Top Supply Chain Initiatives: Lean, Demand-driven, Globalization

But trading partner integration impeding effective supply chain performance, E2open survey finds; leaders shifting to multi-tier synchronization model

Redwood City, CA — April 27, 2007 — Industry leaders are shifting their operations model from a traditional manufacturing-centric model to a focus on synchronizing the extended supply network that includes multiple tiers of suppliers and multiple tiers of distribution to ensure that the right product is delivered to the right location at the right cost, according to the results of a new survey released by E2open.

The survey, conducted at the fourth-annual SAP Logistics and Supply Chain Management 2007 conference, held in Orlando, Fla., had conference attendees from more than 160 companies rank the top supply chain initiatives that enterprises are undertaking in order to deal with the complexities of today's global economy.

Early adopters of the multi-tier synchronization model have achieved superior customer service levels, streamlined inventory across the supply network, reduced costs for all participants and improved flexibility, according to E2open, a provider of supply chain management software-as-a-service for visibility and control over global supply networks.

Based on the survey, best practices demonstrated from early adopters include:

  • Global organization: A new organizational model that establishes a global supply chain operations group — integrating procurement, supply chain, internal and outsourced manufacturing, logistics and distribution — that is accountable for overall operational effectiveness of the end-to-end supply chain across operating units, geographies, suppliers and distribution networks. This group is responsible for harmonizing the key strategic and tactical elements to optimize overall supply chain performance. Local accountability for execution is retained, but clear alignment of metrics is achieved with this new "supply chain control tower" function.

  • Global initiatives: Industry leaders are able to rapidly and effectively execute a continually evolving mix of the following high-priority supply chain initiatives:
    • Globalization to leverage economies of scale across multiple operating units
    • Lean demand-driven supply chain
    • Operations and sourcing in low-cost countries (China, etc.)
    • Outsourced manufacturing and design
    • Process automation, such as vendor- or supplier-managed inventory (VMI or SMI), international procurement office (IPO) and trading center (ITC), etc.
    • Trading partner integration
  • Global platform: The new global organization and initiatives must be supported by improved visibility to timely and accurate supply chain information and greater control over the processes that span across companies in the extended supply network. A new shared platform is required to synchronize processes and information across all participants in the end-to-end supply chain, extending internal processes and systems and leveraging the investments made in traditional enterprise applications such as enterprise resource planning (ERP), supply chain management (SCM) and product data management (PDM) systems. This platform must support the very different architecture, technical, security and operational requirements of a multi-enterprise solution.

Survey respondents validated the highest-priority supply chain initiatives:

  • 48 percent of survey respondents identified lean supply chain — eliminating waste and unnecessary steps, for example, by evolving from a "push" to "pull," demand-driven strategy;

  • 45 percent identified operational improvement programs — obtaining visibility into supply chain information by replacing manual processes with automation (automated VMI/SMI programs, IPO/ITC, etc.);

  • 39 percent identified globalization — leveraging economies of scale across multiple operating units;

  • 29 percent identified improvement in trading partner integration by migrating from legacy systems to multi-enterprise supply chain platforms — replacing legacy collaboration applications and B2B gateways.

Additional initiatives identified by respondents included outsourced manufacturing and design as well as operating and sourcing in low-cost countries such as China, Southeast Asia, Eastern Europe and Latin America.

Survey respondents also cited the top business objectives for their supply chain initiatives as follows:

  • 66 percent cited reducing operating costs;

  • 52 percent cited reducing inventory;

  • 41 percent cited improving on time delivery;

  • 39 percent cited improving availability and cycle times.

Survey responses confirmed significant capability gaps in the technologies they are using to enable the required trading partner integration, validating the need for a new supply chain information and process platform. When asked how they synchronize their supply networks on inventory data, forecasted and actual demand and supply, and related information and processes that are critical to achieving the expected business objectives, survey respondents indicated the following:

  • 44 percent are using EDI

  • 42 percent are using e-mail

  • 29 percent are using Excel spreadsheets

Numerous respondents indicated that they are still using paper and fax.

"With a general realization that 'the world is flat,' today's competitive landscape is defined by companies that are best-in-class in managing their extended end-to-end supply chain," said Lorenzo Martinelli, executive vice president at E2open. "Industry leaders have demonstrated a proven approach that includes establishing a global organization responsible for driving global initiatives to maximize overall supply chain performance and supported by a new global platform that provides the required visibility to information and control over processes that extend across the end-to-end supply chain."

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