Download Making better supply chain decisions through total delivered cost

Making better supply
chain decisions through
total delivered cost
management
Agenda
Introductions
► Who we are
► Session objectives
► 21st annual trends in logistics and transportation study
► Total delivered cost
► Questions
►
Page 1
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Introductions
►
Gary Allen
► North
►
America – Logistics Practice Leader
Tony Ross
► North
Page 2
1210-1397979
America – Healthcare Supply Chain Leader
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Agenda
Introductions
► Who we are
► Session objectives
► 21st annual trends in logistics and transportation study
► Total delivered cost
► Questions
►
Page 3
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Ernst & Young has a strong global presence
in Supply Chain and Operations
Global SC&O & Advisory Footprint
Supply Chain Transformation
►
►
►
Asia Pacific
►
Americas
300 Supply Chain
professionals
8,200 Advisory
professionals
EMEIA
250 Supply Chain
professionals
450 Supply Chain
professionals
3,600 Advisory
professionals
►
►
►
►
►
►
11,200 Advisory
professionals
Supply chain strategy and Operating model
transformation (including TESCM)
Total delivered cost optimization
Supply chain network and global trade flow
optimization
Transportation and logistics optimization
Improving supply chain responsiveness and agility
Improving cash to cash cycle and working capital (incl.
inventory optimization)
Supply chain functional performance improvement –
S&OP, Planning, Manufacturing, Logistics, Service
Order to cash performance improvement
Improving supply chain risk management
Improving supply chain sustainability
Procurement Transformation
►
►
►
►
Global
$22.9b revenue ($4.3b Advisory)
140 countries
152,000 professionals
Advisory
Page 4
1210-1397979
Assurance
Tax
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
►
►
►
►
Transaction
►
Procurement strategy and operating model
transformation
Advanced strategic sourcing and spend category
management approaches (incl. demand
management)
Procurement advanced hedging and risk
management strategies
Complex commercial contracting and outsourcing
reviews and implementation
Driving improved supplier relationship management
including innovation and development
Procure to pay performance improvement
Improved supplier risk management
Advanced procurement analytics incl. landed cost
models
Procurement performance management and benefits
tracking
Agenda
Introductions
► Who we are
► Session objectives
► 21st annual trends in logistics and transportation study
► Total delivered cost
► Questions
►
Page 5
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Session objectives
Major trends affecting logistics and how they affect supply
chain decisions
► Perspective on total delivered cost, how companies are
using it today and a road map for you to apply it within
your organization
►
Page 6
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Agenda
Introductions
► Who we are
► Session objectives
► 21st annual trends in logistics and transportation study
► Total delivered cost
► Questions
►
Page 7
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
2012 trends in transportation and logistics study
Background
►
►
21st year of the study
Joint research with Dr. Karl Manrodt, Georgia
Southern University; Dr. Mary Holcomb,
University of Tennessee; Ernst & Young;
and Con-way
The 2012 study sample represents
more than
► $30.1 billion domestic
► $20.5 billion international in logistics
expenditures
1,370
Page 8
1210-1397979
$50.6 billion is approximately
6.7% of total domestic
transportation spend
respondents from 16 industry sectors
represented this study
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
2012 study – top five megatrends
These top five trends were consistent across all sectors:
Companies are not maximizing their potential
to differentiate service.
Business analytics capabilities need further development
to enable differentiation capabilities.
Increased visibility is needed to build the needed level
of flexibility and to enable differentiation of service.
Closer collaboration with key supply chain members
is needed to increase flexibility.
A deeper understanding of indirect costs are needed
to achieve the desired level of efficiency.
Page 9
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
2012 study – top five megatrends
Differentiated service
Companies are not maximizing their potential
to differentiate service.
►
►
►
Survey participants overwhelmingly agreed that “being better than our competitors in terms of service would
significantly improve our competitive position.”
While “best” customers do receive better service, the difference in service levels between this group and “average”
customers is fairly low.
“Average” customers reported more service improvements from the previous year than “best” customers.
1. Being better than our competitors in terms of
service would significantly improve our competitive
position.
2. Innovation in logistics / transportation service
would significantly improve our competitive edge.
