3 | Editorial: Natural risk behaviour

7 | News & Background:

• Segmentation proves crucial for the supply chain
  Big negative impact of tsunami
  Column by Tom van Woensel

10 | Management article: Do or die, Manage or ignore supply chain risk

18 | Facts & Figures Supply Chain Risk Management

20 | Supply Chain Risk board game

22 | Case study: Nokia’s victory over Ericsson down to superior risk management in 2000

26 | Profile Kris van Ransbeek, former VP supply chain Chiquita EMEA

32 | Industry report: Chemical industry’s supply chain

35 | Tools & Technology

36 | Case study: Control tower project at FloraHolland

Download this issue here.

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Related posts:

1. Global SCALE Risk Initiative
2. Get the Board onboard
3. 3rd Annual Supply Chain Risk Management Seminar Barcelona 2011

Related posts:

1. Carbon Disclosure Project Supply Chain Report 2011
2. State of Logistics Report 2011
3. The Logistics Report 2011

A global study carried out by IDC on behalf of IFS reveals that less than a third of companies find their enterprise applications intuitive and easy to use. The study examined the importance of usability and flexibility in enterprise applications among companies in the USA, the UK, Germany, France, Benelux, Scandinavia and India.

Today’s global business world is more complex and interconnected than ever, constantly posing new challenges on productivity and business agility. There is therefore a growing demand among companies for enterprise applications that are intuitive and easy to use. The survey clearly shows that ERP providers must improve their software in order to meet these demands.

“The study proves what we at IFS have known for many years: usability and agility are vital for companies in terms of productivity. IFS will therefore continue to focus on usability and user experience as these will be areas of key importance going forward,” IFS CTO Dan Matthews said.

The survey, based on interviews with C-level respondents in seven different industries, verified that usability and flexibility are important considerations when evaluating enterprise application software. The most notable findings were:

-Less than one third (29%) find their enterprise applications intuitive and easy to use
- More than half (60%) consider some tasks a waste of time when using the enterprise applications
- Almost half (45%) expect noteworthy business changes to take place within the coming 12-24 months and 82% of these respondents believe their business applications need modification to support these changes
- 44% believe their enterprise applications have a negative impact on business agility

Anders Elbak, Research Manager at IDC, commented, “The research clearly proves that while being essential for running a company, enterprise applications are likely to hamper productivity through unintuitive user interfaces, poor integrations, difficult navigation and insufficient search functionality.”

Even though a large majority of companies (60%) considered usability when purchasing a new system – 24% of respondents even held it as the most important consideration – less than one third (29%) of all respondents were running intuitive and user-friendly enterprise applications – compared with the 2008 IFS study on the same topic, in which 64% of companies reported usability as an important aspect and 42% regarded their systems as easy to use. This suggests that expectations about how intuitive and user-friendly ERP systems should be have been raised in line with the general trend of ‘consumerisation’ of software applications and smartphones – a development that will prioritise usability as a consideration for companies evaluating new systems and as a design factor for software companies.

> Download the survey here

Related posts:

1. European supply chain software mapped out
2. The 2011 Global Supply Chain Agenda
3. The Chief Supply Chain Officer Report 2011

July 19, 2011

Results Show Demand Sensing Reduces Average Weekly Forecasting Error by 40 Percent.

Terra Technology, the most-trusted provider of innovative supply chain solutions for consumer products companies, in July 2011 announced the release of the Terra Technology 2011 Forecasting Benchmark Study. The report identifies forecasting trends based on activity from one third of the North American Consumer Packaged Goods (CPG) market and includes insights about performance during promotions and new product introductions. The study, which spans the 2009-2010 period, encompasses more than 7 billion physical cases that represent more than $200 billion in sales from nine leading multinational consumer products companies.

Results show that weekly forecast error for Demand Planning systems remains high in CPG, at almost 50 percent, with bias remaining positive at 5 percent. Results also show that Demand Sensing provides a major improvement in forecast accuracy across all companies, reducing weekly error by 40 percent. Improving forecast accuracy is key to an efficient and cost-effective supply chain since demand uncertainty is the number one driver of safety stock.

