
The drivers of job satisfaction vary by generation. While Baby Boomers are more motivated by having
challenging work and believing in the company and its products/services, Generation X and
Millennials are more motivated by training, career path opportunities, and a work/life balance. When it
comes to what’s important to them, Millennials are more similar to Generation X than Baby Boomers.
As a result, the shifting ages of the supply chain workforce are challenging the more traditional
definitions (often held by Baby Boomer bosses) of supply chain teamwork definitions. In one-on-one
qualitative interviews, Baby Boomer bosses will often grumble that “These young kids want to work
fewer hours, have time to work from home, be coached/trained more than I was, and want career
certainty despite market uncertainty.” Based on the findings shown in Figure 15, this is a true
statement. While Generation X and Millennials want more work/life balance, fewer hours, and greater
time to work from home, this is not always possible.

The conclusion? Accept the facts and build the team to embrace cross-generational differences.
Supply chain management remains an exciting career path with significant job opportunities and
overall job satisfaction. Overall, employees feel they have challenging work, competitive and
acceptable salaries, and work/life balance. There is an opportunity to improve training, to build talent
and flexible work programs, and make employees feel more appreciated. Closing the gaps requires
the recognition of cross-generational talent needs and building teams that are inclusive.

Recommendations
As you read through this report, we hope it stimulates thought and drives action. Here are nine
recommendations to consider in building your strategy:
1. Ask the Right Questions. Think Beyond Existing Paradigms. A frequent mistake companies make
is to focus only on technology. Start with the goal and work backward. Define the digital strategy and
the path forward to Supply Chain 2030. Test and Learn.
2. Get Good at Managing Data. Data volumes are increasing, and cleanliness issues abound. Get good
at using new forms of analytics to clean and parse data. Use cognitive and prescriptive analytics to
redefine master data management.
3. Build Strong Horizontal Processes. Success in horizontal processes improves alignment and drives
agility. The greatest success happens when the company is good at supply chain planning and can
manage the horizontal processes holistically from the customer’s customer to the supplier’s supplier.
Don’t get caught in silos.
4. Rethink Old Problems and Apply New Solutions. New forms of analytics offer opportunities to solve
old problems. Think past the status quo and drive new levels of performance. Test new technologies
and don’t accept that the current state defines best practices.
5. Think Beyond Three- and Four-Letter Acronyms. While traditional data architectures center on
reporting on SCM and SCE architectures think beyond APS, CRM, ERP, SRM, TMS, and WMS
requirements in defining your strategy. Connect traditional architectures to workforce automation and
systems of insights by thinking holistically about data requirements and analytics.
6. Drive Innovation. Use techniques within the launch phases of innovation that embrace the world of
gray. Aggressively pursue process innovation that can drive success. Innovate at the edge and move it
to the core.
7. Customer-Centric Supply Chain Strategies. Build processes to stimulate customer-centric strategies,
outside-in, with a clear understanding of what the customer values.
Summary
Supply chain management is three decades old, but there is great room for improvement. Horizontal
process evolution, new forms of analytics, and customer-centric processes offer promise, but will only
be effective if we can throw off the shroud of traditional supply chain thinking. To make these steps,
we need to think past functional excellence to focus on a balanced scorecard and build supply chain
talent to drive next-generation processes.

Primary Research: Reports Used to Compile
This 2017 Research in Review Report
From February 2012 through December 2016, Supply Chain Insights has published over 125 reports.
Unlike other industry analyst groups, who keep their research behind a paywall, we share research
openly to help all global supply chain leaders. All of our research is updated regularly and archived on
the Supply Chain Insights website; is in our Beet Fusion community for social sharing, and is found
on SlideShare.
To gain a deeper comprehension of the quantitative research on the topics discussed in this
document, check out the full analyses contained in these reports:
Imagining the Future of Supply Chain Management
Conquering the Supply Chain Effective Frontier
Supply Chain Metrics That Matter: A Focus on Food & Beverage Companies 2017
Supply Chain Metrics That Matter: A Focus on Aerospace & Defense Companies 2017
Revenue Management: Rethinking the Digital Transformation
Supply Chain Metrics That Matter – A Focus on Auto Parts Companies
Supply Chain Metrics That Matter – A Focus on Automotive Companies 2017
Digital Procure-To-Pay
The Power of Downstream Data
Supply Chain Metrics That Matter – A Focus on Chemical Companies
Supply Chains to Admire – 2017
Driving Digital Supply Chain Transformation
Insights on Supply Chain Finance
Building the Network of Networks
Supply Chain Talent – Evolving Across Generations
Supply Chain Metrics That Matter: A Focus on the Retail Industry
Direct Materials: The Supply Chain’s Missing Link for Performance Improvement

About Supply Chain Insights LLC
Founded in February 2012 by Lora Cecere, Supply Chain Insights LLC is in its sixth year of operation.
The Company’s mission is to deliver independent, actionable, and objective advice for supply
chain leaders. If you need to know which practices and technologies make the biggest difference to
corporate performance, we want you to turn to us. We are a company dedicated to this research. Our
goal is to help leaders understand supply chain trends, evolving technologies, and which metrics
matter.
About Lora Cecere
Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights LLC and
the author of popular enterprise software blog Supply Chain Shaman currently read
by 15,000 supply chain professionals. She also writes as a Linkedin Influencer and
is a contributor for Forbes. She has written five books. The first book, Bricks Matter,
(co-authored with Charlie Chase) published in 2012. The second book, The
Shaman’s Journal 2014, published in September 2014; the third book, Supply
Chain Metrics That Matter, published in December 2014; the fourth book, The
Shaman’s Journal 2015, published in August 2015, the fifth book, The Shaman’s Journal 2016,
published in June 2016 and the sixth book, The Shaman’s Journal 2017, published in July 2017.
With over 14 years as a research analyst with AMR Research, Altimeter Group, and Gartner
Group and now as the Founder of Supply Chain Insights, Lora understands supply chain. She has
worked with over 600 companies on their supply chain strategy and is a frequent speaker on the
evolution of supply chain processes and technologies. Her research is designed for the early adopter
seeking first mover advantage.

Endnotes
i
Supply Chain Insights, Supply Chain Metrics That Matter Managing the Cast-to-Cash Cycle, http://supplychaininsights.com/supply-
chain-metrics-that-matter-the-cash-to-cash-cycle/ April 24, 2017
ii
Supply Chains to Admire, Supply Chain Insights, http://supplychaininsights.com/portfolio/2016-supply-chains-to-admire/, April 25,
2017
iii
Keith Oliver, Wikipedia, https://en.wikipedia.org/wiki/Keith_Oliver, March 19, 2017

2017 Research in Review - report - 19 DEC

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2017 Research in Review - report - 19 DEC