Study identifies 10 ways to improve supply chain efficiency

Tennessee study looks at ways to improve data management, get more collaboration

06/27/2013


A recent report from the University of Tennessee pinpoints 10 game-changing supply chain trends that can help companies improve their operations.

The UT Global Supply Chain Institute researched the topic and identified and tracked the trends. UT supply chain management faculty surveyed 163 supply chain professionals from 132 global companies to develop the list. As defined by the survey, a game-changing trend is one that greatly impacts a firm's shareholder value and can be extremely difficult to implement successfully.

“This research confirmed that world-class companies need to revisit these trends on a regular basis to stay abreast in today's dynamic and rapidly changing environment,” said Paul Dittmann, executive director of UT's Global Supply Chain Institute. “Companies also must be open to considering new challenges, such as the application of business analytics to big data and cloud-based applications.”

Companies surveyed ranged in size of revenue from $75 million to $500 million. The respondents cuit across all disciplines: 59% were manufacturers, 27% were retailers and 14% were service providers.

"The study highlights some of the latest trends that companies must consider as they look to the future," said Brad Newman, principal at Ernst & Young LLP, one of the study’s sponsors. "While there have been strides made to address such issues as cross-functional integration and collaboration, companies need to be even more diligent about how they leverage new sources of data to address the unique needs and economics of different customer and product segments."

The 10 trends addressed in the survey are:

1. Customer relationship management

Leading companies are successfully segmenting their products and customers and developing tailored supply chain solutions for each segment. This approach allowed one firm to eliminate nearly half (48%) of its inventory while still improving on-shelf availability from 96% to nearly 100%.

2. Collaborative relationships

A win-win collaboration between supplier and customer may be rare, but it can produce amazing results. These collaborations should be built on a foundation of common metrics, shared benefits and trust. OfficeMax collaborated with its supplier Avery Dennison to dramatically increase revenue by more than 22%, achieve product availability to more than 99%, significantly decrease inventory by 34% and save more than $11 million in logistics costs.

3. Transformational strategy 

Only 16% of firms have a documented multiyear supply chain strategy, yet developing these strategies can produce spectacular results. Whirlpool used a transformational strategy to deliver record-high service levels while decreasing inventory levels by over $100 million and logistics costs by $20 million.

4. Process integration 

Of great concern to supply chain organizations is the functional silos that still exist and disrupt supply chain performance.

"When processes are integrated and silo walls are eliminated, the results can be staggering," Dittmann said. 

One opportunity that can have tremendous impact is integrating purchasing and logistics. Although both functions are traditional supply chain functions, the research confirmed significant payback when these two areas align their objectives and operating plans.

5. Driver-based metrics

Simply changing the performance measurement and goal-setting system inside a firm can greatly enhance the overall performance of the supply chain. Procter & Gamble applied this concept and dramatically increased customer service levels, market share and sales.

6. Information sharing and visibility

Firms are changing the game by sharing and linking together masses of information from multiple sources (also referred to as big data) and interpreting the data using business analytics expertise. 

7. Demand management

No one buys a company's stock because of the company's ability to forecast. Yet increasing forecasting accuracy along with integrating the demand and supply functions across the supply chain can drive higher revenue, lower working capital and decrease costs. Leading companies are leveraging big data and new approaches to better forecast demand.

8. Talent management

Talent management is the number one requirement for transforming a supply chain. Critical competencies in hiring top supply chain talent include global orientation, leadership and business skills, and technical savvy.

9. Virtual integration 

One of the fundamentals of a great supply chain is for a company to stick to what it does well—its core competencies—and leave the rest to world-class service providers. When outsourcing, firms should create a win-win vested outsourcing framework with its service providers.

10. Value-based management 

Supply chain excellence is the key to creating shareholder value. On average, the supply chain controls 100 percent of the inventory, manages 60% to 70% of cost of goods sold and provides the foundation to generate revenue by delivering outstanding availability. 

The first annual "Game-Changing Trends in Supply Chain" survey was sponsored by Ernst & Young LLP and Terra Technology. To download a copy of the full survey, go to http://utk.edu/go/g7



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