Survey spotlights need to improve capabilities
Deloitte Consulting finds manufacturers taking steps to better manage the information flow among supply chain partners.
By Staff -- Modern Materials Handling, 4/1/1998
Not surprisingly, among the nearly 200 North American manufacturers and distributors responding to a survey, 97% rated effective and efficient supply chain management as critical or important to the long term success of their business.Yet, despite recognizing the importance of managing the supply chain, only 33% of these firms believe their supply chain capabilities to be above average for their industry (first chart, below). And a mere 1% ranked their supply chain performance as world class in this survey by Deloitte Consulting, Toronto, Ontario, Canada late last year.
"Companies are not as far along the development path as they'd like to be," says Deloitte Consulting partner Ron Factor, "even though they have already made some progress on individual initiatives."
The surveyed companies are taking action to improve their capabilities, however. Eighty percent either (1) already have begun major supply chain initiatives, or (2) will start such an effort sometime this year (second chart).
Also noteworthy: 75% of the companies plan to significantly increase their spending on supply chain technology to support their improvement initiatives and to attain competitive advantage.
This survey focused on supply chain systems and technologies-particularly information systems. Indeed, many responding companies "believe that managing the flow of information in the supply chain may be as important as managing the flow of products," as the survey report notes.
Even so, the survey raises questions about how supply chain partners will manage that flow. For example, the survey found that many of the companies have a capability in Electronic Data Interchange (EDI). Yet they have not been able to leverage this investment and convert a large number of their supply chain transactions to EDI.
Meanwhile, the Internet is emerging; it's the "wild card," as Factor labels it, that offers "interesting alternatives" for business-to-business communication.
The Internet may become a key channel to communicate with supply chain partners as well as with consumers. Many of the surveyed companies believe that the Internet will replace traditional EDI channels within three years.
Many of the companies are implementing enterprise resource planning (ERP) systems. Most firms, moreover, will "bolt on" the additional subsystems that they require.
Nearly half (46%) of the surveyed companies already have a warehouse management system (WMS). And in two years 37% of the respondents said they will have added an WMS.
Currently, many of the surveyed companies use an WMS that was developed in house. But the trend is towards using packaged software to support warehouse operations, the consultants say, rather than a home-grown system.
One piece of "good news" from the survey, Factor suggests, is this: Manufacturers now "really care about their warehousing and distribution operations." There's increasing recognition of what these contribute to a manufacturer's competitiveness.
The survey demonstrates, Factor also suggests, "that you'd better be great at what you do, because there's less tolerance for poor performance." Customers demand high levels of service. "And there's no room for sloppiness in a company's cost structure," he adds, citing but two key measures of performance among a number of such criteria.
For more information or to receive a copy of "The North American Survey of Trends in Supply Chain Management," call Greg James at Deloitte Consulting, Toronto, 416-867-8102.
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