Wednesday, June 29, 2011
Maximizing Supply Chain Flexibility Is Top Requirement for Global Supply Chain Executives, According to New Survey from PRTM
Global Supply Chain Leaders Who Implemented Five “Operational Flexibility” Levers Increased Revenues 12 to 15 Percent and Reduced Supply Chain Costs 8 to 10 Percent
WALTHAM, Mass. - Wednesday, June 29th 2011 [ME NewsWire]
(BUSINESS WIRE)-- High volatility, massive swings in customer demand, and challenges in ensuring sufficient supply are the current reality for global supply chain executives—making supply chain flexibility the new imperative for growing company revenues while keeping supply chain costs under control. The findings are part of a new survey—2011 Global Supply Chain Trends—from 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 Trendsreport 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 percent 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 percent of supply chain performers, while laggards are the bottom 20 percent. 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. He continued, “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.”
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 planningwith 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/engineeringis 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 supply chain study can be accessed at www.prtm.com/sctrends2011.
Since 1976, PRTM has created a competitive advantage for its clients by changing the way companies operate. PRTM management consultants work with senior executives to develop and implement innovative operational strategiesthat deliver breakthrough results. The firm is a leader in operational strategy, supply chain, product development, and customer value management. PRTM has 18 offices worldwide and serves major industryand global public sectors. For more information, visit www.prtm.com.
Katherine Waite, +1 617-821-2282