eSupplyChainManagement:

TheCornerstoneofyour

E-BusinessStrategy

ePharmaSummit

April17,2001AgendaWhoisi2Technologies?TheInternetandyoursupplychainComponentsofabest-in-classsupplychaineSCM:Thefoundationofyoure-businessstrategySuccessfullyimplementingeSCM2i2’sMissionUnderstandingtheValuePotentialistheFirstStepini2’sValueDeliveryProcess3Foundedin1988,withabout6000employeesin65officesaroundtheworldRecognizedleaderinSupplyChainManagement&e-Business,accordingtoBenchmarkingPartners,Gartner,AMR,GigaDesignatedbyBenchmarkingPartners“best-in-class〞inSCM3yearsrunning$1.1Brevenuein2000;profitablesinceinception90%annualgrowthrate57%overallSCMmarketsharein2000;70%oftop10pharmacompaniesareSCMcustomersCustomercommitment1,000customerswith9000implementations55%ofannualrevenuefromexistingclientsLeaderinR&D-investover23%ofrevenueannually(industryaverageis12%)0200400600800100012009697989900Revenue($000,000)i2TechnologiesataGlance4GartnerGroupSCPMagicQuadrantSource:GartnerResearch,20005AgendaWhoisi2Technologies?TheInternetandyoursupplychainComponentsofabest-in-classsupplychaineSCM:Thefoundationofyoure-businessstrategySuccessfullyimplementingeSCM6PurchasingManufacturingDistributionCustomer

Service&SalesFewchange-oversStableschedulesLongrunlengthsLowCOGSFewvendorsRegulatedenvironmentLowinvent-oriesLowtrans-portationHighinventoriesHighservicelevelsRegionalstocksFunctionalsiloswithconflictinggoalschallengesupplychainflexibilityandresponsiveness

SourceMakeDeliverSell7Sophisticatedsupplychaintechnologiescan

driveoperationalefficienciesthatERP

cannotdeliver19601970198019902000DepartmentEnterpriseExtendedEnterpriseMarketplaceFinMgmt,MRPERPAPSSFASCMCRMeProcMeta-MarketplaceGL,AP,AROE,IMMarketplace

IntegrationM2M8Value$WebsitePresenceeCommerce

Buying&SellingeBusinessBuying&Selling,

InformationSharing

Redeployingcurrent

businesspracticesIntelligent

eBusinessSynchronized

end-to-endbusiness

processes,spanning

multipleenterprisesOptimizedbusiness

processesWheremostPharmaceuticalandHealthcarecompaniesaretodayEvolutionoftheInternetforBusiness9WholesalersSuppliersManufacturersTheTraditionalPharmaceuticalSupplyChainRetailersCareProvidersPatientsInformationGoods10TheInternet-EnabledSupplyChain:

ConnectedandCollaborativeInformationGoodsRetailersPatientsWholesalersManufacturersSuppliersCustomerExchangesLogisticsExchangesLogisticsProvidersSupplierExchangesContract

ManufacturersVirtual

ManufacturersCareProviders11B2BconnectivityandcollaborationwilltransformthetraditionalsupplychainCyberMarketTraditionalTradingPartnersEnterpriseDepartmentalProductivityExternalTransactionsCollaborativeInteractionDomainApps1995HighercustomerexpectationsandincreasedpressureonmarginsComplextradingnetworkswithnewinternetchannelsDynamicbusinessrelationshipsPartneringwithcompetitors,suppliersandcustomerstodevelopanddeliverproductsEliminatingintermediariesConnectionParadigmBusinessParadigmE-Commerce1995-2000C-Commerce2000-2005AgendaWhoisi2Technologies?TheInternetandyoursupplychainComponentsofabest-in-classsupplychaineSCM:Thefoundationofyoure-businessstrategySuccessfullyimplementingeSCM13SCMisthe“tiethatbinds〞yourbusinessprocessestogetherWholesalersPhysiciansDistribution

CentersTransportationMarketplacesSuppliersSupplierMarketplacesManufacturing

PlantsCareProvidersRetailersLogisticsProviders14SCMshouldbeacriticalcomponent

ofyour(e)businessstrategyAflexiblesupplychainprovidesthevelocitytoIncreasemarketsharebyimprovedcustomersatisfactionandloyaltyDerivecompetitiveadvantagefromdifferentiatedresponsetocustomersAbest-in-classsupplychaingeneratesvalueforyourbottomlineIncreasedrevenuethroughfewerstockoutsHigherprofitthroughincreasedthroughputandbetterproductmixReducedinventoryandobsolescenceReducedwarehousing,transportationandreturnscosts15SupplyChainManagement=

