Companies Increase Product Availability while Holding the Line on Supply Chain Costs

Accenture study shows that increasing collaboration is the key to competitive advantage

Accenture study shows that increasing collaboration is the key to competitive advantage

Barcelona — March 11, 2004 — Manufacturers and retailers in Europe and North America have made solid gains in product availability while holding the line on supply chain costs, according to a study released today by Accenture.

The study, which surveyed 184 supply chain executives from manufacturing and retail companies in Europe and North America about their fulfillment operations, found that overall product availability increased from 87 percent to 90 percent between 2001 and 2003, which translates into a 25 percent reduction in out-of-stocks. During the same period, average supply chain costs decreased slightly, from 10.2 percent of sales to 9.8 percent.

Inventory turns deteriorated from 11.0 to 9.8 between 2001 and 2003. The most significant turn-performance problems were in the food and consumer products industry, where average inventory turns fell from more than 17 to fewer than 13 from 2002 to 2003, and in the retail industry, where average inventory turns fell from 14 to fewer than 11 over the same period.

"Availability is a particularly potent supply chain measure because ensuring that items are available when a customer wants them directly influences companies' short-term revenues," said Jose Bleda, a partner in Accenture's Supply Chain Management practice. "However, lower inventory turns — and associated increases in inventory carrying costs — are preventing many companies from improving overall supply chain performance."

Survey recipients also were asked to provide their views on the most significant opportunities, challenges and obstacles associated with world-class fulfillment. Among other findings:

* The cost-saving opportunity ranked highest was "improving management of inventory levels," selected as "significant" or "extremely significant" by 69 percent of survey respondents. The next highest, "reducing transaction costs," was selected by 58 percent of respondents as "significant" or "extremely significant."

* The fulfillment challenge ranked highest was "collaborating with multiple partners," with 67 percent of respondents considering this as "significant" or "extremely significant." The next-closest item, "accessing currently untapped markets," was cited as "significant" or "extremely significant" by only 46 percent of respondents.

* The key obstacles to implementing collaborative practices were "organizational barriers," deemed "significant" or "extremely significant" by 44 percent of respondents, and "an insufficient understanding about how to work collaboratively," deemed "significant" or "extremely significant" by 39 percent of respondents.

"Increased collaboration with suppliers and external business partners is among the best ways for companies to improve availability without continuing to undermine turns or inflate inventories," said Bleda. "Utilizing collaborative practices can drive down costs across the supply chain; companies that master this capability have an opportunity to create competitive advantage."

In 2004, Accenture conducted an online survey of supply chain executives from manufacturing and retail companies in Europe and North America. The focus of the inquiry was to understand how companies in various industries leverage fulfillment to improve near- and longer-term business performance and to gather data about their fulfillment operations.

Of the 184 executives who participated in the survey, 67 percent were from Europe, 20 percent were from North America, and the remaining 13 percent were from the Asia-Pacific region. Industries most heavily represented include communications, electronics/high technology; food and consumer products; pharmaceuticals and medical products; retail; and automotive and industrial equipment.