“We believe this study is the most comprehensive examination of forecasting performance for the CPG industry,” said Robert F. Byrne, President and CEO, Terra Technology. “It is unique because it provides a truly comparable benchmark for manufacturers to evaluate demand planning performance against their peers. It also shows the potential of Demand Sensing to improve forecast accuracy, supported by real-life performance figures from leading manufacturers whose supply chains are among the most respected in the industry.”

Findings and insights from the analysis include:
- Demand Planning weekly forecast error remains almost 50 percent in the CPG industry, despite the effort and expense invested in implementing Demand Planning systems. The 5 percent bias may be indicative of the optimistic nature of Marketing.
- Promotional volume jumped more than 75 percent in 2010 as companies sought to drive sales by offering consumers additional value. Contrary to conventional wisdom about promotions, individual items are forecast as accurately when promoted as they are when not promoted. However, bias is more than five times higher during promotional periods.
- High expectations and the absence of prior sales history make new product introductions particularly hard to forecast. In 2010, new items accounted for 13 percent of the volume and experienced weekly Demand Planning error rates of 65 percent over their first year compared to 46 percent for existing products.

Demand Sensing provides a consistent step change in forecast accuracy across all aspects of the business, including promotions, new products, fast-moving and slow-moving items. The 40 percent reduction in overall error provided by Demand Sensing confirms the benefits of an automated mathematical approach which harnesses real-time demand signals throughout the supply chain to improve forecast accuracy.

The Terra Technology Forecasting Benchmark Study differs from other benchmarks because all raw data is taken directly from the participants’ Demand Planning systems, then consistent metrics are used. The 2011 dataset includes 300,000 item/warehouse combinations with 55,000 base codes and 72,000 items across 350 locations.

> Read and download the Terra Technology Forecasting Benchmark Study

Related posts:

1. Benchmark study compares forecasting performance results
2. Transportation Forecasting based on actual data
3. Procter & Gamble reduces safety stock by 50%

Main facts and figures are:
• 70% of surveyed companies declare that green Supply Chain is a true economical lever.
• For 47% of the companies, the return on investment of a green Supply Chain is reached within 3 years.
• More than half of European companies now use environmental criteria to assess their Supply Chain performance: share of recycled packaging material, CO2 emissions,…
• 2/3 of companies adopted or plan to adopt a green policy for their purchases.

The quantitative study was conducted among about 600 European decision-makers by Novamétrie between 2010 and 2011, with a position within Supply Chain, Sustainable Development or Industrial Divisions.

Related posts:

1. Carbon Disclosure Project Supply Chain Report 2011
2. Excellence in Supply Chain Sustainability
3. The supply chain in 2030

16th Annual Third-Party Logistics Study from Capgemini Consulting, Penn State University, Heidrick & Struggles and Panalpina examines the global market for 3PL services

Capgemini Consulting, the global strategy and transformation consulting brand of the Capgemini Group, in cooperation with Penn State University, leadership advisory firm, Heidrick & Struggles and global logistics provider, Panalpina, today announced the findings of the 16th Annual Third-Party Logistics (3PL) Study, examining the global market for outsourced logistics. The report reveals that the majority of shippers worldwide are increasing their use of 3PL services, with 64 percent of respondents reporting a rise. At the same time, the report indicates an average of 42 percent of total logistics expenditures being spent on outsourcing, the same as last year’s study. However, 24 percent of shipper respondents reported some return to insourcing 3PL services and 58 percent report they are reducing or consolidating the number of 3PLs they use, indicating uncertainty about the global economy continues to impact 3PLs.

The 2012 Third-Party Logistics Study is based on over 2,250 responses from both shippers and logistics service providers in North America, Europe, Asia-Pacific and Latin America, as well as other locations throughout the world such as the Middle East and Australia. In addition to documenting the evolution of the third-party logistics market, this year’s report also provides an in-depth analysis of logistics operations in emerging markets and the electronics industry as well as talent management to address the skills shortage in the logistics industry.

