Supply Chain Benefits Largely Untapped at Most Companies

Survey cites insufficient planning, cultural issues among factors slowing progress

Survey cites insufficient planning, cultural issues among factors slowing progress

El Segundo, CA — October 29, 2003 — A new survey from Computer Sciences Corp. (CSC) and Supply Chain Management Review revealed that most companies are struggling to implement a comprehensive supply chain management program.

On a scale of one to five, with five signifying a fully evolved supply chain that employs Web-based tools and involves key external parties, approximately 90 percent of the 142 respondents placed between levels one and three. Furthermore, the majority of those only placed at levels one and two, signifying that their supply chain initiatives are limited to internal activities only.

"This figure isn't surprising in light of the fact that more than half the respondents don't have a formal strategy in place and don't know the revenue impact of their supply chain initiatives," said Chuck Poirier, author of seven books on supply chain management and a partner with CSC's Supply Chain Solutions practice. "Less than 17 percent said their supply chain strategy is fully aligned with their corporate strategy. Without a strategy or proper assessment tools in place, initiatives are not linked to the business plan, can't demonstrate results effectively and, therefore, lack the executive support they need to achieve their full potential."

The survey also showed over-reliance on technology with respondents affirming investments in a wide variety of software products. The most-cited solutions include: enterprise resource planning (ERP), 63 percent; inventory planning, 53 percent; Web-based applications, 52 percent; advanced planning and scheduling, 48 percent; e-procurement systems, 47 percent; warehouse management systems (WMS), 42 percent; and business-to-business exchanges, 41 percent.

"With investments like these, companies should be further ahead than they are," commented Poirier. "This is another example of seeking the 'silver bullet' in software solutions. Many have purchased state-of-the-art applications before making the process improvements needed to effectively apply the technology."

Cultural issues continue to play a role in the adoption of supply chain management, according to the survey results. Only 40 percent of survey respondents said their supply chain leadership works effectively with their information technology (IT) leadership. In addition, said Poirier, the sheer number of respondents at levels one and two shows that companies are still struggling with trust issues associated with sharing processes and access with outsiders.

Among those actively pursuing initiatives, supply chain management programs continue to demonstrate merit, CSC said. Well over half the respondents have already achieved operating cost savings in excess of five percent. Twenty- five percent of respondents said they have seen revenue increases of between one and five percent, and nearly 15 percent said revenue has increased six to 10 percent.

However, Poirier said these figures show that companies continue to chase cost savings rather than pursue the long-term benefits of an extended enterprise supply chain. "Those that focus solely on the internal aspects are only reducing costs," said Poirier. "They're falling well short of potential bottom-line revenue gains. This is a little odd considering that three out of four respondents said their CEO considers supply chain management to be a source of competitive advantage."

"While the emphasis on cost reduction prevails, IDC too has seen a growing number of companies viewing their supply chain as a key driver of competitive advantage," said Romala Ravi, manager of IDC's Supply Chain research program. "Notwithstanding this growing trend, the path forward will see these companies investing in more focused and quickly implemented supply chain initiatives that are linked to underlying business processes. As the projects get more focused, companies will look to their supply chain vendors and service providers to help them build a roadmap and connect smaller-scale projects into a comprehensive and meaningful supply chain strategy," said Ravi.

Respondents cited "visible and active senior management commitment" as the single greatest success factor for their implemented projects (61 percent). "Performance measures aligned to desired outcomes" was number two (56 percent). "Technology enablers established and operating" placed only fifth, suggesting the growing acknowledgement that technology alone is not the answer, said Poirier.

According to the survey, high technology, telecommunications and wholesale delivery companies are in the lead. Industries showing the least progress include consumer goods, government, and oil and gas.

The survey was conducted this summer. It was sent to readers of Supply Chain Management Review and approximately 100 CSC customers with supply chain management responsibilities.

Half the respondents represent corporate offices or independent businesses. The other half hail from business units within companies or wholly owned subsidiaries.

Industries represented include: aerospace and defense, chemicals, consumer goods, government, healthcare, technology, discrete manufacturing, process manufacturing, media and entertainment, oil and gas, professional services, retail, telecommunications, transportation services, utilities and wholesale distribution.

Poirier is a frequent speaker and prolific author. His most recent book, The Networked Supply Chain: Applying Breakthrough BPM Technology to Meet Relentless Customer Demands, written with CSC co-authors Lynette Ferrara, Francis Hayden and Douglas Neal, was released last month.