3. Our customers consider logistics / transportation
service an important differentiating characteristic that
is just as important as our products.
4. Increasing costs are often used to moderate
logistics / transportation service differentiation.
5. The logistics / transportation service offered by
our company is a barrier to new competition.
6. Our logistics / transportation service allows us to
charge a premium / prestige price to our customers.
“Best” customers receive better service
1.94
2.58
2.59
3.12
3.85
3.96
0
1
2
3
4
5
Scale: 1 = Strongly agree; 7 = Strongly disagree
Page 10
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
2012 study – top five megatrends
Business intelligence
Business intelligence (analytics) capabilities need further
development to enable differentiation capabilities.
►
►
►
Most commonly shared data with
key customers and suppliers
primarily involves operations.
Business intelligence is not yet a
strategic imperative but driven
primarily by customer contract
requirements.
The top five impediments to
developing robust business
intelligence capabilities are:
►
►
►
►
►
Lack of integrated processes
Objectives that vary across
business units
Cost of implementation
Lack of standardized data
Lack of organizational strategy
Predictive modeling and
data mining
38.8%
Meta data management
Advanced analytics
(including on-line analytical
processing)
25.7%
58.9%
37.1%
15.9%
19.6%
15.9% 10.6%14.5%
27.1%
14.5%
21.3%
Not Planned
Planned
Interactive visualization
57.9%
18.2% 12.6%11.2%
Implemented
Completed
Dashboards
Data mining
19.4%
26.4%
20.3%
19.5%
22.0%
24.5%
38.3%
29.5%
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%100%
Page 11
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
2012 study – top five megatrends
Increased visibility
Increased visibility is needed to build the needed level
of flexibility and to enable differentiation of service.
►
►
Domestic visibility of the physical flow of goods and products on both the inbound and outbound
sides increased.
►
Visibility for the remaining points in the supply chain reported no improvement.
International visibility also improved for inbound and outbound transportation. Other parts of the
supply chain halted previous years progress.
Supplier’s
Supplier
5.2
Supplier
3.8
Inbound
3.0
Company
2012
2.7
NOTE: 1 = very visible; 7 = not very visible
Page 12
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Outbound
1.9
Customer
3.6
2012 study – top five megatrends
Collaboration with suppliers
Closer collaboration with key supply chain members
is needed to increase flexibility.
►
►
►
►
►
The results show that companies have placed much more effort in sharing information and
collaborating with key customers than they have with key suppliers.
Capacity forecast sharing was near the bottom of the list of primary actions taken by
companies to offset rising transportation costs.
Improved integration of information systems with external supply
chain partners was also one of the least likely initiatives to be taken.
Sharing data (as a collaboration
initiative) has focused on operations
and tactics
If we continue to focus at these
levels, how and when will
collaboration become strategic?
Shipment
status
70%
Commonly shared data
With key customers
Advanced
ship notice
49%
63%
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
62%
Production
schedules
37%
Customer
delivery
requirements
Page 13
Demand
forecasts
Order
status
68%
Commonly shared data with
key suppliers
2012 study – top five megatrends
Cost to serve
A deeper understanding of indirect costs is
needed to achieve the desired level of efficiency.
►
Most companies tend to focus on cost of good sold, few companies have the capability to understand their true cost to
serve (CTS).
►
CTS is often averaged across customers and products in a profitability review. Disaggregating these CTS averages
highlights opportunities to reduce value leakage.
►
Leading class companies segment CTS at a customer, product, brand or company level and complete the picture by
providing end-to-end supply chain costs.
►
CTS has recently become an area of focus, and many companies plan to launch CTS initiatives.
Page 14
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Poll question #1: 21st annual trends in
logistics and transportation
Page 15
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Agenda
Introductions
► Who we are
► Session objectives
► 21st annual trends in logistics and transportation study
► Total delivered cost
► Questions
►
Page 16
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Current business environment
Companies must respond to meet increasing customer* and internal expectations without
increasing their costs
Pressures from various commercial strategies
Enterprise-wide imperative
“Leverage global sourcing as a major source
of cost reduction for the company in years to
come”
“Focus on the product needs of customers
and reduce inventory that is not in high
demand”
“Monitor inventory movement and receive
automatic alerts to proactively manage
supply chain events and prevent order
failures”
Understand the end-toend supply chain costs
and the impact of
changes to the current
network
“Understanding impact of supply chain
changes on our bottom line and financial
reports”
(*Customer in this narrative is another company or entity buying from a company; customer does not represent the end consumer.)
