Despite disruptive technologies such as big data, cloud computing, and the Internet of Things (IoT), one of the single biggest concerns for supply chain executives continues to be forecasting.
In a recent survey conducted by eyefortransport (eft) for its 2015 Chief Supply Chain Officer Forum, supply chain executives cited forecasting as their primary concern, according to nearly 40 percent of respondents. This indicates that forecasting is both a challenge and a primary area in which to cut costs, said eft.
Survey results were based on interviews with supply chain or logistics executives at retailers or manufacturers, with the majority of respondents coming from a manufacturer (83 percent). The industry most represented is the hi-tech/electronics/telecommunications segment. Other big responders come from healthcare and manufacturing/industrial industries.
Here are key findings from the 2015 CSCO Report.
In addition to forecasting, two other top business challenges cited by supply chain executives include inventory management and optimization, according to nearly 35 percent of respondents, which eft attributes to the increased importance of e-commerce to both manufacturers and retailers, followed by cost containment and reduction, according to 32 percent of respondents.
Eft cited a correlation of the decreasing importance of new technology implementation, which is now less of a business challenge and a less effective way to cut costs compared to 2014. The report also indicates differences among companies by revenue. For example, companies in the $500 million to more than $1 billion range selected demand variability as their primary challenge, in line with overall results. However, companies with revenue of less than $50 million and between $50 to $500 million cited cost containment and reduction as their biggest challenge.
So what are effective methods for cutting supply chain costs? Improving internal efficiencies was the most effective method for cutting costs over the past 12 months, according to nearly 70 percent of respondents, which is in line with 2014 results, said eft. This was followed by improved forecasting (nearly 50%), which was also the only area that increased in effectiveness compared to 2014, renegotiating existing transport contracts (about 45%) and cheaper or better sourcing of materials/new suppliers (about 42%).
“A key takeaway from the 2015 results is the marked drop in investment in technologies that cut costs, suggesting that companies are perhaps looking more towards internal methods in order to reduce costs,” according to the research report.
Supply chain executives were also asked about sales and operations planning (S&OP) processes. More than two thirds of respondents said “the S&OP process is a cross-functional team effort” and that “senior executives contribute to final S&OP decision making” within their organization. Other responses indicate that key suppliers do not regularly contribute to the S&OP process, and risk mitigation is not often integrated into the S&OP process.
Most respondents ranked their supply chain contingency planning as “satisfactory.” Similar to top business challenges, ratings for supply chain contingency planning varied by company revenue. For example, around 35 percent of companies with revenue of more than $1 billion rated their supply chain contingency planning as above average, compared to the 14 to 15 percent rating by companies with revenue below $1 billion.
The survey also finds that 10 percent more supply chain executives now hold a seat on the operational board compared to 2014. According to executives, 68.6 percent said the head of the supply chain sits on the operational board today. “…very encouraging for the role of the CSCO in the overall company strategy,” according to the report.
Although sustainability appears to be a key area in the future agenda of global supply chain executives, the survey results indicate that the importance of sustainability has decreased since last year. Still, more than one-third of respondents rated sustainability as extremely important to their business.
The biggest obstacles to achieving supply chain sustainability, according to respondents, are lack of resources (20.9%), not important to suppliers (15.5%), implementation costs (13.7%), lack of shared values (13.6%), and not important to management board (13.6%).
Future Supply Chain Opportunities
Supply chain executives also were asked about future opportunities in the areas of big data, omni-channel, 3D printing, and IoT. Here’s what they discovered. Analysis indicates that supply chain executives are shifting towards a more positive view of the expected impact of big data on supply chain management. While only three percent believe it will be a total game changer, up to 82 percent of respondents think that big data will have a moderate to significant impact on the supply chain.
The big area where supply chain executives think big data will have the best impact on return on investment (ROI) is visibility, according to nearly 30 percent of respondents. This is followed by enhancement of demand planning capabilities (nearly 25%) and product and market segmentation strategies (about 17%).
In terms of expanding omni-channel capabilities over the next 12 months, three quarters of retailers have plans to expand and 40 percent of manufacturers are investigating the possibility. The biggest concerns around omni-channel operations expansion were the integration of IT systems between multiple channels (33%) and last mile delivery (18%).
Survey results indicate that 3D printing is increasing in importance compared to 2014, with more respondents selecting it will have a significant or small impact on manufacturing processes. About 15 percent of respondents said they are currently using 3D printing to some degree and about 25 percent are currently evaluating the options available.
The areas where 3D printing will have the biggest impact in the next three years (on a weighted average) include increased customization, although spare parts logistics ranked highest in terms of “significant impact,” said eft. Respondents expect little impact on general inventory optimization, according to the report.
One of the biggest trends in the electronics industry is the IoT and supply chain executives were asked if there were any potential opportunities and impact for the supply chain. The key finding: seven percent of supply chain executives see no impact, and over one third see a significant impact. The takeaways: 33 percent see some impact as a result of more data to manage, which will require bigger IT budgets, analytics, architecture and infrastructure, and 35 percent see a huge impact, which will cause a re-thinking of entire logistics and supply chain networks, architecture and bandwidth as well as customers demanding this level of service automation.
All of these topic areas will be discussed at the upcoming Chief Supply Chain Officer Forum, sponsored by eft, June 16-18 at The Radisson Blu Aqua, Chicago, Illinois. See: http://events.eft.com/csco/ for more information.