- Supply & Demand Chain Executive, 14 December 2012
Traditional Consumer Packaged Goods companies and retailers are developing cross-disciplinary technologies and capabilities to rethink their strategies across critical business segments.More
As rising commodity prices and other factors squeeze manufacturers, frugal re-engineering can cut costs and improve margins.More
Greater and more intense competition and global value chains are leading to substantial shifts in what is expected of the supply chain function. It is no longer enough to simply connect supply and demand at optimal cost and service levels. Today’s business leaders are demanding more from their supply chains, including competitive advantage.
Coupled with India's unique operational challenges, such expectations make the role of a supply chain professional extremely complex. Yet there are examples of organizations across industries that have managed to move beyond the constraints in India to develop supply chains that lead to competitive advantage. How do they do it? What are the challenges, and how do they get beyond them? How do they define supply chain success?
To answer these questions, the Council of Supply Chain Management Professionals (CSCMP) in India and A.T. Kearney embarked on a first-of-its-kind joint study. Based on A.T. Kearney’s experience helping organizations in India and one-on-one conversations with C-level executives and senior-level supply chain professionals in the country, this paper highlights seven supply chain best practices—or themes—that successful organizations across India are using to gain competitive advantage.
Collaborate to integrate the value chain virtually. Collaboration can be at three levels: across functions, across the value chain, and beyond the value chain. For collaboration to work, it must be led by the dominant player, based on a win-win partnership with shared goals, and focused on the long term with clear markers for success.
Replace one-size-fits-all with a tailored approach. Organizations in India are more diverse than ever. So taking a one-size-fits-all supply chain approach does nothing more than compromise segment-specific needs.
Plan more frequently and across multiple horizons. Supply chain managers must be able to see the big picture while also focusing on the details. The key to doing both is in frequent and multi-horizon planning sessions: weekly reviews for short-term planning, and regular reviews for long-term planning.
Implement pull replenishment across the value chain. To deal with pressure on costs and services, leading supply chain organizations implement pull replenishment strategies across their entire value chains from customers to vendors.
Actively manage complexity. The best supply chain strategies integrate complexity management in all planning processes to prune that which is non-value added and capitalize on that which is value added.
Let business needs drive technology and automation choices. Technology and automation are integral to overcoming challenges in India. Leaders employ technology and automation thoughtfully and tailor it to their business needs.
Reconfigure the supply chain organization to include business management capabilities. The shift in supply chain expectations calls for a fundamental rethinking of the capabilities required of the supply chain. Today's organizations need to have a suite of business management skills in addition to their supply chain skills.Close
- CPG matters, March 2013
Learn how to better evaluate and prioritize value chain improvement in corporate decision-making and unlock benefits that support both growth and cost reduction.
Shared services will play a major role in the next chapter of India's growth story.
India has become a global hub for shared services, serving many global companies in search of lower costs, more efficient processes, and business transformation. Indian companies, however, have not emphasized shared services, preferring to focus primarily on top-line growth. This is changing, however, as Indian companies see shared services as an important step in enabling growth and innovation and driving efficiency.
The classic scope of services delivered by shared services will need to change as organizations increasingly demand a shared services model, even for core activities. This trend will require new business models, stronger provider-user relationships, and transformational contracts.
There will be a number of challenges in achieving this transformation in the role of shared services in India. This will require a greater collaborative effort by customers, service providers, and the government.
Within this context, the Confederation of Indian Industry (CII) and A.T. Kearney worked together to provide a perspective on the current state of shared services in India. This paper highlights the benefits, identifies drivers for growth, and pinpoints the imperatives for key stakeholders, including shared services users, providers, and government. We hope this paper encourages a deeper discussion about the role that shared services can play in the next chapter of India's growth story.Close
As emerging economies seek to influence global standards, Europe's role as a shaper becomes a priority.
Standards are the rules, guidelines, and definitions that describe repeatable ways of doing things. Standards are a crucial element in the EU's industrial strategy as Europe seeks to remain a shaper of global standards rather than a follower.
