Survey Finds Gap Between Supply-Chain Tech, Business Strategy

By Jacqueline Emigh  |  Posted 2004-11-02

Survey Finds Gap Between Supply-Chain Tech, Business Strategy

High-tech vendors and retailers are at the top of the list when it comes to the progressiveness of their supply-chain initiatives, while the forestry and mining industries are near the bottom. Across all industries, big needs remain for aligning supply-chain technology with business strategy, as well as for collaborating with supply-chain partners, according to the results of a new survey.

Just as last year, a few players—such as Dell Inc. and Wal-Mart—are way ahead of virtually everyone else in their supply-chain initiatives, according to the report, which was produced by Computer Sciences Corp. (CSC) and industry trade publication Supply Chain Management Review for the second consecutive year.

But increasingly, Wal-Mart seems to be serving as a role model for some other retailers, Chuck Poirier, a partner in CSCs Supply Chain Solutions practice, said in an interview with

"If youd asked me just a few years ago, I would have said that Wal-Mart was the only progressive company in retail," Poirier said. "Wal-Marts competitors still tended to rely on their manufacturers and suppliers. But now, several others are pulling themselves up, probably because theyve seen the results that Wal-Mart is getting with its supply-chain initiatives."

At the other end of the progressiveness spectrum are "heavy-duty" industries such as construction, forestry, mining, and oil and gas, Poirier said.

In the survey, participants were asked to rate their companies "stage of development" across various supply-chain areas. Essentially, results continued to show that most companies fall somewhere between Level 2 ("Optimizing Internal Integration") and Level 3 ("Advanced Supply Chain Management," or the beginning of integration with supply partners). Relatively few have moved on to Level 4 ("E-Commerce: Value Chain Collaboration") or to Level 5 ("E-Business: Full Network Connectivity").

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But within a variety of vertical markets, the study also discovered great disparities between companies at the leading edge and admitted supply-chain laggards.

Generally speaking, the laggards are "putting the cart before the horse," Poirier said. "Slapping down commercial, off-the-shelf software from i2 or Manugistics isnt enough. Companies first need to figure out the problem in their [business] processes, and fix that."

In the survey, conducted this year among 236 supply-chain professionals, 60.8 percent of respondents said they are currently using ERP (enterprise resource planning) systems to "advance supply-chain evolution and drive results."

Another 47.4 percent are using Web-based applications and services in their supply chains, whereas 46.4 percent are deploying inventory planning, analysis and optimization systems.

Tied for fifth place, at 43.1 percent each, were advanced planning, forecasting and scheduling systems and e-procurement and B2B (business-to-business) exchanges.

Next Page: Improved relationships between supply-chain professionals and their IT counterparts.

Improved Relationships

Other technologies used include TMS (transportation management systems), 32.5 percent; JIT (just-in-time)/Kanban, 29.2 percent; CRM (customer relationship management) applications, 27.3 percent; CPFR (collaborative planning, forecasting, and replenishment), 22.5 percent; supply chain event management systems, 17.2 percent; SRM (supplier relationship management) applications, 16.7 percent; collaborative product design, engineering and manufacturing applications, 15.3 percent; and RFID (radio frequency identification), 9.1 percent.

On a positive note, results indicated that relationships are improving between supply-chain professionals and their IT counterparts within organizations. Only 14 percent of this years respondents said their work relationships around introduction of new technologies were not effective, or only marginally so—in comparison with 39 percent in the same survey last year.

On the other hand, 52 percent of this years respondents said their companies either do not have a supply-chain strategy or are just starting to develop one.

The study also showed some encouraging findings in the area of cost reductions. Twenty-seven percent of all respondents reported that use of supply-chain technology had reduced their costs by 1 percent to 5 percent, while 33 percent obtained cost reductions of between 6 percent and 10 percent. Another 8 percent of respondents cut costs by 8 percent to 11 percent, and 4 percent garnered cost savings of more than 20 percent.

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But the impact of supply-chain initiatives on revenues wasnt as clear. About 57 percent of the participants pointed to revenue increases, ranging anywhere from 1 percent to 5 percent. On the other hand, 38 percent answered "dont know/not sure" to this question.

Over the longer term, growth in revenues is a more important supply-chain objective than cost reductions, according to Poirier.

What are the biggest opportunities for vendors going forward? "I suggest that theyre on the collaborative side," he said. "If I had one piece of advice to give to vendors, it would be to go to a couple of your top customers and get them to collaborate with their major suppliers.

"This isnt about beating up on suppliers. This is about saying, for instance, OK, here are some places where we can substitute materials, or where we can draw more [product] through."

In other results, 57 percent of respondents said they will make investments in logistics, transportation and warehousing over the next three years. Another 53 percent will invest in purchasing, procurement and sourcing.

Other supply-chain investments will include forecasting, planning and scheduling (49 percent); inventory and materials management (42 percent); and SRM/CRM (41 percent).

Check out eWEEK.coms for the latest news and analysis of enterprise supply chains.

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