Page 17
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Business complexities require a new
solution
Internal and external demands
Misaligned internal objectives
Companies are being squeezed from all sides:
Commercial and supply chain often have misaligned
objectives:
►
►
►
Commercial – demanding increased promotional support and
sales incentives
►
Manufacturing and logistics – Increasing service levels while
reducing manufacturing and logistics costs (e.g., delivery, make to
order)
Supply chain aims to minimize costs by eliminating non-value
adding activities and is frustrated when commercial overcommits.
►
Commercial looks to build volume through differentiated customer
offerings and is frustrated when supply chain fails to deliver orders.
Purchasing – internal cost of supply reduction pressures balanced
against increased logistics costs and manufacturing flexibility
Inefficient behavior is rewarded:
Customer behavior directly affects cost and
profitability:
►
Up to 20% of cost of goods sold (COGS) can be directly affected
by customer behavior (i.e., ordering, planning, logistics).
►
Connecting customer demands all the way back through
manufacturing and cost of supply is often not well understood.
►
Companies often return 1.5% to 2% off list price to customers in
efficiency terms that are not conditional and founded on total
delivered cost.
►
Purchasing is rewarded on material pricing reductions,
manufacturing on production rates and quality, and logistics on
cost and delivery.
Without an understanding of total delivered costs, companies cannot reward efficient behavior or
defend against changes that drive cost.
►
Enables a fact-based dialogue
►
Facilitates communications between commercial and supply chain
►
Requires a detailed understanding of total supply chain costs and profitability to uncover the next generation of cost savings
Page 18
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
What are companies doing?
While most companies have attempted various total cost management initiatives, they tend
to be disparate supply chain activities
Potential activities
Examples
Transportation
optimization
►
Increase transport efficiency ratios via customer price negotiations and introduction
of logistics terms
Global trade
management
►
Reduce freight, broker, duty and compliance costs
Network
optimization
►
Use spare capacity in distribution centers and consider shared warehousing
arrangements
Order management
►
Identify inefficient order demands and associated costs to drive fact-based
customer discussions
Logistics
outsourcing
►
Use outside expertise and capabilities to help flex with market and customer
demands
►
Leading companies integrate all factors across supply chain and commercial
organizations to reward efficient behavior and defend against cost increases.
►
Efficiency investments conditional and based on a total delivered cost viewpoint.
Total delivered
costs
Page 19
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Three components of total delivered costs
Total delivered costs encompasses the entire supply chain from source of supply through delivery
to customer.
Supplier
Retailer/
Distributor/
Customer
Manufacturer
Total landed cost
Conversion cost
Cost to serve
Total delivered cost
Customers continue to struggle to understand profitability and the related impact of balancing
supply chain cost trade-offs and consumer needs across these components.
Page 20
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Understanding the challenges and insights
for each component is critical
Strategic
Global
Total delivered cost
How do I optimize my supply
chain costs while balancing
internal and external needs?
Strategic/t
actical
Insight
Global/
regional
Landed costs
How do I optimize my global
sourcing and logistics
network across regions?
Sourcing strategies should
properly account for all indirect
and direct costs
Tactical/
operational
Challenge
Regional/
local
Conversion cost
How do I balance
manufacturing performance
and demand variability?
Small improvements in process
reliability can produce significant
results that make the difference
between profit or loss
Tactical/
operational
Component
Regional/
local
Cost to serve
How do I optimize my
executional flows?
Help sales teams understand
delivery cost economics to build
efficiency into trade terms
Page 21
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Understand and model operating
scenarios that meet needs while
optimizing supply chain costs
Total delivered cost framework
Models tend to be unique by industry or customer but extend the focus from gross profit to
economic profit, taking into account all the cost elements.
