Supply Chain Leaders Outlast Tough Times

As companies try to bounce back from the economic downturn, knowing how to use supply chain management (SCM) to boost bottom lines is more critical than ever, according to The Eighth Annual Global Survey of Supply Chain Progress.

The CSC survey concludes that supply chain management has matured and a majority of respondents see it as being of core importance to business. SCM not only helps offset customer demand for lower prices, it can also be used to find cost reductions and increased revenue. But it is mostly the supply chain leaders that are taking advantage of SCM’s business benefits.

Rising in importance

The survey found that the supply chain is more business sensitive than ever and needs to be a primary area of focus for manufacturers and retailers. Companies need to use SCM to right-size their cost structures and inventory to service their customers at the desired level.

“If I’m trying to reduce my costs, I have to go into the supply chain,” says Brad Barton, managing director of CSC’s Supply Chain Practice. “The bottom line is companies are turning to supply chain management to find cost reductions and inventory reductions, as well as provide a sales uplift.” Telling indicator in the survey was that more than three-quarters of respondents felt that the supply chain increased in importance during the economic downturn

Despite the advantages effective SCM brings, fewer firms reported the upper ends of cost and revenue benefits, while a much larger percentage of respondents in 2010 said they found no savings or were not able to report such benefits. More than half of the respondents said that SCM either had no impact or increased revenues from 1 to 5 percent

Among the key business trends noted in the survey was that to reduce costs, business leaders went directly to their supply chains, working with key suppliers to reduce cycle times with their best customers and to increase revenues. At the same time, it appears buyers were able to get bargains as reduced costs were reported on the buy side.

Leaders vs. followers

The 2010 survey showed a sharp difference in performance between firms that consider themselves to be leaders in supply chain competence and others, the followers. Supply chain leaders and followers generated about the same levels of cost savings from their investments, however leaders reported twice as much revenue gains

The survey reports some shifting in the customer base for firms, with leaders shares by satisfying the best customers, apparently taking market share away from less adept competitors. Supply chain leaders were more likely to gain market share in the down economy

Supply chain leaders share common attributes, including the presence of a supply chain officer, a greater global control and functional span, and the use of modeling techniques to improve network designs. Among leaders, a common SCM solution is to deploy inventory replenishment techniques to reduce inventory levels and free up cash.

Managing the supply chain is integral to managing the overall business, Barton asserts. “Supply chain is the key lever because that’s where all your assets reside, and that’s where your property, equipment and inventory all go, so everyone is really zeroed in on supply chain management.” Refreshing category strategies was seen as a primary area of focus for supply chain managers

In short, the survey found that the ingredients for success and superior performance start with establishing a strong supply chain strategy that is linked directly to business results. The 2010 survey attracted close to 200 respondents from 20 industries in every major geographic region of the world. The survey was conducted by CSC, Supply Chain Management Review, and the Eli Broad Graduate School of Management at Michigan State University, with assistance from the Council of Supply Chain Management Professionals and Supply Chain Europe magazine.