Joseph Francis - SCC and SCOR Overview.pdf - Supply Chain ...

SCC and SCOR OverviewSupply Chain CouncilExecutive Presentation© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 1 | 12 Sep 2011

What Keeps You Up at Night?Stock Market Volatility, Oil Prices, Labor,Political Instability, SecurityReducing Inventory/Working Capital/ AssetManagementReducing Total SupplyChain CostsSupply Chain Resiliency& Sustainability:Risk Management& GreenCompeting in aGlobal MarketProviding Superior & ConsistentCustomer Service While IncreasingRevenue & Margin© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 2 | 12 Sep 2011

Supply Chain is Dominant Company Cost Driver• In 2007, US business logistics costs rose toan all time high of $1.4 trillion (10.1% of USnominal Gross Domestic Product ) 3• Supply-chain generally accounts forbetween 60% and 90% of all companycosts 1• A 2% improvement in process efficiencyfor supply-chain processes has 3000% -5000% the impact of a 2% improvement inefficiency for… IT… HR… Finance 1 … Sales…Fortune-10 CompanySupply-Chain Cost as% of Total Costs 2GM 94%Ford 93%Conoco 90%Wal-Mart 90%Chevron 88%IBM 77%Exxon 75%GE 63%Citi 1 0%AIG 1 0%1 Exclusive of Financial Services companies2 Source: Hoovers 2006 Financial Data, Supply-Chain Council 2006 SCMBenchmark data on SCM cost for discrete & process industries3 CSCMP 19 th Annual State of the Logistics Industry© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 3 | 12 Sep 2011

The Dupont ModelIncome StatementNet ProfitMargin3 %NetProfit$ 3.00GrossProfit$ 40TotalExpenses$ 34Net Sales$ 100COGS$ 60VariableExpenses$ 12Return onnet worth74.91 %FinancialLeverage11ROA6.8 %Sales$ 100Taxes$ 3Fixed Expenses$ 18InventoryExpenses$ 4Balance SheetAssetTurnover2.27Sales$ 100divided byCurrentAssets$ 26Inventory$ 16AccountsReceivable$ 44TotalAssetsFixedAssets$ 18$ 8Other CurrentsAssets$ 2Assumption: Financial Leverage is a company-wide constant= Total Assets / Shareholder Equity© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 4 | 12 Sep 2011

SCOR KPI’s Help Measure Performance…KPIs that managethe activitiesPerfect Order FulfillmentOrder Fulfillment Cycle TimeSupply Chain FlexibilitySupply Chain Adaptability †Supply Chain Management CostCost of Goods SoldCash-to-Cash Cycle TimeReturn on Supply Chain Fixed AssetsReturn on Working CapitalSupply ChainsImpact the LeversRevenueExpenseWorkingCapitalFixed CapitalProfitCapitalEfficiency& ShareholderValueValue© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 5 | 12 Sep 2011

SUPPLY CHAIN COMPLEXITY SIMPLIFIEDUSING SCOR FRAMEWORK© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 6 | 12 Sep 2011

Supply ChainIt’s aFAN!It’s aSPEAR!It’s aWALL!It’s aROPE!It’s aSNAKE!It’s aTREE!© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 7 | 12 Sep 2011

What is a Supply Chain?Product/Portfolio ManagementSupplier processesProduct DesignSales & SupportDCORCCORSupply ChainSCOR ®Customer processes© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 8 | 12 Sep 2011

Supply Chain Architecture OverviewBusiness StrategySupply ChainStrategySupply ChainConfigurationSupply ChainAssetsSupply ChainPerformanceSupply ChainProcessesSupply ChainSkillsStandard for Supply Chain: SCOR ®© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 9 | 12 Sep 2011

