Supply Chain Initiatives Cut Costs, Increase Revenue, Survey Finds

The bad news about supply chain management (SCM) efforts? They’re difficult. The good news? They work. That’s the conclusion of a recent survey conducted by Computer Sciences Corporation and Supply Chain Management Review. A total of 180 supply chain professionals from 18 industries responded to an eight-page questionnaire designed to measure the progress of supply chain initiatives.

The results confirm that significant cost reduction is possible with a concerted supply chain improvement effort. Sixty-one percent of respondents have cut supply chain costs by 1% to 10%, while 13% have saved between 11% and 20%. Additionally, companies are using the results from their improved SCM to generate revenue increases. Fifty-two percent of those responding have upped revenue 1%–10%, and 11% have raised revenue by 11% to 20% or more. These numbers prove that serious attention to SCM can bring five to eight points of new profit to a firm’s financial statements.

The biggest progress reported this year is in supply chain strategy. Only 5% of the respondents indicate that they have no such strategy, down from 10% last year. A sizable 38% (compared to 18% in 2004) say supply chain is developed and executed at the division or business unit level. Forty-nine percent say supply chain strategy is aligned with corporate strategy, and 57% say it is reviewed formally every year—more evidence that supply chain is gaining the attention of executive management as a critical business driver. But there are some laggards: 32% of all respondents indicate they are still in the process of developing a supply chain strategy.

Although the survey results reveal considerable concern for a host of issues related to supply chain vulnerability, 54% of the respondents do not have contingency plans in case of significant disruption. Along with the increase in global shipments experienced by most firms, a new set of issues is emerging. International freight movement, new import or customs regulations, and critical trading partner vulnerabilities are now of concern to more than 30 percent of the respondents.

Developing a business case for supply chain investment is near the top in the SCM areas needing work, in spite of the documented cost savings and revenue increases. And finding the means to collaborate more effectively—internally and externally—is still one of the major problems confronting the supply chain professional.

Other key findings include the following:

* SCM is most likely to fail when there is poor connection among functions across a business—often signaled by poor supply chain visibility and lack of best-practice sharing internally.

* While technology is an absolute necessity for advanced supply chain progress, dealing with its impact is still a major thorn in the side of many practitioners.

* Despite potential economies from global supply chain efforts, most companies optimize locally.

* In spite of the rhetoric about the importance of customers, few firms collaborate closely with key customers.

* Companies continue to install software before retooling their underlying processes, and expect root-cause problems to be eliminated.

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