Supply Chain Executives' Agenda for 2004

Collaboration, financial supply chain, IT "shelfware" among critical issues on consultancy's "top 10" list

Alexandria, VA — December 19, 2003 — Collaboration, financial supply chain issues and IT "shelfware" are among the issues facing supply chain executives in the year ahead, according to the annual "Supply Chain Executive Agenda" issued by Capital Consulting & Management Inc. (CCMI) to focus attention on the changing and critical issues supply chain executives must address in 2004.

The challenges are substantial, CCMI reports: executives must provide measurable financial value from supply chain-related initiatives, including squeezing return on investment (ROI) from technology and improving the flow of funds across the supply chain, while also addressing collaboration, spend data analysis, supply chain acceleration, security and related high-value areas.

The consultancy's "top 10" list of priorities for the year ahead:

1. Develop meaningful collaboration programs beyond the typical partnership rhetoric.

Most companies have some type of strategic supplier program, avow partnerships with key customers, share information with trading partners, and work jointly to improve supply chain performance. Still, most programs are limited and don't drive major economic advantages. To succeed, companies need to more openly share data, redesign inefficient practices and jointly plan with key customers and suppliers.

2. Accelerate supply chain actions and decision-making.

Today's supply chain leaders put a premium on speed. Companies that respond faster to changing customer needs, more flexibly adjust manufacturing and delivery cycles and expedite new products to market can achieve significant competitive advantage. Executives need to renew efforts to understand and minimize non-value-added time and eliminate bottlenecks that slow the supply chain.

3. Improve financial supply chain operations by optimizing cash flows.

Many supply chain initiatives focus on the flows of products and information but overlook the flows of funds across trading partners. How and when companies pay and get paid is a critical factor in delivering shareholder value. By setting and managing appropriate payment terms and establishing efficient invoicing and collection mechanisms, companies can deliver additional supply chain value and improve relationships with key suppliers and customers.

4. More aggressively develop supplier spend data to enhance visibility of purchases.

Spending with external suppliers is most companies' biggest expense item. Yet many companies have minimal visibility into what is spent, by whom, with which suppliers, and at what price. Multiple, incompatible ERP systems, growth by acquisition and a lack of corporate policies contribute to the problem. Executives should concentrate on gathering the baseline data on supplier spending in order to develop and execute strategic sourcing and supplier management initiatives that deliver bottom line value.

5. Develop more comprehensive supply chain security plans.

Executives all face an increased risk of future supply interruptions, as well as a slew of new regulations and procedures for international shipping. But simply adding inventory to cover all potential events isn't the answer. Executives need to identify key vulnerabilities, set priorities and devise creative, cost-effective and realistic ways to address them, such as changes in product specifications and strategic use of on-shore secondary supply sources.

6. Align incentives and metrics to improve performance across the supply chain.

Companies base traditional measurements and rewards on internal activities and frequently focus on individual silos. For breakthrough supply chain performance, companies must align with key suppliers and customers on win-win metrics. They must also establish incentive programs that drive people to pursue improvements, and then share in the rewards. As the saying goes, "you get what you measure."