Total delivered cost
Illustrative
Costs to serve
►Secondary
warehousing and distribution:
– Inbound material handling
– Materials storage
– Order assembly
– Transportation
► Order-to-cash processing costs
► Selling costs
► Customer working capital costs
Landed and conversion costs
Standard COGS:
– Raw/purchased materials
– Packaging materials
– Variable conversion costs
– Fixed conversion costs
– Primary logistics
– Customs fees, duty, tax
► COGS variances:
– Purchase price variance
– Materials usage variance
– Conversion cost variance
►
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Economic
Profit
Gross Profit
Net Sales
Value
1210-1397979
Deals &
Allowances
Gross Sales
Page 22
Poll question #2: Total delivered cost framework
Page 23
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Cost-to-serve capabilities allow companies to balance customer
service improvement with supply chain efficiencies
Along with sales and operations
planning (S&OP), cost-to-serve
provides the basis on which supply
chain and commercial interact. It
enables supply chain to make the
move to become more customer
centric
Cost-to-serve analytics can identify
unprofitable customer trade lanes,
allowing interventions to be made
Understanding cost to serve on a
customer-by-customer basis can
allow more specific promotion
pricing to deliver higher returns
CTS provides transparency of the
true profitability of customers and
products and enables visibility into
supply chain costs across the
business through a variety of lenses
– product, customer, brand and
product group
Defining efficient trade terms makes
certain that both the supplier and
customer benefit from
improvements in efficient behavior
Supply chain
and
commercial
interface
Go-tomarket
distribution
strategy
Promotion
pricing and
performance
Efficiency
trade terms
Cost
to
serve
Customer
and product
profitability
Customer
joint value
creation
Customer
service
offering
Operational
continual
improvement
Helps inform any joint customer
initiative so that both parties benefit
from changes
Helps to understand and control the
true cost of service offerings such
as:
► Seven-day delivery
► Custom pallet requirements
► Electronic B2B utilization
Tracking and controlling customer
cost drivers in daily operations can
drive incremental cost and effort
benefits such as:
► Working with customers to order
full pallets/full trucks
► Increasing percentage of notouch transactions
There can be a 10x cost differential in serving “efficient” customers versus “inefficient” customers
Page 24
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Resulting in benefits across the supply chain and typically
generating upwards of 10% of total cost to serve within the region
►
Incentivize customers to order full pallet quantities to reduce
case packing ratio through structured pricing and trade terms
►
Identify inefficient order demands and associated costs in
order to drive fact-based retail discussions
10%-20% of
Contract renegotiation with 3PL provider
budget
►
Plant
Plant
warehouse
Supplier
DC
►
Put in place logistics efficiency terms
based on cost to serve to reward efficient
behavior and defend against cost
increases
►
Make efficiency investments conditional
and based on true cost to serve
Efficient spend
1%-2% off list price
CP company supply chain
►
Increase transport efficiency ratios via
customer price negotiations and
introduction of logistics terms
►
Support transport contract renegotiation
►
Increase average order sizes through
the use of structured logistics trade
terms with tiered pricing reflecting
quantities ordered, leading to reduced
processing volumes
6%-12% of
budget
Page 25
1210-1397979
Retailer store
shelves
Retailer
RDCs
Retailer supply chain
15%-30% of
budget
►
Transition customers to electronic order
placement and eliminate inefficient behaviors,
e.g., deductions and queries
►
Increase average order sizes through the use of
structured logistics trade terms with tiered pricing
reflecting quantities ordered, leading to reduced
processing volumes
►
Restructure teams to focus on priority customers
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
►
Increase efficiencies in how
deliveries are made to
customers through flexibility
in the network, e.g., peak
versus off-peak
6%-12% of
budget
Global consumer products company – Cost to serve case study
The business problem
Customer
Initial hypothesis
Two largest retailers
Increased direct deliveries
from plant warehouse to
customer
Two largest retailers
Increase vehicle fill
Four small retailers
with low vehicle fill
Consolidation of volume to
increase vehicle fill
Opportunity
Potential
impact
(% total CTS)
4.3%
1%
0.7%
6%
The operating company has been challenged to significantly
reduce costs during FY12.
Tasked it’s operating companies with identifying significant cost
reductions. Cost to serve identified as a key enabler to driving savings.