THE BUSINESS’ MONEY IS IN SUPPLY CHAIN!WHEN IT COMES TO SUPPLY CHAINS, HAVING TWO IS BETTER THANONE, AND THREE OR MORE MAY BE BEST OF ALL!ISLANDS OF PROFIT IN A SEA OF RED INK BYRNES, J..L..S. SR. LECTURER MIT© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 11 | 12 Sep 2011

Business Strategy• A product or Service for each Market or Segment• Supply Chain Definition Matrix is used to define the supply-chains within anenterprise• Column Generation:› The columns in the matrix are focused on demand e.g. channels or segments or customers• Row Generation:› The rows in the matrix are focused on supply e.g. business lines or products or locations orsuppliersCostPerformanceStyleMarket Product A B C D1 ✔2 ✔ ✔QualityBrandProduct 13 ✔ ✔4 ✔ ✔Innovation© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 12 | 12 Sep 2011

Supply Chain Strategy• Supply Chain Competitive AttributesCustomerInternalAttributeReliability (RL)Responsiveness(RS)Agility (AG)Cost (CO)Assets (AM)StrategyConsistently getting the orders right,product meets quality requirementsThe consistent speed of providingproducts/services to customersThe ability to respond to changes in themarket (external influences)The cost associated with managing andoperating the supply chainThe effectiveness in managing the supplychain’s assets in support of fulfillment© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 13 | 12 Sep 2011

Supply Chain Strategy• Supply Chain Competitive AttributesCustomerInternalAttributeReliability (RL)Responsiveness(RS)Agility (AG)Cost (CO)Assets (AM)Required PerformanceSAAPP© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 14 | 12 Sep 2011

Supply Chain Performance and GovernanceMetric Actual P A S GapRL Perfect Order Fulfillment 82 74 81 88 6RS Order Fulfillment Cycle Time 6 10 6 3 --AG Flexibility 46 60 45 29 1CO SC Management Cost 5.1 9.5 6.7 3.9 --AM Cash-to-Cash Cycle Time 83 98 64 30 --© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 15 | 12 Sep 2011

SCOR HIERARCHY“DE-LAYERS” COMPLEXITY© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 16 | 12 Sep 2011

SCOR HierarchyLevel 1 Level 2 Level 3 Level 4 Level 5Scope Configuration Activity Workflow TransactionsSupply-ChainSourceS1SourceStocked ProductS1.2Receive ProductEDIXMLDifferentiatesBusinessDifferentiatesComplexityNames TasksSequences Steps LinksTransactionsDefines ScopeDifferentiatesCapabilitiesLinks, Metrics,Tasks andPracticesJob DetailsDetails ofAutomationFrameworkLanguageFrameworkLanguageFrameworkLanguageIndustry orCompanySpecificLanguageTechnologySpecificLanguageStandard SCOR definitionsCompany/Industry definitions© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 17 | 12 Sep 2011

Supply Chain Performance and Diagnosis• Diagnostic metric relationships enable root causeanalysisMetricLevelPerfect Order Fulfillment 1L> On-time 2L> In-Full 2L> Correct Items 3L> Correct Quantities 3L> Perfect Documentation 2L> Initial Quality 2© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 18 | 12 Sep 2011

Supply Chain Configuration and Capabilities• High Level Material Flows and Practices • VMI• Kanban• Make-to-Order• S&OP• CPFR© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 19 | 12 Sep 2011

Supply Chain Processes• Work and Information Flowsmp3 Factory mp3 HQ Retail, inc.Customer P.O.S1.1Schedule Prod.DeliveriesD2.2Receive, Enter,Validate OrderDelivery CommitC.O.C.O. = Customer Order, Inv. = Inventory,P.O. = Purchase Order, Prod. = ProductD2.3Reserve Inv.Calculate DateC.O.Inter-Company P.O.S2.1Schedule Prod.DeliveriesD1.2Receive, Enter,Validate OrderD1.3Reserve Inv.Calculate Date© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 20 | 12 Sep 2011

SCOR ROADMAP PROVIDESRAPID TURNAROUND© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 21 | 12 Sep 2011

