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Study Shows Gap Between Business Goals, Supply Chain Strategies Sign Up to receive Daily News Alerts in your E-mail Inbox
Posted on Monday, July 09, 2007 5:00:00 PM |
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In a global study of manufacturers' goals and strategies, analyst firm Manufacturing Insights found that many companies show a schism between their business priorities and the supply chain strategies they use to achieve them. Manufacturers cited as their top two business objectives increasing quality and customer satisfaction, and reducing overall cost and/or improving productivity, according to the survey, released today by Manufacturing Insights, an IDC Company.However, while 71% of respondents put increasing quality and customer satisfaction at the top of their business priority agendas, nearly half (48%) of the respondents said reducing material, manufacturing, and logistics costs was their top supply chain strategy. The second most important supply chain strategy was "more responsive, more timely decision-making across the global supply chain." So, are manufacturers chasing their primary business goal — improving quality and customer contentment — by cutting materials and logistics costs?"The survey results indicate that many companies have a gap between their overall objectives and how they execute in the supply chain," said Kimberly Knickle, program director at Manufacturing Insights and lead analyst on the survey, in a prepared statement. "Ideally, companies should map their business objectives with supply chain priorities to make the most effective IT investments." To a large degree, the gap stems from differences in how IT and line-of-business managers understand supply chain technology, Knickle told Managing Automation in an interview. "IT understands what supply chain can accomplish." IT also understands the potential of new applications and tools, Knickle said. However, if the CFO doesn't have the same understanding, he or she might not be so quick to sign the check to pay for the technology, she added. "People don't necessarily draw a perfect line from their business objective to what investments they want to make in IT for supply chain," Knickle said.But "IT is from Venus; business managers are from Mars" doesn't tell the whole story. Different priorities emerged based on such parameters as company size, industry segments, geographic regions, and manufacturing orientation.For example, the study found that business maximization and optimization priorities are functions of market development and maturity. In mature regions of North America, Western Europe, and Asia/Pacific, companies were focused on reducing costs. North American manufacturers also selected increasing revenue and/or exploiting new markets in their top two business objectives impacting supply chain performance, reflecting ongoing efforts to globalize, according to the study. Western European manufacturers selected innovation in new or existing products or services, indicating their efforts to unify their presence in European Union markets, the study said. And quality and customer satisfaction were top business objectives linked with the supply chain for companies in Eastern Europe, China, and Asia/Pacific.Manufacturing Insights noted that innovation in new or existing products and services came up only rarely as a top business objective with regard to supply chains. "Our results may indicate that manufacturers in mature regions are still struggling in winning the global competitive match, and therefore many of them are still prioritizing cost-cutting initiatives versus funding product innovation," the study said. "We expect more regions to recognize that supply chain performance can and should be tightly interwoven with innovation priorities."The study also asked respondents to identify the "most important IT investment areas in terms of their impact on global supply chain performance over the next two years." Respondents listed advanced supply network planning or manufacturing scheduling; advanced inventory management or optimization; and supply chain execution, logistics control, and management as their top three choices.Knickle expressed some surprise at seeing supply chain execution in that list. "I think of it as a category which is less interesting," she said. It sounds less innovative because it has been around for a while. But supply chains themselves are becoming more complex, more sophisticated, and more difficult, so people need help with this."On the other hand, advanced inventory management got a "significant vote of confidence for a category that is still very small in terms of the amount of money people spend on it," she added.The survey of more than 800 manufacturing and retail companies worldwide was conducted in January and February 2007. Roughly 20% of the respondents hold job titles indicating they are part of the IT organization, while more than 80% of respondents represent lines of business in their organizations, such as supply chain operations, materials management, or procurement. Knickle said this weighting toward line-of-business managers was intentional.
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