The European Round Table of Industrialists worked with A.T. Kearney to study the issue of developing and implementing standards. We found six recommendations for establishing standards in European industry:
- Establish performance targets to foster innovation. Standards spread collective knowledge, bringing together industry players in a working environment of sharing and collaboration. The use of standardized parts and business processes can reduce early investment costs and risks, and provide a platform from which industries can innovate.
- Consult with experts. Involving technical and industrial experts, even when standards are initiated by governments, can help build standards on solid foundations.
- Coordinate industry players. European standardization bodies can play a larger role in facilitating standard-setting along the value chain and across industries.
- Balance speed and consensus. Standards must be put in place quickly in the face of accelerating technological change and market competition, and they must be built on a foundation of consensus to broadly address the requirements of all players.
- Encourage a global approach. European companies that adopt and participate in setting global standards increase their market access to other countries.
- Encourage SME participation. Despite their importance to the European economy, few small and medium-sized enterprises (SMEs) are actively involved in setting standards.
Supply chain performance is a measure of competitive advantage—both immediate and long term.
Today, CEOs and supply chain executives continue to ask important questions:
- How do we control mounting complexity?
- How can we balance size and efficiency with flexibility and responsiveness?
- Is it possible to plan for demand volatility?
- Which of the many companies in our supply chains should be our closest and most trusted partners?
Answering these questions requires taking a closer look at the pressures on today's supply chains, the different improvement measures available, and the reasons why companies often fail to take the appropriate measures.
Executives know they need to improve their supply chain performance and that simply cutting costs and improving service is no longer a viable option. Yet those who move beyond the basics to take the larger leap of seeking transformative change often fall short. There are several reasons why:
- After picking the low-hanging fruit, what's next?
- Benchmarking is analogous to goal setting.
- Trouble getting past unfulfilled promises.
- Measuring beyond cost and service.
Next, supply chain objectives must be closely aligned to overall business objectives, especially if the goal is to gain competitive advantage. At this level, it is important that your supply chain capabilities can carry you into the future.
Once you are looking beyond cost and service and including "new" capabilities among your strategic targets, the result is increased and growing competitive advantage.Close
- Supply Chain Management Review, January 2013
A.T. Kearney's Patrick Van den Bossche discusses the importance of cooperation across departmental boundaries and how to unlock significant value that's trapped between silos.
- The right way to think about network optimization
Networks are complicated, and managing them requires an expansive strategic imagination.
The conventional way of looking at a network is through the direct-value lens: How much does it cost to run the network? Networks are a great deal more complicated than that, and managing them—or, more fittingly, optimizing them—requires an expansive strategic imagination.
No matter what kind of network one manages—hospitality, retailing, banking, leisure, telecommunications whatever it might be—once the network is built, it immediately begins its evolution. Even within a single local market, the network is evolving all the time. As the network goes through its life cycle, perspectives on sustaining it must change as well. The means for doing this are distilled in A.T. Kearney’s Network Optimization Tools, or KNOTs, comprised of eight elements, each focused on a strategic element of the network.
The English word knots translates as les nœuds in French, or nodes. This is an apt image for thinking about the symbiosis of the local and the networked—the balance of savoir-faire métier and savoir-faire local, of the collective intelligence of the network and the specific intelligence of the individual.
Think of KNOTs not as a laundry list of best practices used to build an optimal network but as electrons—each one discrete and at the same time interacting around the nucleus. A national bank develops financial products centrally, but the local branch manager manages the relationship with customers. The national bank maintains good relations with the regulators while the branch manager cultivates the good will of the town mayor. A manufacturer’s leverage with suppliers may be directly proportionate to its number of plants, yet procurement is not only about concentrated volume. It is also about expertise the manufacturer owns in a multitude of categories and brings to bear in the local nodes of its network.
A sobering counterexample is the flameout of video retailer Blockbuster, which channeled its energies into adding thousands of stores and tens of thousands of employees in North America and Western Europe only to be caught off guard by competitors such as Netflix and the rapid adoption of streaming video. In hindsight, Blockbuster’s history suggests an unbalanced emphasis on its real estate network and not enough on the customer experience. The result was catastrophic.
