Synchronized Supply Chains: The New Frontier

mThink Knowledge - Posted on 14 April 1999

Authored by:

David Anderson;
Hau Lee, Stanford University

Accenture

The supply chain as a concept and a reality is moving far beyond the confines of an individual organization. It has become a dynamic process that involves the simultaneous acquisition and continuous reevaluation of partners, technologies, and organizational structures. The building blocks of successful supply chains are numerous and their interactions are complex, but businesses have no choice but to embark on such an initiative: the supply chain has evolved from corporate necessity to enhancing competitive advantage for savvy industry leaders.

Aligning Business and Supply Chain Strategy
In the 1980s and early 1990s, the majority of companies focused their supply chain initiatives on reengineering supply chain cost structures. These initiatives were driven primarily by corporate restructuring and downsizing as company strategies responded to the accelerated opening of global markets. Overall, these efforts were amazingly successful; a study by the Council of Logistics Management shows that during that period, companies managed a reduction in logistics costs of 33 percent (see Figure 1).


Figure 1.	North American Logistics Costs

As the 1990s have progressed, we have seen a new driving force in corporate strategy: delighting global customers. Customers have become increasingly demanding, expecting ever higher levels of product and service performance. Gradually, in industry after industry, customers are coming to expect greater customization of products and services to their individual needs. At the same time, they are also used to a constant stream of innovations in the goods and services they use that either reduces the cost or improves the benefits they receive.

While the globalization of many industries has created many opportunities for the participants it is also bringing to the customer competitive products and fresh alternatives that further increase the customer's expectations. Finally, product quality no longer provides the competitive advantage that it did earlier in the decade; it is merely considered a qualifying factor as customers choose from a wide range of fairly equal alternatives. The customer is beginning to demand the same levels of quality, not just in the product itself but in the delivery of that product and the services that are packaged with it.

Supply chain strategies are undergoing tremendous changes in response to these pressures. Outsourcing and partnering with other enterprises are becoming more commonplace as companies seek to share the burden of demand for more complex products and more responsive services. With the enablement of new technologies such as the Internet, new channel structures have rapidly emerged to satisfy these demands. Companies are recognizing that supply chain innovations can be not only be a driver of cost reduction, but importantly, a catalyst for revenue growth by achieving greater levels of customer satisfaction.

As we look into the post 2000 era, we see another major evolution in supply chain strategy supply chain design and operations will drive, as well as continue to be driven by corporate strategy and shareholder value. We call the new generation of supply chain strategy, Synchronized Supply Chains.

Synchronized Supply Chains encompass three major structural changes in how companies will manage supply chain operations:

Companies will collaborate with supply chain partners and synchronize operations
Technology and the world wide web will be key enablers of innovative supply chain strategy
Supply chain organizations will be restructured and reskilled to achieve these goals

Synchronized Supply Chains will have a major impact on creating value for a company and supply chain partners. This will be accomplished by increasing shareholder value through profitable revenue enhancement, cost reduction and improved asset productivity by synchronizing company and channel partner's supply chains.

The value that can be created by aligning business and supply chain strategies can be readily seen by a review of the success of three major U.S. companies recognized for their leadership in supply chain management. Wal-Mart, Coca-Cola, and Dell Computer have easily outperformed their competitors in terms of shareholder value growth over the eight year period from 1988-1996, Wal-Mart's growth exceeded its industry average by nearly 250 percent, Coca-Cola's by nearly 500 percent, and Dell Computer's by over 3,000 percent (according to the Stern Stewart EVA^TM 1000 database).

Collaborating to Create Value
While the field of supply chain management provides a wealth of opportunities to create value for a company, one of the more difficult aspects is recognizing which initiatives can deliver the most value for a particular industry and a specific company. A Synchronized Supply Chain strategy, with its inherent focus on web-enabled collaboration among supply chain partners, is emerging as a major driver of long-term competitive advantage for pioneering globally aligned companies.

In order to understand how companies are aligning their operations with Synchronized Supply Chain strategies, Accenture, in conjunction with Stanford University, Northwestern University, and INSEAD, launched the Consumer Driven Demand Networks (CDDN) initiative. This is a multi-year, multi-industry effort focused on assessing the value that can be gained through synchronization of material, information, and financial linkages across the "extended enterprise". The first study concentrated on value creation opportunities in the personal computer (PC) industry. The second study (being finalized) has focused on creating supply chain value in the food and consumer packaged goods industry.

