Survey: inflated inventories tied to poor data quality and excessive legacy systems

Meeting customer demands in a short order world has become the greatest challenge of goods producers managing ever more complex global supply chains, a new study indicates. The survey from Verusen, a provider of supply chain intelligence, reveals that 43% of businesses are intentionally inflating their inventories to protect against further disruptions, raising their cost structures.

This is due in part because data complexity that is driven by poor data quality, siloed materials data, and excessive legacy software systems today stands as the most prevalent causes cited for poor materials management and planning in the supply chain industry. The result is lost revenue and increased inventory costs. The report, “How Supply Chain Disruptions Have Shaped Supply Chain Initiatives and Priorities,” surveyed global industry executives in Manufacturing, Automotive, CPG, Energy/Oil & Gas, and Pulp & Paper.

Today, companies increasingly lack resources and directional clarity in meeting supply chain management goals, Verusen added. This is occurring as companies are trying to become more agile to better meet their customers’ needs, as the pandemic continues to create extraordinary supply disruptions. Such disruptions have already negatively impacted the electronics and automotive industries and are expected to impact the 2021 Holiday shopping season

“As we approach 2022, many organizations are continuing to act in response to the global pandemic and the completely unforeseen situation it has caused. For most, this has resulted in massive revenue losses, materials shortages, inconsistent data, and increased strain on networks around the world,” said Paul Noble, founder, and CEO of Verusen. “Our new study on materials management and planning sheds light on the fact that the industry is seriously lagging in its response to address the challenges the pandemic has posed. Two out of three companies are using the same materials management business practices they used five years ago, while less than half are intentionally inflating their inventories to protect against further disruptions. That’s an unsupportable situation that needs to dramatically change if they want to remain in business and succeed.”

Key findings from the survey include:
● 90% of companies are focused on cost reduction and 75% are focused on operational risk reduction as their top procurement and sourcing strategies, these focus areas are often in conflict with each other.
● 65% of companies’ materials management strategies haven’t changed since the beginning of the pandemic, while 43% are intentionally inflating their inventories to protect against further disruptions.
● Data complexity driven by poor data quality, siloed, disparate, and excessive legacy systems are by far the most prevalent causes cited for poor materials management and planning.
● 42% of companies said a one-off data cleanse project is still the leading approach to improving their data, and 37% of respondents are still using common tools like Excel to optimize materials management.
● When asked about the challenges to digitally transforming materials management, nearly 65% pointed to a lack of resources as the largest barrier. Most surprisingly, 81% of respondents incorrectly believe that it would take well over a year to implement an AI-driven Materials Management solution.

Cost control around procurement remains a preeminent issue. Organizations are experiencing pressures to reduce costs and operational risk. Nearly all survey respondents (90%) noted that their companies are focused on cost reduction, but at the same time, three-quarters also described a focus on operational risk. This combination of poor data cost controls, and resource constraints are stifling efforts by companies to digitally advance their materials management processes.

The study, conducted in August 2021 with leading global supply chain executives, of whom 81% are with companies that have between $5 and $20 Billion in revenues, finds that few companies are using new technologies to tackle supply chain process issues caused by the COVID-19 pandemic. This inability is a result of tighter cost controls and dependence on legacy work processes.

To access Verusen’s 2nd Annual Supply Chain Survey click here.