We organize our network nomenclature into three types: production networks, service networks, and distribution networks. La Poste, for example, is a production network in that it operates like a factory producing a product: collecting and distributing mail. Taxi companies, railroads, and airlines are other good examples of production networks. The nodes in these networks are more than just infrastructure. One must own the nodes or there is no business to manage. Closely related to the production network is the service network, typified by telecommunications and hospitality. A hotel network, for instance, cannot deliver a night’s sleep over the Internet. The consumption of its product is done at the local level even though each node in the network is supported by the expertise of the whole. The service is the network.
A distribution network is retail in all senses of the word, especially in its tailoring of products to meet the needs of local customers. Distribution networks are high touch and in certain ways are the easiest networks to think about in terms of nodes. The most familiar example, literally the most concrete, is a brick-and-mortar retail chain. Find a Wal-Mart, and its distribution center will not be very far away.Close
Striking the right balance between capital expenditures and financing options is key to maximizing return on investment in large capex projects.
Large-scale capital expenditures (capex) all face a crucial challenge: finding the right trade-off between capex cost and financing options to optimize return on investment (ROI). They also share many characteristics, including, for example, complexity, multiple stakeholders, and bankruptcy risks.
Generating the best possible ROI is arguably the main objective of a large capex project. One of the toughest challenges in reaching that objective is meeting the expectations of stakeholders—financial and commercial stakeholders, procurement experts, engineers, project managers, lawyers—who have their own concerns and expertise. Some of their expectations are in direct conflict with others. Every expectation has the potential for conflicts and contradictions.
Managing total capex is the key to carrying out a successful project. After all, the most important criterion for potential owners to evaluate a project is its ROI, and a good ROI depends on the project’s commercial attractiveness, which depends on financing costs, which influence capital structure and capex, which must meet all stakeholders’ quality and time requirements. Furthermore, different financing options assert different influences on large capex projects, primarily because large projects require multisource funding. These options include stakeholder equity, ECA-guaranteed debt, International Financial Institutions (IFI) guaranteed debt, and commercial debt. The larger the project, the likelier it is to depend on ECA and IFI financing, especially if the project lacks a major shareholder.
Our approach to successfully managing large capex projects is executed in four phases:
Phase 1: Define data and constraints.
Phase 2: Develop different scenarios.
Phase 3: Discuss output and adapt scenarios accordingly.
Phase 4: Evaluate and select final procurement scenarios.
Collaborative optimization is an excellent tool for navigating the process of finding the best procurement strategy. It is an innovative sourcing technique that creates value through bidding and business-award optimization, and helps identify the best combination of lots and suppliers to meet buyer requirements and supplier strengths.
Collaborative optimization allocates bidders according to the constraints detailed in Phase 2. For each scenario the goal is to minimize the following: adjusted payment to bidders, including optional discounts and penalties; penalties for violating rules related to constraints; and prices of lots that don’t get allocated. We add constraints such as minimum contract value and national content requirements to create further scenarios to help find a solution.
In most cases there are many possible procurement scenarios to analyze, and A.T. Kearney has developed a three-pronged “filter” approach to paring down the number of scenarios until the best one is left standing.
The first filter aims to eliminate scenarios that offer a poor supply-market situation—the goal here is to identify scenarios that don’t involve materials, products, or components that might become bottlenecks in times of high demand.
Filter two is crucial, since it focuses on ROI—here, scenarios are filtered according to the impact of their financing costs and capex on the project’s ROI.
Finally, filter three is a basic risk assessment to determine operational risks, contracting risks, and the risk of limited level of competition among potential bidders during the tendering process.Close
As knowledge of ERP systems has grown so too have the misconceptions. It is time to set the record straight.
Careers and fortunes have been built and lost because of enterprise resource planning (ERP) systems, and in the process, some reliable advice has emerged on how best to address the challenges and capture the benefits of a standardized system. However, as knowledge has grown, so too have the misconceptions. Many of the myths from earlier days persist today and often dissuade potential purchasers of ERP systems. In this paper, the authors highlight six ERP myths generally accepted as fact and recommend ways to regain control of the ERP journey.Close
- CSCMP's Annual Global Conference, 1 October 2012
A joint presentation by Southern Wine and A.T. Kearney focused on the need for positive-sum value chain integration.
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