Unlocking the Hidden Value in the Personal Computer Supply Chain
Despite extensive attention and activity related to improving supply chain collaboration within the industry, the PC industry does not view itself as being highly integrated. As such, the significant benefits to be gained have attracted considerable interest and substantial activity, much of which is either underway or planned. There is confusion among participants about the methods of collaboration that would garner the most benefits. The research¹ shows that, if undertaken correctly, supply chain collaboration in the PC industry can be well worth the effort for PC industry participants and that two findings (among others) are to be recommended as particularly beneficial in moving towards a Synchronized Supply Chain:

Pursue Compression Strategy
Collaborate on Planning and Execution


Figure 2.	Supply Chain Compression Options

Pursue Compression Strategy
Pursue compression of the supply chain's structure by understanding all the options and making choices strategically.
Although there may be any number of variations, the research identified four basic options for supply chain compression that are available to commercial PC market participants (see Figure 2). Each option can deliver increasingly greater value, yet each is also progressively more challenging to undertake:

Intra-company Postponement:
moves final configuration from a company's manufacturing plant to its distribution center.
Inter-company Postponement:
moves final configuration from the PC assembler to a downstream channel partner (for example, distributor, reseller, or retailer).
Sales Agent Model:
assumes inventory is carried by the assembler alone, allowing the distributor/reseller to focus on sales and order taking.
Direct Model:
makes the assembler responsible for both order processing and fulfillment, thereby eliminating the distributor/reseller roles.


Figure 3.	Compressed Supply Chain Impacts on Shareholder Value Added

Substantial value is being missed by many companies that either do not grasp the possibility of modifying the fundamental supply chain structure, reject it as being too risky, execute it poorly, or attempt to do too much at once even though some options may conflict with others. The study's detailed analysis shows that successful implementation may enhance shareholder value by as much as $470 million for a typical assembler and $100 million for a typical distributor (see Figure 3).

Collaborate on Planning and Execution
Implement collaborative planning with supply chain partners, not just because it enhances value, but because it has become a requirement for survival.
Rapid technological change, ever shorter product life cycles, and increased supply chain complexity in the PC industry have all compounded the challenge of matching supply to demand. Close collaboration among supply chain partners can better align the parties and thus enhance the value of the network's combined activities. Collaborative planning and execution is a three-pronged effort, encompassing demand planning, order fulfillment, and capacity planning. It also requires the support of the latest technology. Together, these efforts send a more accurate demand signal throughout the supply chain, which minimizes waste and maximizes responsiveness.

Collaborative demand planning is accomplished by allowing order and market information to flow upstream continuously from the point of sale, while information on product availability and inventory levels flow downstream. This continuous information loop eliminates or substantially lessens the type of incremental distortion that occurs when each participant responds to their own interpretation of supply and demand data.

Collaborative order fulfillment goes further. It is characterized by negotiated or joint decisions, such as order size and frequency, and by the transfer of management, and possibly ownership of inventory from the customer to the supplier. As a result, there is less incremental distortion of demand. The greater the synchronization, the greater the value added to the entire supply chain's performance. The most highly synchronized order fulfillment approaches let customer demand data directly drive orders, instead of basing orders on forecasts.


Figure 4.	Collaborative Planning Impacts on Shareholder Value

Joint capacity planning involves jointly coordinating on medium to long-term material and capacity issues so that the supply chain can gear up or cut back large or long-lasting fluctuations in customer demand.

One example of capacity planning is the long-term sharing of capacity risk through joint venturing. One leading DRAM manufacturer has made collaborative planning through joint ventures one of the cornerstones of its strategy. It uses this method to share both risks and rewards with partners who have a significant ongoing need for DRAMs. For example, when it launched its first DRAM joint venture, a computer manufacturer co-invested in a new manufacturing facility. In return, it was guaranteed a percentage of the facility's output. By sharing capacity risk and planning, both companies benefited when they were able to keep up with demand during a 1995 DRAM shortage.

