Maximizing supply chain flexibility 'big challenge'
Massachussets (US), June 29, 2011
High volatility, massive swings in customer demand, and challenges in ensuring sufficient supply are the current reality for global supply chain executives, according to a new survey.
Maximizing supply chain flexibility is the new imperative for growing company revenues while keeping supply chain costs under control, said the '2011 Global Supply Chain Trends' survey conducted by global management consulting firm PRTM.
Based on interviews with senior executives from 150 companies across industries, this 2011 supplement to PRTM’s 2010–2012 Global Supply Chain Trends report identifies five levers that increase operational flexibility, drive revenues and cut costs.
Companies that have implemented the five supply chain flexibility levers have, on average, achieved a 12 to 15 per cent revenue increase and reduced supply chain costs by 8 to 10 percent, according to PRTM.
However, PRTM found that operational flexibility requires significant investment as well as a top-down commitment from supply chain executives.
In the survey, supply chain leaders are defined as the top 20 per cent of supply chain performers, while laggards are the bottom 20 per cent.
Companies were evaluated according to various quantitative criteria and PRTM’s Supply Chain Maturity Matrix, which is based on the Supply-Chain Operations Reference-model (SCOR).
“Volatility is the new norm for supply chain operations, and continuing economic uncertainty is affecting demand by driving shorter capital investment cycles and tighter inventories,” said Dr Reinhard Geissbauer, director at PRTM and leader of the study.
“At the same time, political unrest, growing competition for resources, and a supply base not yet fully recovered from the financial crisis is generating supply shortages. And that outlook does not even include singular events such as Fukushima, Icelandic volcanoes, and other natural events,” he added.
As part of the study, PRTM found five “operational flexibility” levers that boost revenues and reduce supply chain costs:
*Supply Assurance/Proactive Capacity Management: More than 70 percent of respondents said that supply assurance management—ensuring that the necessary resources to satisfy customer orders are available—is the most important lever to boost operational flexibility.
Yet nearly half of respondents have not fully implemented partnerships with key suppliers and one-third said they haven’t focused on it at all.
*Collaborative End-to-End Demand and Supply Planning: Supply chain leaders have established end-to-end, real-time supply and demand planning with both key customers and suppliers.
Collaborative forecasting, executive sales and operations planning and real-time demand planning are being implemented, on average, by more than 50 percent of the companies surveyed. However, more than 20 percent said their companies have not even started to execute these key end-to-end planning initiatives.
*Tighter Integration/Partner Supply Chain Architectures: All players in the global supply network must work together to execute agreed upon performance standards.
In the last two years, more than 70 percent of respondents began establishing flexible production facilities, but more than one-third reported issues with key supplier architectures and nearly the same percentage found major gaps in their customers' architecture.
*Tearing Down the Wall: Eliminating the divide between supply chain management and product development/engineering is essential for accelerating ramp-up and ramp-down of products into diverse customer markets.
Half of those surveyed understand this and consequently have invested in higher development responsiveness. A “win-win” collaborative set-up includes joint consideration of product development, sales and supply chain requirements.
*Superior Collaboration and Flexibility: In today’s volatile environment, collaboration and flexibility are critical for success.
Only 10 percent of respondents reported that they have developed these capabilities to the point where they can adapt their business models faster than the competition, the survey added.-TradeArabia News Service