Today’s 3PL marketplace is experiencing significant change and established 3PLs are adjusting their business models to provide greater value to shippers. The report shows relationships between shippers and 3PLs continue to be successful with 94 percent of 3PLs and 88 percent of shippers stating communication, flexibility and openness are key to contributing to their success. However just 68 percent of shippers judge their 3PLs as sufficiently agile and flexible, down from 72 percent last year suggesting this is an area where 3PLs can make significant further contributions to supply chain success.

“The responses from this year’s study represent an interesting record of the shifting use of 3PL services,” said Dan Albright, Vice President and North American Supply Chain Leader at Capgemini Consulting. “Whilst some companies are increasing outsourcing services, we are still seeing the consistent churn that occurs each year with 3PL respondents observing that some of their customers are returning logistic activities back in-house. It’s

vital that 3PLs and shippers work in close collaboration and that 3PLs remain innovative by offering value added services to provide true value to shippers to help reverse this trend.”

Spotlight: Growth in emerging markets while traditional markets are slowing
A substantial 80 percent of shippers in the survey conduct business with or within an emerging market, with the majority (52 percent) doing so from a mature market. China, India, Brazil and Mexico are considered the top emerging market opportunities amongst respondents. With mature, industrialized markets largely growing at a slower pace, the emerging markets offer significant growth potential. The 3PL capabilities shippers most value when entering emerging markets are expertise on the latest global trade regulations and managing and optimizing shipment routing based on free trade agreement (FTA) knowledge. The majority of shippers in mature (65 percent) and emerging markets (73 percent) recognize 3PLs’ knowledge of FTAs as very important.

“Entering any new market requires due diligence and this is more critical when it’s an emerging market. Government investment in infrastructure will contribute to attracting global manufacturers and 3PLs to do business in emerging markets.” said Nicholas Wyss, Senior Vice President, Global Head of Industry Vertical Fashion, Panalpina Management Ltd. “Shippers based in mature and emerging markets favor strong support from 3PLs for a successful 3PL operating model in emerging market countries.”

Spotlight: Challenges facing 3PLS in the electronics sector
Multiple layers, supply constraints and the specific challenges the various channels present, coupled with short product lifecycles, mean the electronics industry demands a fast and nimble supply chain. Because electronics products are often high value, they pose specific challenges including assuring security, preventing counterfeit and packaging sufficiently to handle long distance transportation. Pressure to reduce operating costs was cited as the top logistics challenge for shippers in the electronics industry (59 percent), but just 28 percent believe 3PLs can help them with this challenge. The report’s findings suggest that within the electronics industry, 3PLs need to perform better in selling to electronics customers and shippers need to be more open to collaborating with 3PLs to address their top challenges.

“Logistics operations within the electronics industry are faced with a number of unique challenges. Close communication and collaboration between shippers and 3PLs is vital as supply chains become more complex” said Dr. C. John Langley, Clinical Professor of Supply Chain Management, and Director of Development for the Center for Supply Chain Research, Penn State University. “As the demand for high value electronic goods increases, it is more important than ever that shippers are able to draw on 3PLs’ knowledge to achieve a solid supply chain.”

Spotlight: Importance of Talent Management for 3PLs
Despite the positive reports of the supply chain’s role as a significant contributor to attaining business goals, the logistics industry is experiencing a shortage of capable supply chain managers prepared to work in vital management positions. As supply chains grow more complex, they require leaders who are more diverse and multi-faceted. The report revealed shippers and 3PLs most highly value operational execution (51 percent and 60 percent respectively) followed by people management and development skills (54 percent and 43 percent respectively) in their leaders. To date, the majority of both shippers and 3PLs recruit from inside their own industries but many are increasingly looking to recruit talent from other industries. Company success and performance, attractive salary and benefits and personal development opportunities within the company are considered the top qualities needed to attract talent.