The research indicates that the risks are relatively low for this particular initiative while the return on investment is high. The financial analysis suggests that collaborative planning can lead to inventory reductions of 10% to 50% for each of the supply chain participants. For the representative PC supply chain, this can amount to an enhanced value of as much as $330 million for the entire chain. (Figure 4 shows how these rewards are shared among the supply chain participants)

Unlocking the Hidden Value in the Food and Consumer Packaged Goods Supply Chain
The second CDDN study has focused on identifying supply chain strategy innovations in the food & consumer packaged goods (F&CPG) industry². The study analyzed "winners" and "also-rans" in F&CPG , identifying successful strategies and illustrating ways that "winners" use supply chain excellence, both internally and externally, to dominate their market.

The research findings indicate that the winners had gone well beyond tactical supply chain initiatives and had taken a more strategic approach to the supply chain. The winners succeeded by focusing on two key building blocks of Synchronized Supply Chain strategy:

Choosing the right supply chain(s)
Synchronizing through collaborative design

Choosing the Right Supply Chain:
Aligning supply chain and business unit strategies to achieve market leadership.
The findings suggest six supply chain strategies which have been highly successful and have unique supply chain structures and characteristics. Furthermore, successful firms assess the value provided to supply chain partners, as well as the end consumer, allowing them to balance strategy within the context of the extended enterprise. The first set of supply chain strategies most directly supports business strategies focused on product leadership and brand-building:

Market Saturation Driven:
Focuses on generating high profit margins through strong brands and ubiquitous marketing and distribution.
Operationally Agile:
Configures assets and operations to react nimbly to emerging consumer trends along lines of product category or geographic region.
Freshness Oriented:
Concentrates on earning a premium by providing the consumer with product that is fresher than competitor's offering.

For instance, a leading fresh food supplier considers the cold chain critical to success since temperature is the dominant factor in shelf life. Its cold chain starts from the day the produce is picked and lasts until consumers bring it home to their refrigerators. The cold chain requires several handling activities which incur risk that the desired temperature range will not be maintained and thus the product's shelf life will be shortened. The company controls the cold chain generally to the retail customer's produce distribution warehouse, where the retailer assumes control from that location to the retail shelf. It monitors shelf temperatures on a random basis and provides feedback to retailers. It also provides a toll-free hotline for calls about poor quality that can be traced back to the particular store and works closely with some retail partners to develop and maintain the appropriate temperatures for the cold chain. The cold chain is particularly important for fruit offerings, which are more sensitive to changes in temperature than vegetables. The second set of strategies deal more with tighter collaboration with the channel, the customer, and/or the end consumer:

Consumer Customizer:
Uses mass customization to build and maintain close relationships with end consumers through direct sales.
Trade Focused:
Like logistics optimization, this strategy puts a priority on "low price, best-value" for the consumer, but it focuses less on brand than on dedicated service to trade customers.
Logistics Optimizer:
Emphasizes a balance of supply chain efficiency and effectiveness.

The case of Procter & Gamble (drayer.ascet.com) illustrates how a logistics optimization strategy supports their business strategy. The focus is on driving operational efficiencies by collaborating with trade partners to create a truly demand driven supply chain. Through a series of programs throughout the 1990's that focused on efficient replenishment, promotion, product introduction, and assortment, P&G has reduced its product costs by more than $2 per case between 1990 and 1997, for $2.5 billion in total. An illustrative program reduced product prices for retailers who met certain supply-chain efficiency requirements such as two-hour carrier turnaround; on-time customer pick-up and electronic purchase ordering and invoicing. P&G has led the industry with these types of initiatives, allowing for instance its CRP system to be resold even to P&G competitors, recognizing that making this an open standard will benefit the company strategically.

Each of the six supply chain strategies can be powerful when aligned to a business unit's overall strategy. However, only collaboration between multiple trading partners will yield a synchronized supply chain. This often maximizes the end consumer value proposition and ultimately the value to each supply chain participant.

Synchronize through collaborative design:
Achieving supply chain synchronization with partners through collaborative design.
The majority of collaborative programs today are best described as "joint participation" programs. Customized pallets, reverse logistics and vendor managed inventory (VMI) initiatives primarily focused on one-to-one and/or transactional relationships. The study demonstrated that while these tactics are necessary, they are not sufficient to generate substantially increased shareholder value. Most of the consistent winners researched are moving beyond these tactical aspects of collaboration to jointly designed, strategic, extended enterprise relationships. This means more than sharing sales, production, marketing, and process information in order to improve the product flow through the supply chain. Instead, companies are considering collaborative design, a structured process where partners map supply chain flows, structures, asset deployment, and responsibilities with a proper allocation of risks and rewards. It might require the reallocation among the partners of such supply chain functions as category management, inventory management, forecasting, and the ownership or operation of the transportation and warehousing functions. Even massive investments, such as production networks may see changes in ownership and operation. Of the study participants, 76% had seen such a shift over the last five years.

