voice of the supply chain - leaders speak on technology - 6 jan 2013
DESCRIPTION
This report is based on a quantitative survey among 40 supply chain professionals from 35 companies. The data was collected in the fall of 2012. The results are contrasted with data from the first wave of the study which was collected in the spring of 2012 among 58 individuals from 35 companies. In the future, it is our goal to run this study twice a year on an ongoing basis. We want to help leaders understand how supply chain teams’ attitudes on supply chain technologies are changing. This is not your father’s old-fashioned supply chain. Today, we are at an inflection point. Supply chains have grown in importance; new technologies are evolving, and supply chain leaders are looking for new solutions. Today’s supply chain leader is struggling to assemble/develop the right talent, get to meaningful data and drive actionable analytics. While planned spending on technology is increasing, frustration with existing systems is also increasing. The unfiltered voice of the supply chain leader is shown in figure 1 with unedited open-ended responses.TRANSCRIPT
Voice of the Supply Chain
Supply Chain Leaders Speak on Supply Chain Technology
1/6/2013
By Lora Cecere Founder and CEO
Supply Chain Insights LLC
Copyright © 2013 Supply Chain Insights LLC Page 1
Contents Research 2
Disclosure 2
Research Methodology 2
Executive Overview 3
The Voice of the Supply Chain Leader 5
Spending is Increasing. Confusion Reigns. 6
Global Drives New Opportunities 9
The Rise of Third Generation of Applications 10
Why It Matters 12
Recommendations 13
Appendix 14
Methodology and Survey Demographics 14
About Supply Chain Insights LLC 17
About Lora Cecere 17
Copyright © 2013 Supply Chain Insights LLC Page 2
Research This independent research is published using the principle of Open Content research. The
views are our own.
It is intended for you to read, share, and use to improve your decisions in planning and selecting
technology for supply chain projects. When you use the data, all we ask for in return is
attribution. We publish under the Attribution-Noncommercial-Share Alike 3.0 United States
Creative Commons License and our citation policy can be found on the Supply Chain Insights
website.
Disclosure Your trust is important to us. As such, we are open and transparent about our financial
relationships and our research processes. We keep all individual respondent answers
confidential. Complete details on the research methodology are in the appendix of this report.
Research Methodology This report is based on a quantitative survey among 40 supply chain professionals from 35
companies. The data was collected in the fall of 2012. The results are contrasted with data from
the first wave of the study which was collected in the spring of 2012 among 58 individuals from
35 companies. In the future, it is our goal to run this study twice a year on an ongoing basis. We
want to help leaders understand how supply chain teams’ attitudes on supply chain technologies
are changing.
Copyright © 2013 Supply Chain Insights LLC Page 3
Executive Overview This is not your father’s old-fashioned supply chain. Today, we are at an inflection point. Supply
chains have grown in importance; new technologies are evolving, and supply chain leaders are
looking for new solutions.
Today’s supply chain leader is struggling to assemble/develop the right talent, get to meaningful
data and drive actionable analytics. While planned spending on technology is increasing,
frustration with existing systems is also increasing. The unfiltered voice of the supply chain
leader is shown in figure 1 with unedited open-ended responses.
Figure 1. Open-ended Challenges and Goals Described by Supply Chain Leaders
2013 is all about demand and predictive analytics. There is a shift in focus from supply to
demand. The largest gaps are in demand systems, and the fewest answers on how to redefine
and improve processes are in the area of demand management. What seems clear is that the
path that we have walked is not the path of the future.
As shown in figure 2, the focus is on sensing (demand and supply), visualization and new forms
of analytics. While most companies do not know what “big data” means, they are attempting to
figure it out. They are drowning in data and short on insights.
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Figure 2. Future Focus: Trends that Leaders are Excited About
In this report, we share insights of supply chain leaders on the current state of technology, the
gaps in current performance, and their insights on future requirements.
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The Voice of the Supply Chain Leader 2013 marks the beginning of a fourth decade of supply chain management. The technologies
are mature and the business problem has become more complex.
Frustration abounds. As shown in figure 3, the supply chain leadership team is struggling with
two primary issues: understanding among the executive teams of supply chain management,
and the availability of useable and actionable analytics. The old systems that used only
transactional data with a strong focus on reporting are giving way to new forms of predictive
analytics that use both structured and unstructured data to gain faster and more meaningful
insights.
Figure 3. The Struggle of the Supply Chain Leader
Companies want new answers and deeper solutions for supply chain visibility and demand
management. There is growing recognition that the processes need to change in order to
improve agility and absorb volatility. In figure 4, we show the pain points of the supply chain
organization. This is a shift from the more traditional views of technology that were more
transactional and supply-centric. In 2013, the focus will be on analytics.
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Figure 4. Top Supply Chain Concerns of the Supply Chain Organization
Spending is Increasing. Confusion Reigns. The good news for technology providers is that supply chain leaders are increasing the
spending on supply chain technologies in 2013 (see fig. 5). The bad news is that confusion on
what to buy abounds. There are no clear answers on the winning solutions to purchase and
frustration with current solutions is high.