“As logistics become ever more intrinsic to a company’s ability to attain its business goals, shippers and 3PLs must be able to put trust in supply chain leaders to be prepared for future business challenges.” said Neil Collins, Managing Partner, Transportation & Logistics – Americas, Heidrick & Struggles. “The logistics market must look to develop programs for talent management to create a clear, well-defined business strategy for the recruitment, retention and development of talent.”

For more information and to access the full study please log onto: www.3plstudy.com

About the 2012 Third-Party Logistics Study
2,258 logistics executives from both 3PL users and providers in North America, Europe, Asia-Pacific and Latin America, as well as other regions and geographies, participated in the 2012 Third-Party Logistics Study via a web-based survey. The findings were supplemented with a significant number of focus interviews with industry observers and experts, primarily relating to the special topics identified for this year. Facilitated workshops were also conducted where shipper participants collaborated on shared issues to help provide a better understanding of the survey’s results and to gain their valuable perspective as 3PL users. Though last year the 2010 3PL study was published, this year’s report is called 2012 since that will be when the results will be in active discussion.

Related posts:

1. State of Logistics Report 2011
2. The Logistics Report 2011
3. 2011 Forecasting Performance Benchmark Study

The latest edition of Capgemini Consulting’s Supply Chain Agenda study outlines the major trends and developments affecting supply chain executives from around the world.

This 2011 Global Supply Chain Agenda study demonstrates that while the general economic outlook at the start of 2011 seems positive, a significant number of the respondents to this year’s survey indicate they are uncertain about market demand in 2011 and that they are therefore determined to improve visibility in the supply chain.

The study reveals that the top 2 business drivers for supply chain executives in 2011 are operating a reliable supply chain in a volatile environment, while simultaneously dealing with rising material costs:

• 40 percent of respondents answered that demand volatility was their number 1 business driver

• 35 percent placed increased material / service costs at number 2

Meeting this twin challenge will mean improving control of both the internal and external supply chain. Consequently, when the respondents were asked to name their top supply chain projects in 2011, improving supply chain visibility ranks as top for 45% of them.

> Download report

Related posts:

1. Global Supply Chain Trends 2011
2. Supply Chain Management and the Executive Agenda
3. The New Supply Chain Agenda

Download the free supply chain app for the iPad in the iStore:
http://itunes.apple.com/nl/app/supply-chain-media/id433251052?mt=8

After downloading the SCM app you can read the special edition of Supply Chain Movement about the strategic importance of Inventory Management to business.

Related posts:

1. Supply Chain Movement Q2 – Sustainability Special (also on iPad)
2. Free webinar on reducing supply chain costs

12             PROFILE PETER BRIGGEMAN

“Expect the unexpected” Thanks to the opportunities on offer within Eastman Chemical, Peter Briggeman – having started his career at the bottom of the ladder – was able to work his way up to his current role as director of Supply Chain and Central Services EMEA. “I caught up on my education and training along the way but I think it’s my experience that is really invaluable to me.” Briggeman often refers to his ‘healthy obsession’ for supply chain. “I wake up every morning with a good feeling inside”.

 18        TO EMBRACE OR CAUTIOUSLY ADOPT?

As with innovation, when it comes to sustainability, businesses fall into one of two categories. Leading the way are the trendsetters – those companies who fully embrace sustainable ideals. Trailing behind is a large group of followers who first examine the situation from every conceivable angle before eventually deciding to invest in sustainability.  In practice, there is considerable overlap between companies who are sustainability trendsetters and those who are innovation trendsetters. Its carbon footprint is the most widespread reason for an organization to adopt a strategy for sustainable innovation, including in its supply chain management activities.

24         COLUMN JAAP-WILLEM BIJSTERBOSCH

Energy Supply: Sometimes I wonder if we are paying the real price for energy, especially the price for oil used in transportation: Bear in mind that fifty percent of oil is used in vehicles. Recently, the price of gasoline at the pump hit another record high. Nobody started screaming though. Perhaps it’s still a bargain for me.