Planning+ExecutionSupplyChainManagementisplanningDesignofthesupplychainAnticipationofdemandPlanningofproductionandlogisticstomeetdemandSupplyChainManagementisexecutionMakingaccurateandreliabledeliverypromisestocustomersFulfillingonthosepromiseswhilemaximizingprofitsEnd-to-endvisibilitytoenhancesupplychainvelocitySupplyChainManagement

Strategic

PlanningDemand

PlanningSupply

PlanningFulfillment16SupplyChainManagement

Strategic

PlanningDemand

PlanningSupply

PlanningFulfillmentStrategicPlanningSupplyChainPerformanceSupplyChainDesignWhat’stherightsupplychaindesign?Howwillthesupplychainperform?17StrategicPlanningCaseStudy:

GambroRenalProductsValuePropositionImprovecustomerservicelevelsinanincreasinglycompetitivemarketReduceinventorylevelsandexpeditingcostsProvidevisibilityacrossaglobalsupplychainSolutionProducereplenishmentplansforeachdistributioncenterbasedonlocaldemandforecastsandsafetystocktargetsEvaluatesupplychainperformanceagainstkeyperformanceindicators,andmodelpossiblechangestoidentifyimprovementsGenerateasinglenetrequirementsplantodetermineproductionlevelsResultsReduceddistributioncentersfrom49to6Reducedfinishedgoodsinventoryevenascustomerservicelevels(asmeasuredbyorderfulfillmentratio)increasedby20%Significantlyreducedlogistics(fulfillment)costs18SupplyChainManagement

Strategic

PlanningDemand

PlanningSupply

PlanningFulfillmentDemandPlanningDemandVisibilityPromotionPlanningDemandPlanningWhatisourbestestimateforfuturedemand?

Whattopromote,when?Whatproductshouldbeontheshelf?HowdoIcommunicatethedemandplan?MerchandisePlanning19DemandPlanningCaseStudy:

LeinerHealthProductsValuePropositionProvidegreaterforwardvisibilityImproveforecastaccuracyEnhancecompanygrowthSolutionImplementdemandplanningacrosseveryproductandcustomerlineandinstitutevendor-managedinventoryforkeycustomersDeterminehowforecastwillaffectinventorylevelsandproductionschedulesGainvisibilityintothesupplychainthroughcollaborativeforecastingResultsReducedcycletimesStrengthenedinternalcommunicationandbusinessprocessesImprovedforecastaccuracy20SupplyChainManagement

Strategic

PlanningDemand

PlanningSupply

PlanningFulfillmentSupplyPlanningInventoryPlanningMasterPlanningWhattomake,whenandwhere?Whattoreplenishandwhen?Howmuchtostock?DistributionPlanningAllocationPlanningWhogetsconstrainedsupply?Wherearetheproblems?Howtofix?FactoryPlanning21SupplyPlanningCaseStory:

Bristol-MyersSquibbValuePropositionDecreaseoverallcostsReduceinventoryShortenplanningcycletimesSolutionsPerform“what-if〞scenariosTransformfrommonthlytoweeklyplanningConsolidatemanufacturinganddistributionnetworksintoaunifiedvirtualplanResultsReducedplanningcycletimefrom3monthstohoursDecreasedinventoryIncreasedprofitability22SupplyChainManagement

Strategic

PlanningDemand

PlanningSupply

PlanningFulfillmentFulfillmentExecutionLogisticsExecutionLogisticsPlanningOrderPromisingHowdoweoptimallyallocateinventorytomeetdemand?

Howdowepromise,broker,administerandpresentaconsolidatedorder?

Howdowepick,pack,ship&delivertomeetcustomerserviceandprofitabilityobjectives?

Howcanwedetectandmanageexceptions?Monitor&Control23FulfillmentCaseStudy:

SanofiPharmaceuticalsValuePropositionReducetransportationcostsImplementnewsystemwithinexistingSCMandITarchitectureImproveon-timeshippingSolutionDevelopflexibletransportationmanagementsystemStreamlineshippingprocessAutomaticallyrelayshippinginformationacrossenterpriseResultsDecreasedshipmentcoststhroughbettercarrierselectionIncreasedproductivityinwarehouseasaresultofbetterworkschedulingImprovedcustomerservicethrougheffectivehandlingofspecialshippingrequirements24Collaboration

CollaborationSALES&MARKETING,FINANCEForecastConfigu-rationCUSTOMERSLOGISTICSDistri-butionManufac-turingMFGBusi-nessPlansTranspor-tationSUPPLIERS“Thesumofthelocaloptimadonotequaltheglobaloptimum.〞-EliGoldratt,TheoryofConstraintsConcurrentSupplyChainManagement:

ASingle,DynamicEnterpriseModelThei2TradeMatrixSCMplanningandexecutionsolutionsmaximizesupplychainvelocitybyoptimizingdemand,supply,andfulfillmentbusinessprocesses.SCMistheexecutionallinkbetweenproductdevelopmentandmarketing26AgendaWhoisi2Technologies?TheInternetandyoursupplychainComponentsofabest-in-classsupplychaineSCM:Thefoundationofyoure-businessstrategySuccessfullyimplementingeSCM27