True collaborative design on an extended-enterprise basis is still in its infancy, but the leading firms are already demonstrating collaborative behavior in key areas such as asset ownership and product design. For instance, the research findings showed that while asset reallocation in distribution was more common, it was those manufacturers with less direct ownership of the production assets that actually achieved higher levels of profitability. This suggests that the competitive advantage of outsourcing distribution has been narrowed as the practice has become more commonplace and other functions may hold more potential for the future.

Collaborative product design manifests itself primarily through activities such as joint planning sessions, research on new product designs, sharing promotion/merchandising ideas, consumer value programs, and joint sales calls. Both manufacturers and retailers involved in such efforts also noted qualitative benefits such as gaining insights into consumer behavior and improved relationships. In addition, they saw increases in sales volume and/or profits that suggest a strong correlation between such activities and higher shareholder value. The previous study of the PC industry also noted significant activity and benefits from collaborative product design. In that industry there are many examples of companies that collaborate on activities such as managing product introductions and planning product lifecycles.

Information sharing was found to be a key enabler of these developments. The information ranged from store and warehouse inventory data, to pricing data and sales forecasts. Once again, the findings indicate that organizations that reported higher levels of collaboration achieved higher than average profitability. While it was clear that EDI penetration has reached critical mass, (particularly for purchase orders, invoicing, and advanced shipping notices), its use was more limited for certain types of information such as production schedules and transportation information. This limitation hinders companies from realizing the full benefits of collaborative design. And the opportunity is significant - the study's conservative financial modeling demonstrated that the potential economic impact of collaborative design is more than $12 billion for the 66 representative companies analyzed in the study - given the industry sample's modest EVA™ of $3.8 billion in 1996, this represents a substantial opportunity.

It is clear that while the specific tactics and opportunities may differ between the PC industry and the Food and Consumer Packaged Goods industry, the synchronization of the supply chains in these and other industries represents the next era of competitive advantage. As such, leaders of companies today must consider how they can prepare their organizations for this new environment.


Figure 5.	Choose the Right Initiative

Synchronizing to Sustain Advantage
Success in designing and implementing a Synchronized Supply Chain strategy requires a coordinated set of actions involving all relevant supply chain partners. Unlike traditional supply chain strategies which focus on improving operations inside a company, Synchronized Supply Chain strategies require coordinated crossfunctional and multiple partner decision making throughout the entire supply chain (Figure 5 details the four key building blocks of a successful strategy). Like any other large scale change, it is important to build the business capabilities not just in the business processes, but also to support them with changes to the organizational structure and enabling technologies. Only then can the strategy be effected. Likewise, the strategy and the initiatives chosen need to be in alignment with capabilities that can be realistically achieved in each of these three areas. The core competencies with which a firm begins must be taken into account.

Choose the Right Initiative
Meeting the challenges posed by the rapidly shifting consumer-demand-driven marketplace is a difficult task for most firms today. It is essential for companies to define strategies for both their overall business and their supply chains before they can develop and implement specific tactics in support of those strategies. Indeed, some companies discover that the two "strategies" are, in fact, two aspects of a single overall business plan, and that the two must be closely aligned.

Once a corporation clearly defines its supply chain strategy and understands how it drives corporate strategy, the next step becomes defining the appropriate supply chain configuration. Supply chain strategies have implications far beyond the boundaries of a single company; indeed, they must extend to the relationships between and among all supply chain partners. The process of supply chain configuration should be viewed as a cross-enterprise exercise. The key outcome should be twofold: identifying the best options to deliver product to consumers cost effectively and determination of which corporate entities are most capable of taking ownership of specific processes and activities.

An analysis of supply chain economics examines the role and costs of each of the different supply chain participants. If this examination can be driven down to the detailed practices and performance metrics, then each participant's competitive advantage can be understood. When combined with the targeted value proposition, this can yield the ideal supply chain structure.