28         ROUNDTABLE S&OP

The delicate balancing act that is S&OP: There is a delicate balance between working capital and corporate strategy. Organisations can make significant gains by improving the collaboration between their financial department and their supply chain managers. In theory, Sales & Operations Planning (S&OP) formalizes this collaboration- but to what extent is this happening in practice, and what form is the collaboration taking? ConQuaestor and S&V Management Consultants invited a number of supply chain and financial professionals to take part in a round-table discussion about this very topic.

 31        CASE STUDY NHR

NHR trades and refurbishes second-hand network hardware for businesses all over the world. Its market value reaches into millions which achieves with just a minimum of stock. The key to their success is reliable information.

38         OPINION IMD PROFESSORS

Re-evaluating the supply chain post-Japanese earthquake: Japan’s devastating earthquake, tsunami and nuclear accident have served as a wake-up call across the world to show just how fragile global supply chain can be, with almost 9% of the world’s economic output coming from Japan, these events have had a direct impact on many companies that rely on Japan for manufacturing parts, and have caused countless disruptions across the global supply chain.

FURTHER IN THIS ISSUE

6          NEWS & BACKGROUND

• Supply Chain and Finance share the same vision
• The cost of sustainability
• Roadmap to sustainable behavior

35         TOOLS & TECHNOLOGY

iPad and iPhone turn Supply Chain Movement green; Supply Chain media goes green with the introduction of its very own free application (or ‘app’) for the iPad and the iPhone, which has been developed especially for its two publications, Supply Chain Magazine and Supply Chain Movement. Having managed to secure the unique ‘supply chain’ name globally for its digital publications, the publishing house is truly embracing this latest technology.

PERSONS, COMPANIES & ORGANIZATIONS IN THIS ISSUE

Related posts:

1. Excellence in Supply Chain Sustainability
2. CEOs struggling with supply chain sustainability
3. Ecodesk 2011 Sustainability Transport & Logistics Report

Drawing from interviews conducted with 150 global executives across a broad range of industries in the spring of 2011, we have identified five key levers. To achieve the higher operational flexibility needed to mitigate volatility risks, supply chain leaders must:

1. Focus on supply assurance and proactive capacity management for critical resources. Close partnerships with key suppliers and fast and appropriate responsiveness are the most important ways to master significant up- or down-swings.

2. Relentlessly engage in collaborative end-to-end demand and supply planning. Leaders connect, automate, and actively manage real-time information points with all supply chain partners to support rapid and informed decision making.

3. More tightly integrate their own and their partners’ supply chain architectures. This practice ensures that all players in the global extended enterprise network collaborate to achieve jointly agreed upon performance standards. The supply chain architecture defines how various supply chains play together in the extended enterprise as an integrated whole.

4. Tear down the wall between supply chain management and product development/engineering. Supply chain leaders actively manage the product portfolio to integrate product development and supply chain activities throughout the product life cycle. This approach reduces new product introduction cycle times, limits product variety, and ensures late-stage customization.

5. Relentlessly drive superior collaboration maturity. This ensures that advanced flexibility practices and skills are applied throughout all units of the company, and that implementation is supported by supply chain and functional management. In our survey, supply chain leaders who have implemented the five flexibility levers have, on average, achieved a 12 to 15 percent revenue increase annually, primarily by ensuring fast and reliable delivery times for high-demand products. Leaders have also reduced supply chain costs by 8 to 10 percent, thanks to less expediting, better crisis management, fewer supply risks, reduced working capital, and more effective planning of inventories and logistics.

But supply chain flexibility doesn’t come for free. It requires significant investment in the levers relevant to the company in question. Moreover, it requires top-down commitment—from supply chain executives as well as sales and other company functions—to deploy changes that, by necessity, apply across many functions.

Related posts:

1. The 2011 Global Supply Chain Agenda
2. Managing the Global Supply Chain
3. Carbon Disclosure Project Supply Chain Report 2011