Even mighty elephants can slip and fall

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Even mighty elephants can slip and fall
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Only The Adaptive Survive

• Navi Radjou
• Principal Analyst
• Forrester Research

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Theme
To cope with volatility firms need to migrate
their static supply chains to adaptive supply
networks
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Agenda

• Existing supply chain practices and tools fail to
  help firms deal with volatility
• Static supply chains are dead. Long live
  adaptive supply networks!
• How can firms build adaptive supply networks?

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Whats wrong with todays supply chains?
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Supply chains risk collapsing under the
disruptive influence of new business drivers

• Accelerated global outsourcing
• Ever-shrinking product lifecycles
• Fickle demand

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Plans are insulated from execution reality
Supply Chain Planning
Supply Chain Execution
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Glitches -- however minor -- get amplified
throughout the supply chain
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Opportunity costs associated with supply/demand
mismatches
Company
Supply chain exception
Opportunity costs
General Motors
In 1996, an 18-day labor strike at a
Quarterly earnings reduced
brake supplier factory idled
by 900 million
workers at 26 assembly plants
Boeing
In 1997, two key suppliers failed
Deals lost worth 2.6 billion
to deliver critical parts on time
Sony
Shortage of PlayStation 2
Sony console shipment in US
Graphic chips in 2000
was 50 less than planned
Ericsson
A fire in Philips Electronics

plant
Lost three market-share points
in New Mexico disrupted supplies
againts Nokia in 2000, and was
of chips for key new handset
forced to exit handset market
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But current supply chain apps cant help due to
their centralized architecture
OEMs Planning Department
Customer
Supplier
Contractor
3PL

• Only fit Command Control organizations
• Smart Hub -- Dumb Spokes

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Optimization tools dont make the cut
How do people in your company manage supply
chain exceptions today?
Base 25 European companies implementing supply
chain optimization
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Existing supply chain apps ignore the physical
world
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Firms must migrate to adaptive supply networks
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To begin with, its no longer a chain -- Its
a network!
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Firms must go beyond efficiency
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Firms must migrate to adaptive supply networks
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The unique characteristics of an adaptive supply
network
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Supply chains Vs. Adaptive supply networks
Efficiency
Cost-cutting
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To gain flexibility, firms need a closed-loop
process adaptation strategy
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How can firms build adaptive supply networks?
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You need sense-and-respond software

• Connect with physical assets
• RFID tags
• Remote device tracking apps
• Manage unplanned exceptions
• Event management tools
• Automate decisions -- and learn
• Software agents

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You need people and process changes to

• Interpret data accurately -- by analyzingit
  collectively
• Respond intelligently to changes -- by involving
  partners
• Learn continuously -- by automating mundane
  decisions

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Caveat emptor
In particular Beware of vendors who tell you
that ERP apps are only good for book-keeping!!
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Lets get real Survival comes first!
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Firms roadmap to building an adaptive supply
network
Step 3
Adaptive supply network
Deploy new technologies like agents and RFID to
automate sense-and-respond capabilities
Step 2
Flexible supply network
Use Web services to
Step 1
establish two-way
Transparent supply network
conversation with your
trading partners -- to enable collaborative
problem-solving and decision-making
Establish visibility into
factory-floor activities and
strengthen connectivity with
weakest links in the
supply network
Traditional
Supply chain operations
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Summary

• Uncertainty is here to stay
• Aggressive firms will beat the competition by
  making their supply networks adaptive
• Firms must crawl and walk before they can run in
  adaptive supply networks

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Thank you
Navi Radjou 1 617/613-6119 nradjou_at_forrester.com
www.forrester.com