Copyright © Supply Chain Council. 2006. All rights reserved.AttributeReliabilityResponsivenessFlexibilityCostAssetsMetric (level 1)Perfect Order FulfillmentOrder Fulfillment Cycle TimeUps. Supply Chain FlexibilitySupply Chain Mgmt CostCash-to-Cash Cycle TimeCopyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.OperationsSupply ChainPurchasingLogisticsWarehousingResponsibleAccountableSupportedResponsibleAccountableSupportedResponsibleAccountableSupportedResponsibleAccountableSupportedCopyright © Supply Chain Council. 2006. All rights reserved.S1S1S1Company98%14 days62 days10.1%22 daysParity92%8 days80 days10.8%45 daysAdv96%6 days62 days10.4%30 daysOur CompanyShared Insights SCOR Seminar |Superior98%4 days40 days10.2%20 daysParityGap-6%6 days-18 days-0.7%-23 daysReqGap8 daysShared Insights SCOR Seminar |80%Shared Insights SCOR Seminar |APJ Warehouse US Warehouse EU WarehouseD1D1D1SR2SR2DR2DR2DR2S1S1S1D1D1D1SR2SR2DR2DR2DR2DR2S1S1S1D1D1D1SR2SR2DR2DR2DR2DR2Shared Insights SCOR Seminar |20334356Copyright © Supply Chain Council. 2006. All rights reserved.OEM Supplier(D1)CommercialCustomer(S2)RefrigerantSupplier(D1)CommercialDistribution(P4, D2)Copyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.Controls Plant(P3, S1, M1)Basic Units(P1, P2, P3, S1,M1, M2)ElectronicsSupplier(D1)Motor Supplier(D1)RetailDistribution(P4, D1)Shared Insights SCOR Seminar |RetailCustomers(S1)Shared Insights SCOR Seminar |Shared Insights SCOR Seminar |Shared Insights SCOR Seminar |1815062D1ElectronicsSupplierD2.1Process Inquiry& QuoteSupply-ChainBig AirSmallAirComm’lOverallRating120180300Copyright © Supply Chain Council. 2006. All rights reserved.D1MotorSupplierSupplierD1OEMSupplierD1RefrigerantSupplierCopyright © Supply Chain Council. 2006. All rights reserved.D2.2Receive,Configure,Enter andValidate OrderM2.1ScheduleProductionActivitiesD2.3ReserveResources &DetermineDelivery DateD2.15InvoiceCopyright © Supply Chain Council. 2006. All rights reserved.Perfect OrderFulfillmentCopyright © Supply Chain Council. 2006. All rights reserved.CriteriaWeightP2S1M2.2Revenue& Rank123IssueSourced/In-ProcessProductD2.420%Basic UnitsConsolidate OrdersD2.14Install Product0.20.40.6P1P3M1M2Order FulfillmentCycle TimeGrossMargin& Rank213S1.4Transfer ProductM2.320%P4Produce and TestD2.5Build LoadsD2.13Receive & VerifyProduct byCustomerD20.40.20.6CommercialDistributionOur CompanySupply ChainFlexibilityNumber ofSKU’s &Rank123S120%0.20.40.6Controls PlantM2.4PackageD2.6RouteShipmentsD2.12Ship ProductUnitVolume &Rank12320%0.20.40.6StrategicValue& Rank0.6Shared Insights SCOR Seminar |P3M1P4D1RetailDistribution123S220%CommercialCustomer0.20.4CustomerShared Insights SCOR Seminar |M2.5Stage FinishedProductD2.7Select Carriers& RateShipmentsD2.11Load Product &GenerateShippingDocumentationM2.6ReleaseFinishedProduct toDeliverD2.9Pick ProductD2.10Pack ProductShared Insights SCOR Seminar |Supply ChainMgmt CostCash-to-CashCycle TimeShared Insights SCOR Seminar |S119RetailCustomersD2.8ReceiveProduct fromSource orMake375168AttributeReliabilityResponsivenessFlexibilityCostAssetsMetric (level 1)Perfect Order FulfillmentOrder Fulfillment Cycle TimeUps. Supply Chain FlexibilitySupply Chain Mgmt CostCash-to-Cash Cycle TimeCopyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.Company Parity Adv98%14 days62 days10.1%22 daysSuperiorParityGapReqGapShared Insights SCOR Seminar |Shared Insights SCOR Seminar |Shared Insights SCOR Seminar |Shared Insights SCOR Seminar |28406070ReliabilityResponsivenessFlexibilityCostAssetManagementBigAircoCopyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.Copyright © Supply Chain Council. 2006. All rights reserved.ScopeMigrationApproachTimingProject Risks &ComplexityCostValue• Medium Risk• Medium Complexity• $500KCopyright © Supply Chain Council. 2006. All rights reserved.SmallAircoComm’lObjectives• Reduce Cycle time by direct shipping from factory to commercial customersAnalysis Issue• Order Cycle Time, SCM Cost % RevenueProcesses supported• S1, D1Business GroupsGeography• FH9: _x__ • Sweden: _x__• FM : _x__ • Belgium: _x__• FD: ____ • France: _x__• Complete Critical Direct inbound links• Create local DC• Move new procurement to store at local DC• Drain Regional DC• Close/Sell Assets• Immediate• Eliminates a net 1.5% of SCM cost as % of revenue; 2 Days OCTShared Insights SCOR Seminar |Shared Insights SCOR Seminar |Shared Insights SCOR Seminar |Functions/GroupsIntegrated LogisticsIntegrated ProcurementShared Insights SCOR Seminar |32425571The 16-Week SCOR ProgramProject Charter OutlineExample: ComfyCoSupply Chain Priority: ComfyCoScorecardIdentify Competitive RequirementsSection SubsectionContent/ReasonIntroduction ContextUnderstanding of DocumentOverview ScopeSupply-Chains ConsideredBusiness Objectives MetricsProject Objectives Five-Phase DeliverablesProject MethodologySCOR Project RoadmapApproachScheduleTimeline, MeetingsDeliverablesDetailed DeliverablesRiskLevelProgram Management Key Areas1BudgetCostOrganizationChart and ResponsibilitiesBenefitsMeasures of Success, AnalysisCommunication Who, How, Why, What, When• Continuing Information on our Example Company, what arethe distinct supply-chainsGeography – Customer or Market ChannelSupply-ChainRetailCommercialDefinition MatrixBig-BoxInternetCommercialCommercialRetailerDirectBuildingMajor AcctProductBig AirCox xSmall Airco x xCustomIndustrialxStandardIndustrialx xRankingWeighted ResultSupply-Chain Selection Decision Matrix• The ComfyCo “Commercial” Supply-Chain has beenprioritized by sponsor for improvement.CompetitivePerformance RequirementsAttribute orCategoryS A SA P AP S PP P P• Procedure• Prioritize supply chainperformance requirementsfor each relevantcustomer/market channel• Within a channel you get 1superior (S), 1 advantage(A), and two parity (P)• Each unique combination ofratings defines Your SupplyChain Strategy for thechannel• Think of the rating as adesired state, NOT whereyou want to improve themostParity, Advantage, SuperiorGeo Map of ComfyCo (US)ComfyCo Thread DiagramExample IssuesFishboneminusequalsLevel 2We now link strategy,Parity Median ofperformance, and benchmarkStatistical