Global Supply Chain Trends 2011
In preparing PRTM’s 2010–2012 Global Supply Chain Trends report last year, we noticed that attention to flexibility has become a constant. Hence, this 2011 supplement is dedicated to explaining which levers can increase supply chain flexibility, as well as what leading companies are doing differently from their industry peers.
Drawing from interviews conducted with 150 global executives across a broad range of industries in the spring of 2011, we have identified five key levers. To achieve the higher operational flexibility needed to mitigate volatility risks, supply chain leaders must:
1. Focus on supply assurance and proactive capacity management for critical resources. Close partnerships with key suppliers and fast and appropriate responsiveness are the most important ways to master significant up- or down-swings.
2. Relentlessly engage in collaborative end-to-end demand and supply planning. Leaders connect, automate, and actively manage real-time information points with all supply chain partners to support rapid and informed decision making.
3. More tightly integrate their own and their partners’ supply chain architectures. This practice ensures that all players in the global extended enterprise network collaborate to achieve jointly agreed upon performance standards. The supply chain architecture defines how various supply chains play together in the extended enterprise as an integrated whole.
4. Tear down the wall between supply chain management and product development/engineering. Supply chain leaders actively manage the product portfolio to integrate product development and supply chain activities throughout the product life cycle. This approach reduces new product introduction cycle times, limits product variety, and ensures late-stage customization.
5. Relentlessly drive superior collaboration maturity. This ensures that advanced flexibility practices and skills are applied throughout all units of the company, and that implementation is supported by supply chain and functional management. In our survey, supply chain leaders who have implemented the five flexibility levers have, on average, achieved a 12 to 15 percent revenue increase annually, primarily by ensuring fast and reliable delivery times for high-demand products. Leaders have also reduced supply chain costs by 8 to 10 percent, thanks to less expediting, better crisis management, fewer supply risks, reduced working capital, and more effective planning of inventories and logistics.
But supply chain flexibility doesn’t come for free. It requires significant investment in the levers relevant to the company in question. Moreover, it requires top-down commitment—from supply chain executives as well as sales and other company functions—to deploy changes that, by necessity, apply across many functions.