WEBVTT

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Well, in my research, I find
that nine out of ten companies

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are stuck at the intersection of
operating margin and inventory

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turns.

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And we kind of pat
ourselves on the back

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that we have best
practices, but how can

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we say we have best practices
if we're not making progress

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on those two very
critical metrics that

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correlate very highly to
market cap and market to book?

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And the other thing is, as we
look at emerging technologies,

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whether it's cloud,
or cognitive learning,

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or robotics, or 3D printing,
we have so much opportunity

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to take so much waste
out of the supply chain.

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I'm like, let's rewire
and get on with it.

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So one of the things
I wanted to understand

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was, what were the correlations
of supply chain metrics

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to value?

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Because the traditional
supply chain

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has been very focused
on cost and, as we

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try to become better
business partners,

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people want to
drive value chains,

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but they want to answer the
question of what's value?

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So we started by taking 15 years
of financial data and doing

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correlations to
market capitalisation,

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which is the number of shares
outstanding times price,

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and also looking
at market-to-book,

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and market-to-tangible book.

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And we found that we had
a very high correlation

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on the cash-to-cash metrics
on operating margin and return

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on invested capital.

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We did not have a
high correlation

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of return on assets,
which is interesting to me

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because very manufacturing
centric supply chains will

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often reward manufacturing
on return on assets

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and throw the supply
chain out of balance.

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One of the things I
want to understand

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was why are nine out
of ten company stuck?

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So I started doing qualitative
interviews as supply chain

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leaders and started
really looking at trends

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and I found that there
were five fallacies.

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One was that the supply
chain is a function.

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And as long as the supply chain
is a function, really focused

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on customer service
distribution,

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we can never really build
the end-to-end supply chain.

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Second thing is that many
organisations have too many

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metrics and they're very
functionally oriented

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in their metrics and so
there needs to be trade-offs

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and conscious choice
around metrics.

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And so one of the things I
write about, metric-like cost,

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should really be measured like
a decathlete will measure when

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they go into the games where
they have the functions to be

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second or third in cost, but
it will add up to total cost.

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And it's illogical because
most supply chain leaders think

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they have to have the
best manufacturing

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cost, and the best
transportation cost,

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and the best procurement costs,
but I find in the research

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that that won't add up
to the best total cost.

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And what I find is
that 12% of companies

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can actually measure total
cost, which is an issue,

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so we've got to
really focus on that.

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So that's fallacy number two.

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Fallacy number three was
that, if I have a project

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and the project meets return
on investment criteria,

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then I can add project A, plus
project B, plus Project C,

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and I can drive the
metrics that matter.

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But what you find is without
a clear supply chain strategy,

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people become very circular
and they don't actually

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drive the ball forward.

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The fourth fallacy
is the building

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of value networks in the
end-to-end supply chain

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and what does it really
take to drive value?

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And I find that people have
really pushed cost and waste

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backwards in the supply chain,
elongating pliables and not

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really owning the signals.

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And, in fact, you know,
in the recent research

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the only thing I
can find that people

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are proud of in data sharing
is Excel spreadsheets

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and, you know, e-mail.

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And so how sad is that value
chains are held together

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with Excel spreadsheets
and, you know,

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email after two decades of
investment at 1.7% of revenue.

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So, if we're going
to own a value chain,

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we've got to build
win-win relationships

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and not push cost and waste
backwards in the supply chain.

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And then the fifth fallacy is
that we have best practices.

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I don't think we
have best practices.

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I think we have evolving
and emerging practices

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and I think they can
be so much better

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with the new technologies
and new approaches.

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I'm so excited about what
we can do now with some

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of the new technologies.

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With cloud-based
deployments, we can now

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have canonical infrastructures
for many-to-many data models

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that can allow us to connect
many trading partners

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to each other simultaneously.

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Very different, allowing
bi-directional flows and really

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a system of record.

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I am also very excited
about cognitive learning

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and roles-based ontologies.

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About 9% of companies are
looking at learning systems

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and I think we're five years
away from supply chains that

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learn as we sleep and a
network of networks that

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allows connectivity
between networks

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which is an issue right
now for most companies.

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The third type of technology
that I'm very excited about

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are visualisation and analytics.

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In the old days, you
know, we said analytics

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and we thought about reports.

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But now, when we look at
prescriptive and cognitive

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analytics, we're able
to see real insights

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that we couldn't see before.

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Fourth, I love
sentiment analysis.

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Most people don't
know what I mean

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when I say sentiment
analysis so let me explain.

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It's really using unstructured
text and looking at,

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what do our customers really
think of our products?

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So this could be social
sentiment off of Twitter,

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or it could be blogs, or it
could be writing in reviews,

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but sentiment analysis allows
us to aggregate and to listen

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and most organisations don't
know how to listen at all.

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And then fifth, I'm very excited
as we put all these things

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together with robotics,
and 3D printing,

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and internet of things
and streaming data,

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to be able to build
outside-in processes that

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can sense and adapt and help us
to drive higher level results.

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