In the case of a major U.S. grocery retailer, alternative flow paths were analyzed to first establish viability, then to select optimal parts for certain product/channel combinations. The goal was to reassign appropriate volume from "pick and ship" to the alternative flow path that had the lowest possible qualifying cost. By accessing internal data as well as information provided by trading partners, many items were identified as candidates for factory-direct shipment. The remainder was then filtered for break-bulk candidacy. This process has been dubbed "flow pass economics" and is applicable in many industries.

Cases such as this demonstrate some of the key success factors to be considered. First, look beyond initiatives that focus on functional excellence since breakthrough opportunities typically come outside the functions themselves, chiefly at interface points. Pay close attention to the timing of partner participation and do not be afraid to involve non-traditional trading partners early, even looking outside the industry to identify improvement opportunities.

Ensure that the strategic evaluations are bolstered by strong field operation involvement in the joint design since failure on this score can deliver results that are unlikely to be implementable. Pilot projects can be used in the same way as single company effort, but care should be taken to emphasize the narrow-scope of multi participant efforts in the early stages. The implementation must be bolstered by a strong business case and stringent targets to provide assurance in weathering the implementation "storm."

Developing Synchronized Relationships Among Supply Chain Partners
All of the initiatives mentioned for supply chain synchronization require some level of relationship building. The idea of supply-chain "partnerships" has been discussed frequently for the past several years. The task of building new kinds of relationships is, by nature, imprecise. This human factor can be the most challenging of all the requirements. Skeptics may see the concept as unrealistic because of the complexity involved in true supply-chain partnerships and the difficulty of establishing genuine trust among potential partners. However, there are proven methods to circumvent the difficulties as results have shown.

All of these initiatives require various levels and types of cooperation among the supply chain partners, ranging from transactional to interactive and interdependent. Transactional relationships do not require much shared information or decision making, therefore, they should not be difficult for most partner companies to implement. A more interactive relationship, however, requires shared information, some joint planning and some shared decision making (Figure 6 highlights some of the potential initiatives, their achievable benefits, and the requirements of each partner). Such a relationship requires deeper cooperation, the willingness and capacity to learn new skills, and varying degrees of trust. In this case, the boundaries between companies become blurred, information (proprietary or otherwise) is shared extensively, as are decisions, investments, and assets. The value of goodwill, candor, and skill required in such interdependent relationships cannot be overemphasized. In fact, most companies that are not near this level of cooperation today would require radical transformation to achieve a successful relationship with multiple partners.

Finally, while some integration can be achieved by forcing a weaker partner to simply become the unwilling victim of cost and value shifting. In general, this is not a sustainable proposition, and it generates longer-term total supply chain inefficiency. Cooperation is the cornerstone of successful integration, and there is more value that can be achieved through positive communication than through coercive alignment.

Implement the Right Enabling Technologies
Many technology initiatives for supply chain companies have been focused around implementations of Enterprise Resource Planning (ERP) systems. The driver in these cases is often replacement of legacy technology to provide a common technical architecture and financial system across the entire company. The value provided to the supply chain operations has typically been standardization and automation of processes. These implementations while enormously complex, have centered around a single ERP vendor and had limited impact on supply chain performance.

Meanwhile, multiple software vendors have emerged to provide critical supply chain functionality absent in traditional ERP transaction systems. Many of the possible supply chain strategies have only become feasible with the rapid development of various technologies that provide a means to tackle the complexities and immediacy found in leading global supply chains. This functionality can be grouped into three broad groups of capability.

First, software and hardware advancements have translated into new real world capabilities. Examples are sophisticated forecasting algorithms, highly reactive scenario planning capabilities, planning around real world constraints and priorities, optimization logic to plan supply chain activities, and rapid order configuration and order promising.

Secondly, the convergence and expansion of the enterprise resource planning and supply chain planning software markets means it has become easier to provide integration of information across multiple supply chain activities and other business systems within the company.

Third, the rapid evolution of the Internet has also provided an open technical architecture to support business-to-business collaboration efforts. It has the potential to interactively share a much more diverse and broadband of information than the traditional EDI methods. Finally, its relative lower cost means that information can be economically exchanged with parties (such as individual consumers) with whom it was not previously possible.

