There is no surprise that cost reductions top the high-tech supply chain executives ranking of the three biggest issues or projects for 2014, according to the Annual North American Hi-Tech & Electronics Report from eyefortransport. The survey of supply chain executives also reveals that the most effective strategies for reducing costs include improving internal efficiencies, improving forecasting, and better sourcing of materials and new suppliers.
In addition to cost reduction challenges this year, the survey also looks at some of the pressures on supply chain executives, as well as how they deal with supply chain risk and key challenges working with new suppliers and start-up companies. The survey also indicates that big data is a priority for many supply chain executives.
Here are several of the top findings.
There is no doubt that cost has been a continued concern of supply chain executives. Although strategies vary to control costs, the survey finds improving internal efficiencies (76 percent) has been the most effective measure for cutting supply chain costs over the past 12 months, followed by improved forecasting (48 percent) and cheaper or better sourcing of materials and new suppliers (48 percent). Other top cost cutters include re-negotiation of existing transportation contracts or investing in technologies that cut costs.
eyefortransport said: “While drivers for cost increases have evolved in recent years - from dealing with risk, to increased oil prices and coming to terms with global demand - the one constant that the supply chain executive has had direct control over is the internal structure of the business. As such, seeing this as the top area of cost savings is of no surprise. In fact in our interviews with executives, S+OP, and talent were amongst the most mentioned areas of desired improvement.”
The report also reveals key differences between North American and European supply chain executives when it comes to the importance of forecasting and switching logistics providers. European supply chain executives were far more likely to switch providers to improve their cost outlook than their North American counterparts.
eyefortransport said: “As commoditization continues to play a big role in logistics, this is perhaps a reflection of the differences between North American and European logistics providers - their abilities to differentiate between one another, and the ability of the customer to use switching, or the threat thereof to secure lower rates.”
In addition more than five percent of respondents in North America ranked forecasting higher than in Europe. “Europe's been focusing hard on forecasting over the last several years, with improvements coming at increasingly smaller increments. As such, there is perhaps an element of catch-up taking place here on the side of the North Americans,” said eyefortransport.
With the supply chain seen as a cost center, there is no surprise that cost reductions top the high-tech supply chain executives list for the biggest three issues/projects in 2014. For North American respondents, the second and third biggest issues are new product launches and improved forecasting and S+OP. For European counterparts, the top priorities are reducing inventory and managing supply chain complexity, while improved forecasting and S+OP ranks fourth and new product launches is much further down the list in terms of importance.
Supply chain executives are feeling the pressure in 2014 – 56 percent of respondents agree there is more pressure on them this year and 26 percent strongly agree with the statement. Despite improving economic indicators, supply chain executives are feeling the pressure, which is likely “a reflection of the competitiveness of the industry, and the demand that now lies on supply chain executives for continuous improvement. The integral nature of supply chain in the business is increasingly making the case that 'cost center' is perhaps no longer the most accurate way of describing it,” according to the report.
The survey also reveals there is “an element of uncertainty” in contingency planning for unforeseen interruptions such as ash clouds, flooding, strikes, etc.
eyefortransport said: “Having to balance costs with contingency planning, as well as consideration of all the hypotheticals associated with planning for all inevitabilities, mean that there is that respondents saw room for improvement. As extreme weather becomes more of a reality, markets continue to shift, and the hi-tech industry continues its competitiveness, one can be assured that contingency planning continues to be an area of improvement.”
When asked ‘what is your organization’s biggest data-related priority,’ the top answer was actionable analytics. Fifty percent of supply chain executives responded that deriving actionable analytics is their top priority. This was followed by real-time dashboards (26 percent), selecting the right metrics (14 percent) and coming to terms with big data (10 percent).
eyefortransport said: “Collecting data has become one of the more standardized processes while making the right decisions based on the data has become more difficult to achieve. Challenges for supply chain executives are then not so much gathering data, but asking the right questions of the data, and determining what types of decisions can be derived from the information at hand.”
However, North American and European supply chain executives differ in terms of what areas to apply data analytics to. Overall, the top areas include to enhance demand planning capabilities (62 percent), to increase visibility (56 percent), to enhance S+OP planning (54 percent), and analytics around supply chain risk (44 percent).
eyefortransport said: “North Americans responded in favor of demand planning when thinking about apply analytics to an element of their business. European on the other hand thought visibility was the most important dimension for data analytics. Perhaps these responses are both indicative of a desire by executives to gain greater control over external variables to help with strategic planning. While it's unlikely that any game changers will come out of big data in terms of determining unknown variables, data is certainly providing some answers.”
Supply chain executives also shared their biggest concerns when managing new suppliers. The two biggest challenges are integration of IT systems between multiple partners (26 percent) and partnership-driven innovation (20 percent).
Another key finding indicates that a majority of respondents (34 percent) use reverse supply supply chain for customer retention and satisfaction. However, a healthy percentage also use it for cost recovery (14 percent) and as a revenue stream (10 percent). Still, another 26 percent said they do not have a reverse supply chain.
Of those organizations that do have a reverse supply chain, more than 30 percent said their strategy is not embedded into their overall supply chain strategy. By region, most North American respondents said their supply chain was not embedded into their overall strategy while European counterparts said their reverse supply chain was partially embedded or very embedded.
eyefortransport said: “Reasons for this discrepancy could lie on such things as regulatory measures in the EU vs. the US. As regulations are more stringent on disposal in Europe, it might require more integration of forward and reverse supply chains. Another possibility could be within job roles - North American companies could be more likely to have reverse logistics job titles, responsibilities and scope than their European counterparts. As such, the supply chains are more defined along job specializations.”
The survey also asked about working with start-up companies. More than half of supply chain executive respondents work with either start-up customers (40 percent) or start-up solution providers (24 percent), which means they “are clearly aware of the role start-ups play in their industry, and the potential they offer in terms of innovation and business,” according to the report. However, 48 percent of respondents said they do not work with start-ups.
The biggest challenge cited when working with start-ups is visibility, according to 40 percent of respondents. Other challenges include scalability and having the right IT systems in place.
For more insights into the challenges and opportunities in the high-tech supply chain in North America, visit eyefortransport to download the report.