Sampleto identify performanceAdvantage Midpoint of Parityrequired of strategyand SuperiorSuperior 90 th percentile ofpopulationBasicGeographicContextComfyCoEntitiesMajor Level 2processesMajorSuppliersBasic FlowIndicationCustomerEntitiesLevel 2ProcessesBasicProcess FlowKey EntitiesPlanningNotationBusinessContext1. Multiple Product touch factory to Warehouse2. Highly variable demand from channels3. Channel config constantly changes4. One chance per day to ship5. Channel not ready for delivery6. Losing priority shipments7. Takes a lot of time to enter channel orders8. Duplicate effort entering channel ordersw/channel9. Factory locks schedule for 3 days, noflexibility for demand change10. Multiple-touch on OEM material from Asia11. Logistics providers not aligned to ourpriorities12. Factory doesn’t always build to plan,sometimes to capacity13. Selling what we don’t have, and not sellingwhat we do14. Takes forever to schedule an order toinventory15. No visibility on inbound material for orderplanning16. Chasing down inventory for order planningtakes a long time – manual17. Inventory picture for order planning notalways accurate18. Configuration of Airco unit – can’t alwaysmanufacturing and must ’çlean’orders19. Only one person in order management whounderstands configuration rules20. Errors in re-keying quotes to orders21. Time taken to re-key quote to to order22. No visibility on order load when replenishinginventory23. No demand visibility to reflect to suppliersfor critical parts24. Not understanding what are priority buildorders25. Configuration errors by customer26. No visibility to channel of inventory for sales27. Inventory too high AND too low becauseforecasting errors28. Ability to expedite critical parts for keycustomers29. Long transit time from factory to warehouse30. Losing inventory in warehouse for keycustomers31. Uneven workload on warehouse staff – highin AM, idle rest of day32. Damage to material receiving at warehouseduring peak shipping33. Duplicate builds if boxes not taggedcorrectly to end-cust34. Poor scheduling of staff for shipping –sometimes too many, sometimes too few35. Factory adherence to schedule builds36. Some products run out of inventorylocations at WHSE – overbuild37. Supplier complaints about inaccurateforecasting38. Extra costs due to excess RAW indemurrage39. Too few key workers in factory for complexconfigurations40. No way to get orders dropped when factoryidleBasicProblemPartitioningParetoProcess Worksheet 1Captured SCOR Level-3 ModelPractices BenchmarkingTransaction Productivity AnalysisInterviewees:AccountableStatusSCOREfficiency YieldPractices VolTimeElapsedInput(s) - Highlight Primary InputSCOR ElementOutput(s) - Highlight PrimaryOutputReceipt D2.1Entry D2.275% 90%75% 90%80%80%1001001.5h1.5h2h2hAllocate D2.34% 90%20%1001h24hStep123DescriptionResponsibleEvent TimeFactoryDropPackShipPODM2.1M2.2- 2.6, D2.8D2.9- 2.12D2.12- D2.132% 90%5% 90%8% 90%92% 90%70%70%70%70%1001001001001.5h6h2h44h72h120h24h48hLevelAnd Subsequent3Identification of nextstepAnalysis FocusProcess Steps (>4and