All three of these capabilities are still developing at a rapid pace. Nevertheless, we are already seeing the first wave of supply chain technology installations driven by value creation propositions based on supply chain synchronization. These early solutions typically provide decision support for key supply chain operations by integrating several of the supply chain software vendors. These are complex and often targeted at the key segments of a company's business.

As these solutions mature, there are significant obstacles to overcome to increase their scope to form a complete and coherent solution supporting true extended enterprise supply chain synchronization. The challenges will be to manage roll out of this cross functional integration across multi-echelon supply chains projects that will involve multiple partners, countries, vendors and applications. Also, the development of these products must be matched with innovations in the new collaborative business models these technologies support.

With these thoughts in mind, it is important that any company contemplating reengineering of their supply chain activities fully understand the limitations and strengths of these technical capabilities, so that the new strategy is built around achievable technology imperatives.

Restructure and Reskill Organizational Relationships
Perhaps the most important component of a Synchronized Supply Chain strategy is helping people adapt to the new operating realities of cross-supply chain partner collaboration.

First, metrics regarding acceptable performance must be clearly understood. Since partners are now collectively responsible for revenue growth, costs, asset utilization and service levels, shareholder value must be defined in a "win-win" world where rewards are equitably shared and costs fairly distributed. Even a "win-win" situation can be problematic, particularly if the benefits are not divided equally. If one participant feels that their portion does not reflect their share of the cost, investment or risk, then they will not be willing to move forward with the relationship. The PC industry demonstrates how policies can be implemented to counteract this. Here, it is common to use non-monetary instruments such as generous return policies, rebates and price protection to equitably balance benefits with the associated burden.

Second, core capability teams (consisting of supply chain partner company professionals) must be focused on key Synchronizes Supply Chain activities (for example, integrated supply/demand planning from consumer back to suppliers) which synchronize activities across the supply chain. Finally, the journey to success must be clearly understood and articulated by senior executives charged with making synchronization happen. The strategy must be an integral part of a new "cross supply chain culture", shared by all partners. Lack of common values, behaviors and beliefs will endanger the entire journey.

The overall objective of Synchronized Supply Chain initiatives is that it is more profitable for all parties involved. This is not a "zero-sum game." Supply chain partners need to understand that roles that had traditionally been filled by one party may change to another party in order to drive long-term profitability for each player. Supply chain partners need to evaluate their relative strengths and capabilities openly and critically. Implicit in this process is the requirement to "open the books" to managers outside the corporate boundaries of one particular firm where cross-company and cross-functional teams can analyze cost structures and performance metrics. Trust is the key component if supply-chain partners want to collaborate strategically, rather than only on a tactical level.

It takes a superlative fit to make even the simplest supply chain synchronization ideas deliver. Not every supply chain partner will be equally suited to these demands, therefore, partners must be selected carefully. Their capabilities, management philosophy and vision, culture, flexibility, and commitment should all be taken into account.

The form and degree of integration attempted should not be a matter of will alone or of simply emulating competitors. The nature of the relationships available will determine the success of the various choices. The need to realistically assess the limitations should not discourage integration efforts but the frank assessment merely helps define an appropriate starting point. For instance, a company might choose to pursue collaborative planning or postponement of final product configuration rather than go to a direct model. Moreover, relationships are not static since companies can develop their partner skills over time. One of the compelling advantages of integration efforts is that even modest efforts can produce some immediate benefits, thereby providing the foundation for strengthening their partner relationships over time.

TABLE 1	Benefits and Challenges of Synchronized Supply Chains
Supply Chain Function:	Synchronization Achieves:	...And Requires The Ability to
Demand Generation	Richer understanding of customers' requirements	Translate customer data into valuable insights
Demand Generation	More interdependent customer relationships	Communicate differently
Demand Planning	Reduced bull-whip effect	Align finance, sales and operations forecasts
Demand Planning	Accurate demand plans	Share information
Order Execution	Improved lead times and fill rates	Develop responsive and reliable fulfillment processes
Capacity Planning	Optimal capacity usage	Maintain flexible manufacturing
Materials Planning	Supply/demand alignment	Utilize demand information for materials planning
Purchasing	Lowest total costs	Rationalize supplier program
Purchasing	More interdependent supplier relationships	Communicate differently

CONCLUSION
We are now seeing the supply chain design and operation as a driver of corporate strategy and shareholder value. Companies will find that their conventional supply chain integration activities will have to be expanded beyond the boundaries of their own organization. The collaborative efforts now emerging among supply chain partners will evolve in sophistication and scope so that entire supply chains will synchronize their planning and operational activities. This will necessitate restructuring of supply chain organizations and reskilling of the employees as these new supply chain strategies are implemented. Supply chain technologies will be the key enabler and driver of this innovative supply chain strategy, and companies who are too slow in response to these strategies will be left behind in the market.