While there was once a belief in an extended solution built on an Enterprise Resource Planning
(ERP) platform, there is a growing backlash to spend more on multiyear Enterprise Resource
Planning (ERP). Users are looking to purchase easier-to-use, less expensive Software-as-a-
Service solutions (SaaS). They want software evolution to be easier and they are questioning
the old ways of buying supply chain applications.
Supply chain management requires deep expertise. It is not an area where an application can
be slapped into the cloud: instead it requires skilled consulting to configure and adapt the
specialized solutions for the application. For this reason, some technology providers are starting
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to talk about “solution as a service” where new forms of predictive analytics are supplied via the
cloud with online help and hosted services to make the SaaS deployment successful.
Figure 5. Plans for 2013 Technology Spending
Figure 6. Number of IT Solutions by Application Category Operating within the Supply Chain
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The supply chain management technology market is mature with 98% of companies having
technologies in all the application categories listed in figure 6. The average company has over
150 distinctly different technologies with no technology category listed being dominated by a
single vendor. Despite the aggressive marketing by technology vendors that companies are
consolidating on a common platform, the reality is quite different. Companies have different
applications in various regions of the world; and the unfortunate reality, for the CIO, is that there
is a need to support the multiple solutions shown in figure 6.
The focus for the future, as seen in figure 7, is on demand planning, saving money and
shortening cycles. The good news is that advances in supply chain network design offer great
opportunities to improve supply chain design to reduce costs. While there are small shifts in
responses from the spring to fall surveys, the general trends are similar.
Figure 7. Focus Points over the Next Two Years
Over 60% of companies have a supply chain center of excellence. As shown in figure 8, this
group is starting to play a more prominent role in the selection and deployment of new forms of
technology.
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Figure 8. Roles of the Supply Chain Center of Excellence
Global Drives New Opportunities While companies speak of the global supply chain and assume that it has a common definition,
it does not. The term global has very different definitions by industry and supply chain maturity.
While line-of-business leaders talk about “global deployments,” what most vendors are seeing,
as shown in figure 9, are multinational deployments.
As companies expand their product portfolios to different geographies and build supply chain
teams in those geographies, it offers opportunities for the supply chain technology vendor. In
this survey, 80% of companies had some level of global deployment of supply chain software.
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Figure 9. Definition of Global Solutions
The Rise of Third Generation of Applications The supply chain management market is slowly moving into the third generation of applications.
The first was a best-of-breed market dominated by small industry-specific vendors. The second
phase focused on the extended Enterprise Resource Planning (ERP) platform and the building
of a tightly integrated solution. The third is a phase of new forms of predictive analytics that are
focused in three areas:
• Evolution and support of horizontal processes like Sales and Operations Planning
(S&OP), revenue management and demand/supply visibility
• Inter-enterprise applications to manage third-party operations and multiparty shipments
• New forms of predictive analytics for faster and deeper answers in traditional application
areas
The gaps in current technology deployments are large. It is a case where there are large gaps in
the most important technology deployments. The first and second generation of technology
solutions did not quite hit the mark and the business problem has changed.
To understand the issue, let’s start with an understanding of current satisfaction among
companies with supply chain management technologies. As shown in figure 10, they are the
most satisfied with supply chain execution systems of transportation and warehouse
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management and the least satisfied with supply chain planning systems. The differences are
noteworthy.
Figure 10. Current Satisfaction with Supply Chain Technology Deployments
Figure 11. Performance versus Importance of Current Technologies in Supply Chain Deployments
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The most important solutions are ERP, order management and demand planning. The largest
gaps in importance versus satisfaction are in the areas of ERP, order management and demand
planning, as shown in figure 11. The first and second generation of solutions missed the mark.
The largest gaps are in the areas of the greatest importance. There is a need to redefine
platforms and reimplement these technologies.
Why It Matters The promise of supply chain management solutions was to reduce costs, improve inventory
carrying costs and reduce supply chain cycles. When we look at balance sheet results over the
last decade, despite year-over-year investments, we have not met these stated goals. Operating
margin has increased 1% on average and inventory positions have grown 2%-3%. Only the
high-technology manufacturers have been able to use planning technologies to reduce days of
inventory. For the rest of the industries, despite project after project that was committed to
reducing inventories, this has not been the reality.
Waste has grown between the links of the supply chain. Instead of collaboration, where
companies come together to reduce waste and improve opportunities in the supply chain, what
has happened is the shifting of costs backwards in the supply chain.
However, it is not all doom and gloom. The implementation of technologies has improved
productivity. The average company has been able to improve revenue/employee by 26%. The
technologies have also been used to increase account payables which have decreased supply
chain cycle times, but decreased supply chain resiliency.i
Today’s supply chains are rigid and inflexible. They are brittle at the joints. Waste and cost
opportunities exist in each of the connections, but most companies are still focused on
functional silo excellence. They lack a focus on leadership for the end-to-end value network.
