Most supply chain executives don't have real-time information

More than half of supply chain executives don't have real-time supply chain information; limited visibility into tier-two component suppliers hampers supply chain executives from making informed, cost-effective decisions.

05/29/2009


More than half of the 1,100 supply chain executives surveyed do not have access to real-time supply chain information, according to Gatepoint Research and E2open. And 75 percent lack fully automated data collection and consolidations systems. Key to saving money and accelerating out of this recession may be greater visibility into tier-two suppliers throughout the multi-tier, multi-layered demand-supply networks, according to the cooperative "Supply Chain Benchmark Survey," focused on international procurement in the context of outsourced manufacturing.

Independent sources suggest a spike in spending on international procurement services since the recession began .

Survey asked if systems prevent to ensure supplier prices do not leak into the market. More than one-third of respondents do not have a system to ensure confidential and competitive price negotiations.

 

Source: Gatepoint Research and E2open "Supply Chain Benchmark Survey"

E2open, a provider of on-demand, multi-enterprise solutions that provide visibility and control across global demand and supply networks, and Gatepoint Research said with the evolution of supply chains into supply networks, brand owners require better systems to improve visibility and control, data quality and buying efficiency through consolidated procurement.

Gatepoint Research surveyed more than 1,100 executives including CIOs, CFOs and supply chain executives from the following industries:
-High technology (including consumer electronics, semiconductor and components, and computers and peripherals);
-Telecommunications equipment manufacturers
-Aerospace and defense; and
-Industrial manufacturing.

In the survey, Gatepoint asked respondents about their level of outsourced manufacturing; percentage of procurement that is internationally sourced; how many contract manufacturers are used; spend aggregation across internal divisions and contract manufacturers; supplier visibility rating; intentions for establishing an international procurement center (IPC) to execute "buy-sell" processes; and the systems in place to ensure they can maximize margin by appropriately masking prices.

Survey findings demonstrated that more than half of respondents currently do not have access to real-time supply chain information and seventy-five percent lacked fully automated data collection and consolidation systems. Four out of five respondents have only partial or no visibility into tier-two component suppliers, thus hampering the ability to make informed decisions and manage multi-tier supply chains cost effectively. Moreover, it's not just visibility that is lacking but the ability to trigger action, say Gatepoint and E2open.

Another key finding was that while many companies have or plan to establish an IPC to support "buy-sell" processes (buy directly from component suppliers and sell to the contract manufacturers/internal divisions), the ability to confidently aggregate spending with one or more contract manufacturers and component suppliers is limited.
While a brand owner's primary procurement objective is to reduce costs by leveraging spend across contract manufacturers and/or internal business units, the lack of supply chain visibility for those who have not implemented IPC often results in loss of control over cost management, survey findings suggest. Those who have implemented IPC find it challenging to scale the "buy-sell" process manually to achieve significant business value.

"The result is that operational inefficiencies remain rampant at a time when cost savings are critical," said Desikan Madhavnavur, vice president product management for E2open. "Given the multi-tiered, multi-layered nature of today's demand-supply networks, legacy systems are often ill-equipped to seize the opportunity of reducing procurement cost and reduced component shortages at contract manufacturers. As a result, they miss important opportunities to improve buying efficiency and/or achieve potential tax savings from efficiently running‘Buy-Sell' processes."

To achieve competitive advantage, companies should implement an IPC with capabilities to:
- Execute "buy-sell" processes in which IPC buys directly from tier two component suppliers and sells to the contract manufacturer, with tier two suppliers drop shipping components to the contract manufacturer locations;
- Negotiate better prices with tier two suppliers by consolidating spend across multiple contract manufacturers/internal units;
- Execute and automate purchase order-based as well as vendor managed inventory-based‘Buy-Sell' processes with the contract manufacturers and tier two suppliers;
- Improve demand-supply visibility and control across the multi-tier supply network involving various entities, such as contract manufacturers, tier two suppliers, third party logistics provider hubs, and carriers/freight forwarders;
- Mask prices to maximize brand owner margins and drive greater price competitiveness;
- Allocate demand in case of constrained supply; and
- Manage documents in a drop ship process.

Link to related information about Gatepoint Research and E2open "Supply Chain Benchmark Survey."

- Edited by Mark T. Hoske, electronic products editor, MBT, www.mbtmag.com





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