Balancing Priorities in the Supply Chain

Executive Summary Leading companies are constantly managing competing supply chain priorities. With finite resources, increasingly demanding customers and fierce competition, they must balance operational efficiency, perfect order delivery and supply chain flexibility. The cross functional and multi-dimensional nature of the supply chain makes it very difficult to manage and measure end-to-end processes and metrics to know where rapid intervention and improvement is needed to reduce costs and meet customer demand. The supply chain is characterized as having multiple suppliers, multiple systems generating multiple data and having multiple stakeholders. To make sense of it all, there needs to...
Executive Summary Leading companies are constantly managing competing supply chain priorities. With finite resources, increasingly demanding customers and fierce competition, they must balance operational efficiency, perfect order delivery and supply chain flexibility. The cross functional and multi-dimensional nature of the supply chain makes it very difficult to manage and measure end-to-end processes and metrics to know where rapid intervention and improvement is needed to reduce costs and meet customer demand. The supply chain is characterized as having multiple suppliers, multiple systems generating multiple data and having multiple stakeholders. To make sense of it all, there needs to be a sharing of information with customers, business partners and other internal and external audiences. This paper explores the challenges businesses face quantifying the overall effects of their decisions on often competing priorities. It then demonstrates how Data Discovery software helps generate insight and provides decision-makers with increased visibility to help identify risks and opportunities. “Companies that beat the competition on supply chain performance also achieve significantly better financial results. Supply chain Leaders deliver on time in full (OTIF) on 95.7% of occasions and have an impressive 15.3 inventory turns, while the Laggards achieve only 3.8 turns. That means greater efficiency and customer satisfaction without driving up working capital.” PwC Global Supply Chain Survey 2013 “Only 12% of the organizations responding to a recent Gartner survey stated that they have been able to fully utilize the analytics capabilities offered by current supply chain solutions. Additionally, 71% of organizations state that they need more analytics capabilities.” Gartner: Supply Chain Analytics Technology Solutions Fall Short of Meeting Users" Needs, December 2014 Balancing Priorities in the Supply Chain | 3 Introduction Inventory, distribution, production, procurement and transportation are some of the key costs that exist in the supply chain. Being able to minimize them is a recognized competitive advantage, and one that best-in-class companies regularly use to generate a competitive edge. Take the case of Ikea – its ‘Bang’ mug has been redesigned many times to realize shipping cost savings. Originally, 864 mugs would fit into a pallet; after redesign a pallet held 1,280 mugs. With a further redesign 2,024 mugs could be held. This act of packaging ingenuity and attention to detail reduced its shipping 1 costs by 60%. “Supply chain executives are coping with a wide range of challenges, with profitability and cost management topping the list, followed by supply chain flexibility and the need to meet customer requirements. But those represent just the tip of the iceberg — adapting to competitive pressures, volatility, skills gaps, sustainability — because the range of increasingly important trends that affect supply chain success is wide.” Increasingly businesses need to be able to measure the true cost to serve for each and every order. This capability will allow better PwC Global Supply Chain Survey negotiation and value creation across the supply chain. Supply 2013 chain professionals need to master the deeply interdependent 2 networks to be able to say “yes” to profitable orders and “no” to the impossible. Supply Chains are becoming more extended and complex with a consequent increase in risk and the need for resilience. Ensuring continuity and quality of supply over extended periods with increasing market volatility and competition for resources is essential. Often, the markets with the highest growth potential are also the most risky in which to operate. Globalization and emerging markets have led to increased competition in many industries and raised questions on optimal organizational and supply chain network design. These competitive dynamics drive further pressure on costs and profitability. New technologies lead to new frontiers in supply chain transparency and process automation. These enable multiple supply chain partners along the value chain to seamlessly interact in the joint design, manufacture, delivery and service of complex customer orders. 3D printing could have a huge impact on supply chain as it cuts out warehousing, transportation, and production. The Internet of Things (IoT) has the potential to increase operational efficiency and better integrate the organization. IoT is important as a way to know what’s happening in the physical supply chain, from smart shelves in store self-provisioning capital equipment. A recent IDC survey of 355 U.S. based manufacturers identified the importance of cost reduction as the number one supply chain priority. Against a backdrop of economic contraction, declining margins and rising energy costs, it is no great surprise that it came out on top. However, what was revealing was that other priorities such as improving product/safety and overall customer service also scored highly as well. These goals would stand to be potential casualties in the wake of cost cutting initiatives; so there exists a likely conflict of priorities. 1 2 QFinance, Reducing costs through production and supply chain management SCM World: The Chief Supply Chain Officer Report 2014 4 | Balancing Priorities in the Supply Chain
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