Energize your supply chain network<\/p>\n
Alec Hutcheon, Managing Consultant,
\nBusiness Consulting Services, IBM Indonesia<\/p>\n
Supply chains are facing more challenges than ever before. In
\naddition, traditional supply chain business models are giving way
\nto the emergence of new horizontally integrated, high-performance
\non demand value chain networks.<\/p>\n
These two trends were the basis of a recent survey conducted
\nby IBM Business Consulting Services and IndustryWeek Magazine,
\nwhich sought to gain a better understanding on where supply chain
\nmanagement is today and how it is evolving.<\/p>\n
The survey was expected to provide a perspective on the
\ncontinuing evolution of supply chain and value chain management
\nprinciples.<\/p>\n
Specifically, the value chain survey sought to identify
\ncurrent practices, capture significant trends and establish
\noperational performance benchmarks in five key areas of SCM,
\nnamely, new product development, supply chain planning, customer
\norder management, procurement and logistics.<\/p>\n
It consisted of 18 to 24 questions about overall business
\nobjectives, enabling technologies and current practices as well
\nas core performance data, such as level of resources, cycle times
\nor efficiency rates.<\/p>\n
Out of 25,000 surveys distributed, a total of 1,461 responses
\nwere received from companies in the consumer products and
\nindustrial products industries in the U.S., with representation
\nfrom distribution and transportation, high technology, energy,
\nservices, retail and wholesale industries.<\/p>\n
Clearly, new supply chain strategies are opening up
\ncompetitive advantage opportunities to those with the ability to
\nexecute at a high level of performance. Companies that fail to
\nenergize their supply chain by implementing new and innovative
\nbusiness models may face significant obstacles in delivering
\nexpected profitability on the long-term basis.<\/p>\n
The supply chain executives and managers participating in the
\nsurvey identified three areas of focus, namely, profitability,
\nperformance and partnership. For them, profitability has become
\nthe new top objective of SCM. Pure cost reduction and pure
\nrevenue increase will be secondary objectives if they do not lead
\nto increased profitability. The quest for profitability is
\ndemonstrated through supply chain initiatives that can deliver a
\nrapid return on investment.<\/p>\n
Performance of the supply chain has received a renewed focus,
\ntoo. Companies are challenged to continuously improve their
\nperformance indicators-for example, reduced time to-market,
\nreduced lead times and on-time delivery-and to increase their
\ncompliance including adherence to plan and perfect order.<\/p>\n
At the same time, companies are broadening the reach of their
\nkey performance indicators to measure the extended value chain
\nnetwork that includes their customers, suppliers, service
\nproviders and other partners.<\/p>\n
In relation to partnership, it is clear that collaboration is
\nbecoming the next frontier of improvement to reach a new level of
\noperational excellence. True partnerships are required to develop
\nnew, more complex and better products and services faster.<\/p>\n
Companies and their partners are hard pressed to produce
\nhybrid and cost-effective products and services, and then deliver
\nthem through multiple channels.<\/p>\n
In the past, companies have focused on supply chain
\nimprovements with initiatives centered on operational excellence-
\nincluding rapid return on investment -- and cost cutting. Today,
\nnew SCM business models are required to meet the expected level
\nof profitability, performance and partnership.<\/p>\n
Following the best-in-class supply chain leaders, companies
\nare now investigating how they can leverage the supply chain to
\noutperform their competitors and progress in supply chain
\nmaturity.<\/p>\n
The survey revealed that today's supply chain executives are
\nconcentrating on operational excellence while meeting
\nprofitability and other business performance objectives.<\/p>\n
Here is what the respondents said in regards to each of the
\nmajor areas:<\/p>\n
In the New Product Development (NPD) area, they reported that
\ncost and time were two crucial factors that were driving their
\nNPD strategy. Product innovation management was essential to
\noptimize the return on investment for NPD.<\/p>\n
Companies are developing strategies for cost reduction, which
\nincludes increasing the level of commonality of components,
\nplatforms and assets for reuse. They are also implementing
\nstrategies for revenue growth, such as increasing the speed to
\nmarket.<\/p>\n
Also, many are implementing integrated, collaborative