About the Authors
Dr. David L. Anderson
Dr. Anderson is a Senior Partner within the Accenture Supply Chain Practice, in charge of Supply Chain Technology Solutions, and is based in the Boston and London offices. He specializes in supply chain management, logistics strategy, customer service, logistics information systems, and operations outsourcing strategy.

Before joining Accenture, Dr. Anderson was vice president in charge of logistics consulting at Temple, Barker & Sloane, Inc. and a vice president of Data Resources, Inc. where he founded the firm's transportation and logistics consulting practice.

Dr. Anderson is a member of the Institute of Logistics, the Council of Logistics Management, and the Canadian Association of Logistics Management.

He is currently serving on the National Science Foundation committee on Surface Freight Transport Regulation and has published numerous articles on supply chain compression, global logistics trends, outsourcing and operations management. He is a member of the Board of Directors of the Northwestern University Center for Transportation Studies and of the Stanford University Supply Chain Forum.

Hau L. Lee
Hau L. Lee is the Kleiner Perkins, Mayfield, Sequoia Capital Professor and Deputy Chairman of the Department of Industrial Engineering and Engineering Management, and Professor of Operations Management at the Graduate School Of Business at Stanford University. His areas of specialization include Supply chain management, global logistics system design, inventory planning, and manufacturing strategy. He is the founding and current Director of the Stanford Global Supply Chain Management Forum, an industry-academic consortium to advance the theory and practice of global supply chain management.

Professor Lee has published widely in journals such as Management Science, Operations Research, Harvard Business Review, Sloan Management Review, Supply Chain Management Review, IIE Transactions, Interfaces, European J. Of Operational Research, and Naval Research Logistics, etc. He has served on the editorial boards of many international journals, and is the current Editor-in-Chief of Management Science.

Professor Lee has consulted extensively for companies such as Hewlett-Packard Company, BayNetworks, SUN Microsystems, Apple Computer, IBM, General Motors, Xilinx Corp., Accenture, Eli Lilly and Company, Booz-Allen and Hamilton, Raychem Corp., McKesson, Motorola, and NON-STOP Logistics Company. He has also given executive training workshops on Supply chain management and global logistics in Asia, Europe and America. Professor Lee obtained his B.Soc.Sc. degree in Economics and Statistics from the University of Hong Kong, his M.Sc. degree in Operational Research from the London School of Economics, and his M.S. and Ph.D. degrees in Operations Research from the Wharton School of the University of Pennsylvania.

Footnotes

The study took a three pronged approach based upon 45 mail surveys, 10 site visits and secondary research that included financial analysis of more than 100 companies. Based on this research a financial model was developed of a representative supply chain for the PC industry that constituted the baseline for analysis of initiatives. The value profile was measured using Stern Stewart & Co.'s published value measure known as Economic Value Add or EVATM, which is driven by four levers: revenues, operating margins, capital employed and cost of capital. For each potential initiative, benchmark improvements in inventory turns and margin were identified and applied to the financial model to yield the difference between baseline performance and the value achieved from successful implementation.
The study discussed in this article consisted of a comprehensive analysis of "winners" and "also-rans" in the Food & Consumer Packaged Goods industry, identifying successful strategies and illustrating ways that "winners" use supply chain excellence, both internally and externally, to dominate their marketplace. The team's conclusions are based on a comprehensive survey of 220 manufacturers, retailers, and wholesalers, as well as case studies and interviews with many leading practitioners and supply chain executives of Fortune 500 companies.

The authors would like to acknowledge the substantial contribution of Stuart Roach of Accenture to this paper.

About the Author

Title:

Former Accenture Partner

Accenture

Dr. David L. Anderson is managing director of Supply Chain Ventures LLC, an early-stage venture fund with investments in software and biotech, and aretired managing partner of the Accenture Supply Chain Management practice. He can be reached at david.l.anderson@accenture.com.

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