Supply chain visibility is the number one challenge for chief supply chain officers, according to a new study by IBM.
The study, “The smarter supply chain of the future”, described visibility as the “top challenge but not the top priority” as executives were more focused on strategy alignment, continuous process improvement and cost reduction. Organisational silos were also identified as a major problem.
The study is based on detailed conversations with some 400 chief supply chain officers in 29 industries around the world. While 70 per cent said visibility impacted their supply chains to a significant extent, risk also scored highly (60 per cent), followed by increasing customer demands (56 per cent), cost containment (55 per cent), and globalisation (43 per cent).
Not surprisingly, respondents identified cost containment as their top responsibility. “Supply chain executives find themselves reacting to whatever the cost issue of the day happens to be. Escalating fuel prices, for example, send executives scrambling to re-evaluate distribution strategies, engage third party logistics providers more extensively or even share loads with competitors. When fuel prices fall, distribution and transport methods become more lax as companies emphasise service over cost – reverting back to smaller more frequent shipments and faster modes.”
Risk is an escalating concern. “As important as cheaper, faster, better is, this year, we’re beginning to hear a new verse – a clear message about the overwhelming need for greater visibility and flexibility to manage risk, said Sanjeev Nagrath (pictured), global leader supply chain management at IBM Global Business Services.
“A crisis in one country or region can now ripple very quickly across the world economy creating tremendous turbulence. As supply chains have become more complex, global and stressed, the executives we spoke with believe they must drive far more intelligence throughout their supply chains if they are going to anticipate rather than react.”
Increasing customer demands ere a major issue with two out of three companies struggling to identify customer needs accurately. And the study found that while 63 per cent invited supplier input into their supply chain planning, only 53 per cent included customer input.
Globalisation came fifth in the list of major supply chain challenges. Many companies reported issues with global sourcing including unreliable delivery (65 per cent), longer lead times (61 per cent), and poor quality (61 per cent).
Nevertheless, the financial benefits were seen to outweigh the problems. Some 40 per cent of supply chain executives reported improved margins. The study also showed that more than a third of respondents had experienced an increase in costs as a result of the problems identified above. The study suggested that globalisation had contributed more to revenue growth than to efficiency.