Majority of Supply Chain Improvement Efforts Focus on Short-term Gains

CSC Survey: Focus on cost, lack of strategy and limited collaboration constrain benefits


CSC Survey: Focus on cost, lack of strategy and limited collaboration constrain benefits

El Segundo, CA — November 1, 2004 — The second annual supply chain management survey from Computer Sciences Corp. and Supply Chain Management Review revealed that companies continue to make progress toward supply chain optimization, but they are still leaving money on the table. Key reasons include an overemphasis on near-term cost savings, lack of a strategy or connection to the company's overall strategic goals, limited use of optimization to build new revenues and limited collaboration across the company or with external suppliers and customers.

The survey showed that although companies are making significant investments in software and technology to lead supply chain improvements — particularly in the areas of purchasing, logistics and inventory management — technology is still being put ahead of strategy development and process improvement. Thus, organizations are not seeing advances in collaboration across the supply chain, even in many leading companies.

The result is that businesses are failing to achieve the full benefits of advanced supply chain management in terms of building revenue and increasing customer satisfaction, said Chuck Poirier, author of seven books on supply chain management and a partner with CSC's Supply Chain Solutions practice. The number of respondents indicating that supply chain management is fully, or even partially, integrated into the overall business strategy, or seen as a strategic competence, remains low. This disconnect, along with the focus on short-term cost savings rather than long-term revenue growth and customer relationship, greatly impacts an organization's ability to enhance customer loyalty and improve profitability.

According to the survey, retail and high-tech companies rate themselves as more advanced in supply chain capabilities than other industries. The findings revealed a widening gap between those companies, such as leading retailers, reaping the benefits of supply chain advances and those still struggling to do so.

This year's survey showed that while respondents overall had advanced their supply chain capabilities, a sizable gap still exists between the best and the rest, said Poirier. This presents a challenge and an opportunity for the non-leaders to close that gap or to leapfrog ahead of competitors in an industry.

According to Poirier, the gap may be a result of the lack of strategy development among the responding companies. The shortfall is especially evident when it comes to connecting the supply chain strategy with the business strategy. Just over half of all respondents in both North America and Europe reported that their firms did not have a supply chain strategy or were just starting to develop one. On the other end of the spectrum, only about one in five respondents in both geographies reported having a comprehensive strategy across the entire corporation.

The 2004 results showed some noteworthy forward movement in a few areas, with the greatest progress during the last 12 months in purchasing, logistics and inventory management. In terms of overall sophistication, respondents cited purchasing and sourcing (tied at 23 percent), then logistics (20 percent in 2004 versus only 13 percent in 2003), as their areas of greatest success. Forecasting and planning came in fourth with a jump from 10 percent in 2003 to 19 percent in 2004.

Surprisingly, said Poirier, there was no change in the number of respondents claiming high levels of advancement in the area of customer collaboration. However, collaboration — both internal and external with suppliers and customers — was cited as the single most pressing need. This finding confirms that supply chain professionals understand the criticality of forging collaborative relationships, said Poirier. It also says that they are still struggling with the ways and means to achieve it.

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