\nprocesses with their partners to manage product change and new,
\nderivative product launches.<\/p>\n
The second area, Supply Chain Planning, is about sensing and
\nresponding to market trends. Advanced planning systems and
\ninnovative supply chain practices have been implemented or
\npiloted to increase the responsiveness to customer's demands.<\/p>\n
The complexity of products and markets has forced companies to
\nextend their strategy to an end-to-end supply network. Market
\nleaders are increasing their capability to sense market changes
\nwhile developing capabilities to respond faster through improved
\ncollaboration with their partners.<\/p>\n
Customer Order Management means real-time processing to ensure
\nsuperior customer experience. Order-management processing is
\ncritical to delivering superior customer service and
\nperfect-order standards.<\/p>\n
The demand for on-time delivery against the inability to
\nfulfill sales orders due to out-of-stock conditions continues to
\nbe the chief challenge in meeting customer responsiveness and
\nsatisfaction targets. It also turns out that companies have been
\nslow to embrace leading customer relationship management (CRM)
\npractices of self-service, automated cross-selling and up-selling
\nand purchasing customer focus groups.<\/p>\n
Procurement must go global to achieve the next level of
\nadvantage. Today, the trend toward global sourcing is on the
\nrise, with growth rates of 6 percent - 8 percent from three years
\nago. Attainment of perfect delivery at the original request date
\nis growing rapidly, but supplier lead times have remained
\nsomewhat static.<\/p>\n
More than 30 percent of the respondents indicated average
\nsupplier lead times of 20-plus days. Their information technology
\nfocus was on the integration of internal procurement and supplier
\nmanagement functions, as well as on external integration with
\ntheir trading partners.<\/p>\n
The last area, logistics, focuses on differentiating
\ncompetencies through outsourcing. Specifically in logistics
\ntransportation, warehousing\/distribution and freight bill audit
\nand payment, outsourcing was a theme for 70 percent of the
\nrespondents. Companies are implementing flow-through strategies
\n(cross-checking, merge-in-transit) to provide specialized
\nlogistics services by the customer segment.<\/p>\n
Over 50 percent of the respondents are achieving order-filled
\nrates of 97 percent or greater, but on-time delivery rates are
\nlow. Now technologies, such as Radio Frequency Identification
\n(RFID) are creating significant change in logistics performance
\nand inventory control.<\/p>\n
However, the focus for the majority, as evident by this year's
\nresults, has remained operational excellence attainment
\n(performance through partnership) and managing the supply chain
\nto deliver increased profitability.<\/p>\n
Continuous global and local economic fluctuations have
\nincreased the stress on manufacturing businesses. SCM processes
\nare challenged to provide operational excellence, lean, cost-
\neffective and rapid delivery of products and services globally.
\nProduct's life cycles are becoming even shorter as customer's
\ndemands are becoming increasingly volatile. Markets, supply and
\noperations are becoming progressively more global.<\/p>\n
In summary, the results of the 2003 IndustryWeek Value Chain
\nSurvey show that new key trends are emerging and evolving. First,
\nSupply Chains increasingly include outsourcing and partnerships,
\npresenting even greater challenges in managing demand and supply,
\nand controlling logistics spending.<\/p>\n
Second, real time and accurate access to relevant customer and
\nsupply chain operational data, such as inventory, orders and
\nshipments is essential in meeting customer-service-level
\nrequirements.<\/p>\n
Third, pure product innovation is lessening in importance as
\nthe focus moves toward the product time-to-market and life cycle
\nmanagement to support higher sales and profitability objectives.
\nIncreased importance is also being placed on product \"afterlife\"
\nmanagement.<\/p>\n
Results also show that optimizing supply chain performance,
\nproductivity, and responsiveness has become increasingly
\nimportant to achieve cost-and-service-level objectives.<\/p>\n
Finally, technology components with proven and rapid
\nreturn-on-investment are favored to support critical supply chain
\nprocesses, such as leaner manufacturing processes, demand-driven
\nsupply chain processes, and customer responsiveness. New
\ntechnologies, such as RFID, are changing the game in SCM.<\/p>",
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"sponsor": "Okusi Associates",
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