SCOR IMPROVEMENT AREAS ANDPOTENTIAL VALUE© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 23 | 12 Sep 2011

Typical Potential Improvements 1Area ImprovementRaw materials purchase cost 25%Cost of Distribution 35%Total resource deployed 50%Manufacturing space 50%Investment in Tooling 50%Order cycle time 60%New product development cycle 60%Inventory 70%Paperwork and Documentation 80%Quality Defects 100%1Hughes & Michels (1998) Transform your supply chain. Releasing value in business. London, UK© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 24 | 12 Sep 2011

Comparative Data 1Improvement Area RangeDelivery performance 16% - 28%Inventory Cost Reduction 25% - 60%Reduction in order fulfillment cycle time 30% - 50%Improvement to forecast accuracy 25% - 80%Increase in overall productivity 10% - 16%Lower supply chain costs 25% - 50%Improvement of fill rates 20% - 30%Improved capacity realization 10% - 20%1Stephens (2000) 1997 Comparative Study Pittsburg, USA© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 25 | 12 Sep 2011

Core Value 1• Improvement of operating results of an average of 3% inthe initial SCOR implementation phase by means of costreduction and improvement in customer services• Increase in profitability (between 2x and 6x) with regardsto project investments costs within first 12 months ofimplementation• Reduction in IT costs through minimizing systemcustomization and making better use of standard functionality• Continuous actualization of process change portfolio bycontinuous conversion of Supply Chainimprovements with the objective of increasing annualprofits by 1% to 3%1Poluha (2007) Application of the SCOR Model in Supply Chain Management New York, USA© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 26 | 12 Sep 2011

ADVA Optical Networking• The Challenge• €370.2M Revenue Enterprise1• Rapid growth in demand for storage,voice & data transport• Focus on capturing this growth whilemaintaining profitability• Needed to identify inventory driversand optimize inventory levels toenable ADVA to reach inventoryreduction targets whilst improvingcustomer satisfaction in OrderFulfillment Cycle Time (OFCT) andOn-time Delivery (OTD)• Created a transformation plan thatwould allow ADVA to proactivelyplan, drive and manage theinventory levels and better achievethe balance of cost and service1Hoovers.com• The Solution• Using SCOR, ADVA identifiedperformance gaps in key metricsbetween current and required toreach parity status• Also using SCOR, identified processdisconnects, drivers of inventoryand projects required forimprovement• Grouped and prioritized proposedprojects based on potential impactand amount of effort/risk• Agreed to project list including:Benefits Achieved› New S&OP Process• Gross inventory › reduced Supplier scorecards from €59 million and quarterly to €38business reviews with suppliers,million in 10 months›• Inventory days ofInformationsupply reducedtransparency47% fromand othersinitial scorecard© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 27 | 12 Sep 2011

Douglas Pharmaceuticals LimitedThe ChallengeSignificant growth from 2003 to 2007› 300% increase in new product development› 122% growth in production volume› 61% growth in employees• Created the “perfect storm” of supply chainissues• Converted to new ERP in August 2006• “Burning Platform”:› Customer DIFOT (Export) Down to 20%› Product Lead Times Up to 8 months› New Product Introduction Lead Times Up to 9months› Stock Turns Down to 2.1x› YTD Sales Down 30%• Available Spare Capacity Unknown• Customer complaints impact new licensingopportunities and future earnings growth• The Solution• “Turning point” for organization –DIY not always best• Board mandated review at its April2007 meeting• Process established to evaluateoptions• SCE program initiated using SCOR• 17 week SCE program between Mayand September 2007•Impact on 2007/8 earnings and shareholder value:›EBIT (15.9%)›Enterprise Value ($25.2M)© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 28 | 12 Sep 2011

SAAB AB• Challenge• US$3.1B Aerospace TechnologyEnterprise1• Three strategic business segments:aeronautics, defense and securitysolutions, systems and products• Challenged to execute profitableand customer adapted logisticsintensive businesses› The degree of coordination oflogistics operations highly impactSaabs cost level for logistics› Coordination enables CELprocesses to ensure delivery tocustomers demands• Needed to build competitiveoperations, planning, logistics, andsupport• To do so, wanted to move to a fulllifecycle-based support concept• The Saab Common Solution• One backbone system (today basedon ERP and/or Best of Breed)• Cross-functional collaboration andcommon trust• Increased Interoperability• Align SCM Strategy with CorporateStrategy• Key Enablers› Common Supply Chain Frameworksand Roadmaps› Standardization› Codification› Information Systems1Hoovers.com© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 29 | 12 Sep 2011

SAAB Coordinated Effective Logistics (CEL)• Solution• Step by step approach - no “big bang”• Multiple supply chains and methods• Lack of structured methods andprocesses• Knowledge tied to individuals• Lack of information sharing• Use of the SCOR model› Common definitions and processmapping› Sustainable and structuredmethodology being used as frameworkfor realization of all logistics and SCMactivities within Project CEL throughoutall of its phases; from cradle to thegrave• Project management• Change management• Engineering technique• Benefits Achieved• Creating a Saab Common Logisticsand Supply Chain ManagementFramework› Delivering incremental capabilities› Using SCOR Methodology, Processesand Metrics hierarchy• Initial business cases have identifiedsavings of 73 FTEs and a total ofUS$15M© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 30 | 12 Sep 2011

