The Chief - E2openinfo.e2open.com/rs/e2open/images/CSCO_Report_2011.pdf · 2013-07-16 · This year’s report is sponsored by E2open, a leading provider of cloud-based supply chain

The ChiefSupply Chain Officer

Report 2011A research study by:

Dr. Hau Lee, Chairman, SCM World

Kevin O’Marah, Faculty Member, SCM World

Executive Summary by:

Pier Luigi Sigismondi,Chief Supply Chain Officer, Unilever

www.scmworld.com | SCM World, a RaptureWorld Company

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INTRODUCTION

SCM World, the global institute for supply chain learning, training and development, brings you the results of its 2011 Chief Supply Chain Officer (CSCO) study.

This year’s CSCO Report is a collaboration between Dr. Hau Lee, Chairman, SCM World and Kevin O’Marah, Faculty Member, SCM World and includes an executive summary by Pier Luigi Sigismondi, Chief Supply Chain Officer at Unilever.

Developed to ascertain the priorities and strategies senior-level supply chain professionals are undertaking in 2011 and beyond, this report looks to understand how companies are positioning their supply chain organisations to deliver growth.

Over 750 global executives completed the survey, including SCM World members and non-members, with over 50% of respondents at VP-level and above within their organisations.

This year’s report is sponsored by E2open, a leading provider of cloud-based supply chain management solutions. The report sponsor has no influence over the survey design or results.

We are sure you will find this highly informative reading. Please do not hesitate to contact SCM World to discuss any of the findings in greater detail.

Yours sincerely,

Dr. Hau LeeChairmanSCM World

Kevin O’MarahFaculty MemberSCM World

3© SCM World 2011

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TabLE OF CONTENTS

Executive Summaryby Pier Luigi Sigismondi, Chief Supply Chain Officer, Unilever

Supply Chain Management and Value Creation

Globalisation and Emerging Economies

Sustainability

Talent Management and Skills Development

Conclusion and Recommendations

about SCM World

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In the weeks following the Japanese earthquake and tsunami in March, the eyes of the business world were firmly focused on the global supply chain. In the aftermath of those tragic events, many businesses have suffered shortages in supply and production incapacity, as well as a lack of inventory and inevitable closures across distribution networks.

all this has served to position the supply chain even higher as a key business asset. That is, as a strategic driver of value for the business that delivers tangible competitive advantage. We as supply chain leaders are no longer exclusively technical, operational people with sole focus on driving cost reduction. In today’s climate, we play a fundamental role in enabling the company growth agenda through cross-functional engagement and external partnership with our suppliers and customers. and nowhere is this more evident than in times of crisis where resilience, flexibility, speed and responsiveness across the end-to-end value chain make all the difference.

So against this backdrop, it is my pleasure to write the introduction for the Chief Supply Chain Officer Report 2011. This year’s report has been co-authored by Dr. Hau Lee, Chairman of SCM World and Thoma Professor of Operations, Information and Technology at the Stanford Graduate School of business, alongside Kevin O’Marah, Faculty Member at SCM World.

both Hau and Kevin have designed this report to draw out the critical insights that executive supply chain professionals are prioritising across four key areas: value-driving supply chain management, globalisation, sustainability and talent management. As you will discover, the findings identify a series of key developments which suggest a change in supply chain strategy from three or four years ago.

Highlights of this study include:

► Emerging markets are now fully-fledged growth markets with an overwhelming 80% of respondents selling and delivering to emerging economies

► Sustainability increasingly forms part of the DNa for high performing supply chains, with 65% of respondents characterising pressure from senior management and the board as the source of sustainability efforts

► Talent acquisition and leadership development represent key challenges across supply chain management, with 90% off respondents agreeing that it is at least “an important issue”

In sum, this year’s research findings serve to underline supply chain’s growing role as a driver for value creation and source of competitive advantage in the global context and, in turn, the changing requirements for supply chain leaders to deliver excellence. Consequently, there is no doubt that talent management will become an increasing priority as industry looks to develop future leaders that can drive overall business performance.

