Study: Supply Chain Goals 'Misaligned' with Execution

An optimal supply chain relies on alignment – between supply and demand, or goals and execution – for success. But a recent report has found a significant misalignment between the business objectives of a strategic supply chain and the resources dedicated toward achieving that goal.

Of 250 senior manufacturing executives polled by GT Nexus, which operates a cloud-based supply chain management platform, and researcher YouGov, 40 percent reported a supply chain disruption that impacted their business over the past 12 months. Yet, despite the struggle with disruptions, less than a quarter (24 percent) of these businesses currently has a Chief Supply Chain Officer (CSCO) in place.

“It’s clear in the report that manufacturers expect to face major supply chain challenges in 2016 stemming from external factors beyond their control,” said Greg Kefer, VP for corporate marketing at GT Nexus. “The data suggests their execution roadmap may be misguided, being focused more on cost cutting, for example, than more mission-critical things like having a senior supply chain leader in place.”

Kefer said he found a number of elements in the report surprising, such as manufacturers' technology priorities. Thirty-eight percent of respondents don’t believe their supply chain will be impacted by technology this year. This may suggest a lack of knowledge regarding the impact technology-based systems can have on mitigating supply chain disruption and the role of these systems in supply chain strategy and control, according to GT Nexus.

The study also found almost half – 41 percent – of respondents intend to cut costs in the near future. The researchers acknowledge that supply chain costs can easily spiral out of control given today’s complex business landscape. Supply chains are more expansive –and expensive – than they’ve been in years past, but complexity can be kept in-check by having a supply chain strategy in place . Key elements of this strategy, according to GT Nexus, are executive leadership and seamless information-sharing across an entire network of supply partners.

Technology, of course, enables information sharing. GT Nexus' open platform enables a user, such as an OEM, to network with suppliers, customers, manufacturing partners, logistics providers and even trade authorities to share data in real time. If a shipment is delayed at a seaport, for example, the OEM will receive a notification. This enables the company to make alternative arrangements and avoid costs associated with a supply chain disruption.

Other concerns

The survey found manufacturers' top concerns for the near future also include:

Currency fluctuations and geo-political risk (29 percent)
Labor strikes (14 percent) and the
Transpacific Partnership (8 percent)

“I think a company exposes itself even worse financially if you miss a [disruption] event,” Kefer said. While cost cutting is important, efforts that support a strategic supply chain vision are also critical.

When it comes to future use of technology, companies aren’t only looking at execution based solutions but also planning based solutions, such as inventory and network optimization. The technologies and tools currently being used to manage supply chain execution include:

Inventory management (64 percent)
Factory management (35 percent)
Transportation management (34 percent)

It’s no surprise manufacturers still direct their resources to inventory, factory and transportation management solutions as these technologies help align efforts of all parties involved, give employees enhanced visibility into their specific departments, and help companies break down the walls to operate more effectively, the report said. However, there are other considerations to keep in mind as a company continues to innovate. For example, only 4 percent of companies identified “increased visibility” as a priority in the short term.

Companies across the electronics spectrum are emphasizing visibility and transparency as competitive differentiators. Verical.com, an online marketplace within global distributor Arrow Electronics Inc., emphasizes transparency as part of its strategic business model. Verical, which posts inventory from original component manufacturers (OCMs) and authorized distributors for sale online, provides an API through which buyers can view the provenance of all available components. The ability to trace components back to the OCM is critical in the industry’s anti-counterfeiting efforts.

Tools such as electronic data interchange (EDI) have been adopted in the electronics supply chain to aid in visibility. But EDI requires a significant investment among business partners and links tend to be one-to-one rather than many-to-many. “These options only provide one version of what we call the ‘truth’ of a supply network,” Kefer said. “Companies have to share information in a way so that there is a single version of the truth that all the partners can see."

At the core of this strategy, according to GT Nexus, should be a networked approach. This means:

Having connected partners end-to-end
Driving decisions based on operational information
Establishing deep executional visibility and control

Taking this approach will help manufacturers achieve all of their goals – including cost reduction, the company said. Operating as a network does away with reactiveness and breaks down the silos of information and facilitates a transparent, efficient environment.