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Program

Innovation in Supply Chain Management 2009

Many of the greatest innovations and breakthroughs are created during economic downturns. As the financial crisis re-shapes many firms there is an opportunity to look at how the most forward thinking organizations are harnessing innovation as a strategy to mitigate risk and develop their businesses.

LQ’s innovation symposium will focus on business model innovation and process innovation in tough times.

Agenda

December 2, 2009 at The Country Club

7:00 a.m. - 7:50 a.m.
Breakfast & Networking

7:50 a.m. - 8:00 a.m.
Welcome & Opening Address

8:00 a.m. - 9:15 a.m.
CASE STUDY & PANEL DISCUSSION: Identifying Trends in the Supply Chain: How Organizations Capitalize on Trends to Create Value. (Session notes below)

9:15 a.m. - 9:45 a.m.
Executive Exchange (Q & A)

9:45 a.m. - 10:00 a.m.
Refreshments & Break

10:00 a.m. - 11:15 a.m.
PANEL DISCUSSION: Creating Innovative and Sustainable Supply Chain Practice. (Session notes below)

11:15 a.m. - 11:45 p.m.
Executive Exchange (Q & A)

11:50 p.m. - 12:25 p.m.
Networking & Cocktail Reception

12:25 p.m. - 1:35 p.m.
Lunch

1:35 p.m - 2:15 p.m.
Introduction & Keynote Speaker

2:15 p.m. - 3:45 p.m.
CASE STUDY & PANEL DISCUSSION: Strategies to Mitigate Risk and Build Better Business Relationships. (Session notes below)

3:45 p.m. - 4:05 p.m.
Executive Exchange (Q & A)

4:05 p.m.
Concluding Remarks

Session Notes:

1. Identifying Trends in the Supply Chain: How Organizations Capitalize on Trends to Create Value

The downturn and increased focus on sustainability has resulted in more firms restructuring their entire supply chains, sometimes to become more regional in their approach.

Also, in a growing number of cases, to mitigate risk in the financial crisis, firms are examining the value of vertical integration; Boeing, for example, in producing its new Dreamliner has been recently compelled to purchase one component manufacturer as it attempts to fix its complex supply chain practice.

Manufacturers are also shifting more away from global supply chains and focusing more on developing regional supply chains due to the economic downturn and the new focus on sustainability. After all, energy is becoming more expensive and will likely be less plentiful in the future.

Another major trend shows more organizations are reducing the number of suppliers they outsource to. Siemens, Europe's largest engineering group, for example, has recently stated it would reduce its suppliers this year by a fifth of its 370,000 purchasing partners.

Several other large industrial firms are working on similar projects aimed at reducing their costs.

However, in tandem with the today’s new emphasis on due diligence in the supply chain many firms are considering their both outsourcing options; should they outsource to a more suppliers to reduce risk, or use a reduced supplier base and develop deeper business relationships?

In addition, there is a trend for many large firms to look to the supply chain to free up cash through extended terms which may result in putting some suppliers out of business.

BMW, for example, recently reduced its number of suppliers and it has been in discussions with its rival Daimler about cooperating on joint purchases with the view that purchasing margins could be improved between 8 and 15 per cent on jointly purchased products.

This panel examines important trends and examines opportunities to create new innovative practices as companies use the economic downturn to their advantage.



2. Creating Innovative and Sustainable Supply Chain Practices

Just as information technology exploded in the 1990s, sustainability is the next competitive arena. Sustainability and innovation are even influencing talent development. Green and entrepreneurial graduates in business see opportunities that could advance their careers in ways that are similar to business graduates who looked to technology more than 20 years ago as a high growth area.

While the initial aim is often focused on creating a better corporate image, most firms are finding they can reduce costs and create new business. These results provide compelling evidence that sustainability and innovation offer business opportunities especially during an economic downturn.

Wal-Mart’s CEO, Lee Scott, has directed more than 1,000 suppliers in China to cut packaging costs by 5 percent by 2013 and reduce energy consumption by products supplied to Wal-Mart by 25 percent in three years. Unilever has declared that most of its paper-based products will come from sustainable-yield forest by the end of next year.

Other examples include FedEx, which has a fleet of 700 aircraft and 44,000 vehicles that use 4 million U.S. gallons of fuel daily. In today’s downturn the company is investing in new Boeing 757s as part of its Fuel Sense program aiming to reduce its fuel consumption by 36 percent while simultaneously increasing capacity by 20 percent. FedEx has also turned its energy-saving expertise into a stand-alone consulting business to develop a new profit center.

Returns are another important area. In the U.S., it has been estimated that returns reduce corporate profitability by up to 4 percent annually. Some firms have instituted new processes to re-capture value on products and lost value by reusing them. Cisco, for example, created a new recycling group in 2004. Reuse of equipment has risen from 5 percent that year to 45 percent in 2008, contributing $100 million to Cisco’s bottom-line last year alone.

Enterprise carbon management and energy analysis are becoming more important as tools to identify waste in the supply chain. The important of these tools is bound to increase. After all, the American Clean Energy and Security Act have created nearly 400 new regulations. It is also creating a new cap and trade system that will change the way the industry and shareholders look at carbon production.

What are the opportunities for your firm? What metrics have firms applied to assess factors such as fuel prices, green strategies, and heightened competition? How can you ‘lean’ your organization energy requirements when facing rising fuel prices? These are some of the questions this session will address.



3. Strategies to Mitigate Risk and Build Business Relationships

According to a report in the Financial Times, the managing director of the supply chain management practice at Accenture, Narendra Mulani, conducting diligence in the supply chain is one of the biggest issues of our time.

This is of paramount importance as close to 90 percent of 3PL users in the annual Capgemini State of the Logistics Outsourcing Report stated that outsourcing represents a strategic and competitive advantage for their firm.

However, as the credit crunch continues firms are watching their own financial health and are dedicating more time to examining the solvency of their supply chain outsourcing suppliers. This can often result in the formation of tighter business relationships with suppliers.

Findings of a November 2008 survey of 40 Chief Procurement Officers conducted by Accenture report that 70 percent of these procurement and supply chain executives are dedicating more time to monitor the financial health of their suppliers. Nearly three-quarters are spending more time on supplier relationship management and developing metrics for the health of suppliers. As suppliers are not likely to tell their clients about their financial difficulties it can be vital to communicate with suppliers more often.

Firms such as BMW have had sufficient concern about the potential disruption to their supply chain that to place more staff in their risk monitoring department to keep abreast of the financial health of their supplier components-makers. In one case, a supplier has filed for insolvency, which put BMW into a crisis situation. They looked at going to another supplier, but this would have required six months, which made this an unlikely solution. Instead they worked at stabilizing their supplier’s business.

Each week there are new failures at suppliers in all sectors from retail to manufacturing. Just-in-time supply chains with reliance on a few major partners can leave some firms too exposed.

How should firms monitor whether their suppliers are getting into difficulty? What should they do if they get into trouble?

This session is dedicated to exploring innovative business relationships in today’s economic climate between 3PLs and their clients in order to balance risk and investment.


LQ's Gold (2014) Symposium Sponsors
BCG C.H. Robinson Worldwide, Inc. GENCO GENPRO GENCO
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