As a result, the supply chains respond, but they do not sense; and the technologies do not meet
the business requirements for demand translation and demand and supply visibility. Despite the
outsourcing of manufacturing and logistics, we have made very few inroads in the automation of
the end-to-end supply chain. As companies tackle opportunities with new product launches,
expansion into new geographies, and improving corporate social responsibility, this is increasing
in importance.
The evolution of the third generation of supply chain technologies is an opportunity to “right the
ship,” but only if we are able to understand the gaps of today’s technologies and the business
drivers for tomorrow’s technologies. As long as today’s technology vendors are “yelling” their
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message about their solutions, they are unable to hear how to close the gaps in the current
solutions to utilize the in-memory capabilities, the potential of cloud-based computing, and new
advances in learning systems and visualization. It is time to rethink supply chain planning. Now
is the opportunity to bring new solutions for visualization and predictive analytics to market.
Recommendations 2013 is the year for best-of-breed and new forms of predictive analytics. Maximize the usage of
current technologies and stabilize the investments in current Advanced Planning Solutions
(APS) and Enterprise Resource Planning (ERP). Form a cross-functional group to evaluate the
potential impact of using new forms of predictive analytics on the end-to-end supply chain. Plot
the opportunity for these new solutions outside-in and build a three-year road map.
The traditional consultant has made large sums of money on global ERP deployments. As these
funds are drying up they are looking for the next opportunity. Many are attempting to help clients
with “big data,” “supply chain excellence,” or “new forms of analytics.” Proceed with caution. We
find that the level of understanding of supply chain excellence has gone down in traditional
consulting partners, not up. We also find that they are largely out of touch with the evolution of
third generation supply chain technologies.
Explore new solutions. Pilot them and test the fit. Work in co-development with new forms of
predicative analytics with new best-of-breed vendors. Move slowly. Help these new vendors to
mature their solutions. The good news is that there are starting to be some great advances in
the use of new technologies to solve supply chain problems. With the rising costs of
commodities, and the shortage of talent, all companies should pay attention to these easier-to-
use, cloud-based solutions.
Copyright © 2013 Supply Chain Insights LLC Page 14
Appendix
Methodology and Survey Demographics When we start a survey, we begin with a research hypothesis and a set of objectives. These,
along with a high-level demographic overview, are listed below. We protect the anonymity of the
individual respondents. Each respondent was offered a one-hour discussion of the data when
completed. There was no exchange of funds or gifts as an incentive for respondents’ answers.
A similar survey was completed in the spring of 2012. The details of this first study are available in the Supply Chain Insights Community here. In the current report, we contrast the results of the two studies.
The study respondents are detailed by job type and experience in figure A. In general, the respondents of this study were clustered in large process-based companies.
Copyright © 2013 Supply Chain Insights LLC Page 15
Figure A. Company Overview of Respondents
Supply chains have grown in importance. The respondents of this survey were mainly directors and above. The average respondent had twenty years of supply chain experience.
Figure B. Reporting Relationships
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The respondents of the survey were from mature organizations with 93% having a supply chain organization. The reporting relationship within the organization is rising in importance. In this survey, as shown in figure C, 65% of these respondents say their supply chain organization reports to senior leadership (the Chief Operating Officer, Chief Executive Officer or the corporate President of the company).
Figure C. Definition of Supply Chain for the Respondents
Companies tend to define supply chain organizations very differently. It is for this reason that we determine these reporting relationships in each study that we do.
Nearly two-thirds of respondents report having a supply chain center of excellence, 62% with six supply chain functions with direct reporting relationships. The most common direct reporting relationships are supply chain planning (supply and demand), inventory management, transportation and distribution. There is a lower occurrence of customer service, sourcing or manufacturing having a direct reporting relationship.
Copyright © 2013 Supply Chain Insights LLC Page 17
About Supply Chain Insights LLC Supply Chain Insights LLC (SCI) is a research and advisory firm focused on reinventing the
analyst model to make research more available and actionable. The services of the company
are designed to help supply chain teams improve value-based outcomes. The company offers
research-based Advisory Services, a dedicated Supply Chain Community and Training on
Supply Chain Excellence. Formed in February 2012, the company is focused on helping
technology providers and users of technologies improve value in their supply chain practices.
About Lora Cecere Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights
LLC and the author of popular enterprise software blog Supply Chain
Shaman currently read by 4500 supply chain professionals. Her book,
Bricks Matter, published on December 26th, 2012.
With over nine years as a research analyst with AMR Research, Altimeter Group, and Gartner Group and now as Founder of Supply Chain Insights,
Lora understands supply chain. She has worked with over 600 companies
on their supply chain strategy and speaks at over 50 conferences a year on the evolution of
supply chain processes and technologies. Her research is designed for the early adopter
seeking first mover advantage.
i Supply Chain Metrics that Matter: Driving Reliability in Margins, Supply Chain Insights LLC Report