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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