Raytheon IDS• The Challenge• US$4.7B subdivision of US$23.1B DefenseServices Provider1• Rapid growth but antiquated processes andprocurement focus in supply chain left IDSfacing non-competitive operating costs• No skills within existing team to backgroundand skills for transformational change required• The Solution• SCOR/Six-Sigma program assessing all supplychain processes within IDS, with focus allSCOR process areas• 8550 people within Raytheon IDS, and 7600supplier partners went through transformationfor accomplishing five key challenges:› Improving world-class performance› Connecting every employee to the business› Creating purposeful, collaborative partnerships› Accelerating top-line, double-digit growth› Achieving predictable, best-in-class bottom-lineperformance• Benefits Achieved• 37 Percent reduction in headcount but increaseof college-educated population to 66%• 75% reduction in transactional processing formaterial acquisition• 25% improvement in SC Cost-to-Sales• $57M in bottom-line savings• 98% supplier conformance to contract1Hoovers.com© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 31 | 12 Sep 2011

SASOL Supply Chain OptimizationThe Challenge• US$16B annual South AfricanPetrochemical Concern 1• Embarked on Supply ChainOptimization to identify synergies andimprovement opportunities acrossmultiple business units• Complex changing politicalenvironment and introduction ofsubstantial Managerial class withoutdeep experienceThe Solution• The SASOL Supply Chain OptimizationJourney• Awareness – identified SCOR as a tool (2004)• Embarked on SCOR pilot project – tacklingproblem area to show benefits and understandprocess• First in-house project (to build internalsuccess)• Approval for permanent Center of Excellence(CoE) competency• Prioritization of supply chain projects (projectdemand exceeds supply)• Project 2, 3, 4…..X• Embraced “The SCOR Way” (2007)1Hoovers.comBenefits Achieved• Ongoing CoE for supply chain optimization• Sample project generated IRR of 139% over the projectlifetime• Estimated US$1B cost improvements over 3 year period© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 32 | 12 Sep 2011

SCM Asset Returns: Superior Valuation• Comparison of Fortune-1000 Council member companyshare price aggregate growth from 2003 – present to S&P500 and DOW indices.• Growth inflected after 2 years, and the spread betweenSCOR index companies and other industrials has grown toalmost 30 points.• Growth is increasing exponentially: Compound interest onSC performance.• Correlates SCC Membership/SCOR investments withShareholder value.• Same pattern evident in FTSE-100, DAX, NIKKEI and otherindices.© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 33 | 12 Sep 2011

About Supply Chain Council• SCC is an independent, not-for-profit, trade association• Membership open to all companies and organizations• Founded in 1996• Regional representation (chapters) worldwide: North America,Europe, Japan, Southern Africa, Latin America, Australia/NewZealand, Southeast Asia, Greater China, and Middle East• Focus on research, application and advancement and advancingstate-of-the-art supply chain management systems and practices• Developer and endorser of the Supply Chain Operations Reference(SCOR®) as a cross-industry standard for supply chain management• Offers Training, Certification, Benchmarking, Research, TeamDevelopment, Coaching, and Cross-standard Integration focused onthe SCOR® framework• Approaching 1000 Association Members within global chapters© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 34 | 12 Sep 2011

Sample of Industry Membership Scope© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 35 | 12 Sep 2011

For More InformationW: WWW.SUPPLY-CHAIN.ORGE: INFO@SUPPLY-CHAIN.ORG© 2010 Supply Chain Council. ALL RIGHTS RESERVED. | 2010 Executive | 36 | 12 Sep 2011