Cause

Disconnects&DelaysDistributor++ManufacturerProviderLackofsupplychainintegrationhasacauseandeffectrelationshiptoyourbusiness

Effect

TheBullwhipEffectDistributorManufacturerProviderSalesTimeSalesTimeSalesTimePlanningcycle

timedelayDaysofsalesinventoryDemandsignalpropagationdelay/accuracyTotaltimetorespondtomarketchanges28SalesTimeROARevenueExpensesAssetsInventoryShockAbsorberCapacityShockAbsorberTheBullwhipEffectcanbeisolatedfromthecustomer,butaccommodationisexpensive29SupplyChainwithMultipleDisconnectsFixIntra-EnterpriseDisconnectsFixMulti-EnterpriseDisconnectsAddressingtherootcausesisabetterapproach

RootCauses

BusinessProcessLimitationInefficientprocesses,withdelaysanddisconnectsAdverserelationshipbetweenbuyerandsellerNarrow/superficialinformationexchangeLackofcoordinatedbusinessprocesses(inter-andintra-enterprise)

ITSystemsLimitationMultipleERP/APSsystemsLackofcommonmessaginginfrastructureLackoftimelypropagationofinformation30WholesalersSuppliersManufacturersRetailersSalesTimeSalesTimeSalesTimeSalesTimeAflexibleandconnectedsupplychainwillreducevolatilityandtheBullwhipEffect31e-BusinesscanoptimizeallofyoursupplychainactivitiesE-BusinessSynchronizedSequentialPlanningSynchronizedContinuousPlanning

DemandPlanningDistributionPlanningManufacturingPlanningProcurementPlanningSupplyChainOptimization

DemandPlanningDistributionPlanningManufacturingPlanningProcurementPlanningSupplyChainTaskOptimization32DellComputerusesTradeMatrix?topowertheultimatesupplychainOrganizationGlobalcomputermanufacturerthatdesigns,buildsandmarketsPCs,notebooks,servers,andnetworkingsolutionsforbusinessandhomeusers.Benefits--Mission-criticalhourlyplanningcycles

--110-dayimplementation

--Maintainonly2hoursofinventoryonfactoryfloor

(industryaverageis67days!)

--Dellaveragesabout55inventoryturnsperyearChallengesToreplaceinventoryatbothDellandDell’ssupplierswithaccurate,frequentinformationonDell’smaterialrequirementsdrivenfromactualmanufacturingschedules.33AgendaWhoisi2Technologies?TheInternetandyoursupplychainComponentsofabest-in-classsupplychaineSCM:Thefoundationofyoure-businessstrategySuccessfullyimplementingeSCM34Thepharmaceuticalvaluechain…Supplies&ServicesPharmaSCMStrategic&TacticalPlanningERPsMRPsSellBuyDistri-butorMailOrderPBMLargeHospital

NetworkRetail

Chain35…isbecomingincreasinglycomplex,demandingmoreofyoursupplychainTradingExchanges&Market-placesSupplies&ServicesWorld-wide

Retail

ExchangeCVSNeoformaVHA

IDNsPharmaSCMStrategic&TacticalPlanningERPsMRPsSellBuyDistri-butorMailOrderPBMLargeHospital

NetworkRetail

ChainWal-MartDoctor’s

Office36TwoDifferentApproachestoe-BusinessTinkeringwithyourbusinessFocusonsimpleprocessesSimplebuyingandsimplesellingFocusonautomatingtransactionsTransformingyourbusinessFocusondramaticallyincreasingrevenue

growthandEPSImprovingALLofyourvalue-creationprocessesFocusonbuildingahighvelocitycompany37Buildingane-BusinessStrategy:

CriticalSuccessFactorsSharedvalueMustaddvaluetoeveryconstituent,includingcustomersandsuppliersNeedstohelpyouprofitablydeliveryourproductstotherightcustomerattherighttimeSourcesofvalueeMarketplacesareboundedbyservices,content,andconnectivityValuecreationopportunitiesexistinextendedsupplychainsynchronization,fulfillmentexecution,andothers;procurementisjustthebeginningScalabletechnologythatallowsmultiplemethodsofcustomerandsupplierinteraction,andthatreachesmanytypesofcustomersTimetovalueEaseofadoptionandcostofconversionaresignificantlyimpactedbytimetovalue;everyparticipantmusthaveservices,data,andaccesstobusinesspartnersinordertorealizevalue38Selectingane-BusinessVendor:

CriticalSuccessFactorsLookforsoftwareproductsbasedonXML,HTML,andJava;theseproductsare“web-ready〞Selectvendorsthatreleasenewversionsoftheirproductsthatmovetowardsolvingarchitectureproblemsat