Prior to implementation of the cost to serve solution, they understood
that costs are high and that there is a high volume of internal
movements, but they have no means to quantify this and create a
business case for change.
Approach
Using a cost to serve simulation, they conducted a thorough analysis of
their current cost to serve.
These opportunities were identified as relatively quick wins.
This enabled them to understand exactly where the key cost drivers were
and identify and prioritize potential solutions for further analysis.
Additional opportunities identified how fast- and slow-moving
SKUs are managed within the network.
Initially focusing primarily on their two largest retailers, using the scenario
simulation they quantified the cost and service impact to create a business
case and road map to change.
Benefits identified
Estimated net cost reduction of 6% of total cost to serve through:

Increase in direct flows

Increased vehicle fill

Cost of capital benefit from inventory reduction in supplier DCs
Additional benefits:

Page 26
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Reduced G&A cost and improved operational efficiency (for supplier
and retailer) due to fewer orders, increased vehicle fill and therefore
fewer vehicles
Landed cost issues and challenges
Global sourcing presents significant challenges that can lead to value leakage,
brand damage, penalties and even jail.
►
Companies face growing cost, compliance and risk challenges across their global supply chains as they become
stretched in the pursuit of low-cost country sourcing and revenue growth.
Challenges of globalization
Examples
►
Breaking into new and emerging
markets
►
Kellogg’s Indian breakfast cereal initially failed due to price, positioning and logistics
problems.
►
Margin pressure and value
leakage
►
Hidden duties within delivery duty paid (DPP) contracts cost a manufacturer an additional
30% on landed costs
►
Need to protect brand
reputation
►
Recalls cost Mattel $40m in 2007 and took $612m off its market capitalization.
►
Increased cash flow needs of
the global supply chain
►
A multinational’s VAT systems setup did not match its evolving supply chain, leading to
€20m of irrecoverable VAT trapped on the balance sheet.
►
Excessive lead times
►
Weak controls over third-party distributors led to delays of up to three months in customers
getting orders delivered for this high-tech manufacturer.
►
Many companies continue to address global sourcing issues in a fragmented, silo-based approach that can further
contribute to these issues. These are just a handful of examples to illustrate why it is important to understand global
trade in an integrated way.
Page 27
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Landed cost optimization can enhance procurement and supply
chain decision-making by taking a holistic view of the “inbound”
supply chain costs
Network optimization
►
Materials and finished goods
sourcing
What is the impact on total landed
cost and total delivered cost?
►
New product development
►
Capacity rebalancing
Does the classification, source or
use of import material have
significant indirect tax implications?
Value analysis and engineering
►
Do indirect tax factors trigger or
nullify cost-saving opportunities?
►
Landed cost
optimization will allow
procurement, logistics
and manufacturing to
uncover hidden costs.
Product costing and
rationalization
►
1210-1397979
Are you able to rebalance
production capacity while still
minimizing delivered costs
Make vs. buy (life-cycle cost)
►
Do the cost variables in your makebuy analysis encompass indirect
tax cost drivers?
Plant rationalization
►
Do you consider substitutes versus
original? Are your product costing
methods aligned?
Page 28
Is your supply base cost effective,
and can you take advantage of
short-term price opportunities?
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Are you considering trade and
indirect tax levers as well as
logistics and conversion costs?
