Sadly, loyalty has become a thing of the past. A “relic” in fact, if you believe PricewaterhouseCooper’s latest global supply chain survey. Cast into the dustbin of history alongside “predictable order flow”.
The world is certainly changing. A greater focus on online retail, which is pushing companies towards global, micro-deliveries of many small orders, instead of the traditional big box shipments, means that managers are having to change their supply chains, their networks, their suppliers.
Luckily, the heady pace of technology, which has aided the seamless integration among partners, has made this change easier to manage. But, says PwC, there are still some tough supply chain challenges.
So what are the best companies doing?
Apparently, those on top acknowledge the supply chain as a strategic asset, and achieve a 70% higher performance than their less strategically thinking peers. Take Apple, for example. It sees its supply chain as part of its competitive edge, using it strategically to win one over on the competition.
According to the survey, supply chain leaders (who enjoy 30% higher EBIT margins) deliver on time, in full, 95.7% of the time. And thus achieve 15.3 inventory turns, or cycles, per year. But those low-achieving companies, the ‘laggards’ in PwC jargon, make just 3.8 turns. “That means greater efficiency and customer satisfaction without driving up working capital — essentially, having it all,” states the report. “[This] refutes the still widely held belief that delivery performance is a function of inventory.”
But there is some way to go before the majority of companies achieve these impressive results – because just 45% of respondents, from more than 500 relevant organisations, view their supply chain as a strategic asset, and a mere 9% believe it helps them to outperform their rivals. It turns out that supply chain managers – or their logistics partners – have a vital role to play in ensuring the success of their businesses.
So what have these managers been focusing on? Profitability and cost management, supply chain flexibility and meeting customer requirements.
(No one would suggest that cost management isn’t a critical part of the business in these dark economic days. But the focus on cost has certainly been upsetting suppliers recently, who believe procurement departments have been too singularly focused on cost, at the expense of service and product quality. But the procurement debate is for another day.)
Happily for the logistics sector, the leaders in the supply chain field outsource some 60% of their warehousing and logistics, and 50% of their manufacturing and assembly activities, (boding well for those 3PLs that are increasingly settling in that space). And some 75% of manufacturing and logistics is managed locally, helping them to respond better to customer requirements – which are becoming increasingly demanding, while supply chains need additional flexibility. (Some 83% of leaders configure their supply chains for different customer segments.) As one respondent said: “We’re juggling multiple supply chain balls faster and faster and just hope that none of the efficiency or customer satisfaction balls drops to the ground.”
Meanwhile, the jury continues to be out on near-sourcing. Many leaders use it to keep prices competitive, and have switched from low-cost sourcing to best-cost sourcing – but leaders and laggards use similar organisation models, revealing that these alone are not critical elements in achieving top results.
And what of the other priorities? Training and skills are seen by nearly 60% of respondents as essential, and more believe it should be a focus in the coming years.
And although logistics providers have not been the fastest to embrace the issue of sustainability, their customers are finding it increasingly critical. Some 87% say it is highly important, and 81% of those would like to reach an agreement on a responsible supply chain footprint with their suppliers. Carriers, take note.