Deploying the appropriate landed cost and network modeling tools
to analyze supply chain costs and trade agreements will help
identify potential opportunities
Utilizing actual ERP data
on materials purchases
and product sales,
combined with logistics
transaction data
► Enables improved
decision-making for:
1► Duty cost reduction
►
Example customer output
2
3
Assess use of available
duty regimes and free trade
agreements
2► Sourcing decisions
Compare different sources
in use on a total delivered
cost basis
1
2 3
3a
► Plant rationalization
Assess and check which
plant should supply which
end market
3b
► Capacity balancing
Assess and check which
plant should supply which
end market
Page 29
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Diversified manufacturer – Global trade
software implementation case study
►
Trade preference determination improvement and automation projects generate duty savings between
30% and 60%
►
A recently completed project yielded the following benefits:
Diversified manufacturing –
$8.3B FY09 revenue
6,000
ROI*
 First savings
$5,600
Over 600 types of products/ parts
traded across NAFTA and EU
Manual origin qualification and trade
preference determination processes
Annual duties paid in thousands for comparable
volume of trade
achieved in month 5
 $850K income
5,000
 FY09 US imports: $706M
 FY09 US import declaration filings:
6,300 lines (distinct product/
transaction)
4,000
 Import FTEs: 2.5
3,000
statement impact in
first 12 months
Savings:
$3M
annually
 Cash flow payback
achieved in 20
months
$2,600
Investment
 Improved working
2,000
capital
 Software cost: $2,800,000
 Lower inventory
 Hardware cost: $40,000
 Process improvement and software
implementation services: $600,000
levels
1,000
 Labor efficiencies
 Lower brokerage fees
 Total: $3,440,000
0
* Assumes a 4 months implementation, cost of
capital 8% and 3 years capital amortization period
Page 30
1210-1397979
Other benefits
Prior to GTS
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
After GTS
Lessons learned
Area
Risk
Mitigation plan
Scope of work
and complexity
►
Project delays through too much data
analysis and scope of effort
►
BU participation
and buy-in
►
Depends heavily on BU level
participation and top-down
sponsorship from BU executive
►
Launch an assessment to confirm
business case and prioritize initiatives
► Segment into logical buckets and pilot
one segment in one region
► Structure around supply chain
processes; Plan, Buy, Make, Move, Sell
►
BU participants identified at every level
within the project
Initial buy-in from BU owners
recommended prior to kick-off
Tool: scalability
and alignment
►
Tools built in this project may not be
in alignment with IT systems and
direction
►
Involve IT from the beginning to make
sure that activities are aligned with IT
systems and IT strategy
Assignment and
allocation rules:
buy-in
►
Assignment and allocation rules need
to be defined and bought into across
functions
►
Participation from BU, sales, finance,
supply chain and operations
Facilitated workshops for buy-in
Data availability
►
Profitability dashboard and total
delivered cost waterfall, hinges
heavily on data availability
►
Page 31
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
►
►
Initial two weeks of deep-dive on data
availability
Leverage data warehouse if available
Poll question #3: case studies and lessons learned
Page 32
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Total delivered cost implementation steps
1.
Strategic alignment
►
Understand business priorities, objectives & goals
►
Get support from executive management & key functional leaders
2.
Business segmentation
►
Understand supply chain & customer unique characteristics
►
Break it down into manageable pieces & identify a pilot to get started
►
Establish clear definitions & understanding of services
3.
TDC assessment and modeling
►
Collect, analyze and model scenarios to help prioritize focus areas
►
Focus on useful and value-driven cost data
4.
Organization collaboration
►
Gain alignment & proper incentives across all functional areas
►
Create a cross-functional team with executive sponsorship
5.
System enablement
►
Page 33
1210-1397979
Evaluate which tools are right for you & will help sustain benefits
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Conclusion
►
►
►
►
Key industry trends highlight the
importance of service differentiation,
business analytics, visibility,
collaboration and understanding total
costs.
Customer behaviors and
organization factors directly affect
supply chain costs.
TDC encompasses the entire
supply chain from source of supply
through delivery to customer.
Without understanding TDC,
companies cannot reward the right
behavior that drive efficiencies.
Page 34
1210-1397979
►
TDC is complex and must be broken
down into “bite-size” chunks.
►
Cost-to-serve capabilities allow
companies to balance customer
service improvement with supply
chain efficiencies.
►
Landed cost optimization allows
procurement, logistics and
manufacturing to uncover hidden
costs.
►
Successful projects require executive
sponsorship and cross-functional
involvement.
►
When launching a TDC project, make
sure your strategy is clear and that a
proper assessment is conducted.
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Agenda
Introductions
► Who we are
► Session objectives
► 21st annual trends in logistics and transportation study
► Total delivered cost
► Questions
►
Page 35
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young
Thank you!
Gary Allen
Executive Director, Logistics Leader
gary.allen@ey.com
+1 313 628 8639
Tony Ross
Senior Manager, Logistics Practice
tony.ross@ey.com
+1 214 969 8846
Page 36
1210-1397979
HPCLC Fall Educational Event
Confidential – 2012 Ernst & Young