I feel very energised by these new perspectives and hope you will find them equally inspiring in continuing your own journey toward supply chain excellence.

Yours sincerely,

Pier Luigi SigismondiChief Supply Chain Officer

ExECUTIVE SUMMaRY by Pier Luigi Sigismondi, Chief Supply Chain Officer, Unilever

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SUPPLY CHaINMaNaGEMENT aNDVaLUE CREaTION

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SUPPLY CHaIN MaNaGEMENT aND VaLUE CREaTION

Supply chain management is viewed as a key driver to enhance the competitiveness of companies. Traditionally, supply chain excellence has enabled companies to operate lean and efficiently, thereby reducing waste and resources used. Operating cost reduction in the form of lower processing cost, higher asset utilisation and reduced inventory can result in higher margins for companies. but lately, innovative companies have used supply chain excellence as a means to support new business development, resulting in companies gaining more market share and revenues; increased profitability; improved customer service and loyalty; and enhanced shareholder value. Such value creation aspects of supply chain have become a new competitive ground for most companies to aspire to. Indeed, the super-agile and efficient supply chains of companies like Seven-Eleven Japan, amazon.com, Dell, Zara and Li & Fung are viewed as the driving force for the business’ success.

Is it true that more supply chain executives are using supply chain excellence as a means to create value, or is this limited to the innovators? Does supply chain excellence really enable value creation? In what ways do companies create value using supply chain management and what factors drive the success of the different ways for value creation? This report addresses these matters in order to aid companies, on an operational level, to steer their supply chains for business value creation.

as shown in Figure 1, overall business value and company equity can be created through increasing revenues, value-added services and operating cost reduction. Such value creation and cost reduction can be supported by the use of supply chain levers as performance drivers for the business, whereby value can be created and key business drivers met through supply chain excellence. as such, understanding what the business’ drivers are and their relationship therein with supply chain levers becomes critical in helping companies design the journey to realise success.

Around this specific focus area, the Chief Supply Chain Officer 2011 survey posed the following questions:

1 How important do supply chain executives view supply chain improvements as key for value creation versus operating cost reduction?

2 How important are supply chain levers in supporting value creation?

3 What are the ways in which value can be created through supply chain excellence?

4 For each way of creating value, what drivers play significant roles for its success?

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Figure 1

Figure 2

3.1%

1.3%

0.7%

8.1%

4.1%

2.3%

27.9%

14.4%

9.0%

34.7%

40.1%

36.9%

26.2%

40.1%

51.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

4a6ue crea8on through 6ong term equity improvement (such as enhancing brand

equity)

4a6ue crea8on through increasing revenue

Gpera8ng cost reduc8on

5

4

3

2

1

Figure 1: How important is it for you as a CSCO to focus on supply chain improvements for the following? (1=not important, 5=extremely important)


Importance of Supply Chain Improvements

Rather expectedly, supply chain executives view supply chain improvements as critical for operating cost reduction, with Figure 1 illustrating that 88% of

respondents view supply chain improvements as important or very important for ensuring operating cost reduction. However, what is perhaps surprising is that 80% of respondents also rank supply chain improvements as an important or very important means for value creation through increasing revenue, while 61% correspondingly view such improvements as very important for value creation through long term equity improvements (such as enhanced customer service and loyalty). Such results provide a strong signal that viewing supply chain improvement as a foundation for value creation is no longer limited to the more progressive and innovative supply chain companies and that there is now a widespread view (and we expect corresponding action) amongst supply chain executives to ‘go after’ value creation. Ultimately, in today’s business environment organisations whose supply chain efforts are only confined to operating cost reduction are likely to be left behind the competition.

Importance of Supply Chain Levers and Value Creation

The literature is rich with the many best practices and levers through which companies gain control of their supply chains, while past surveys have focused on identifying what these levers are. Of interest in this report is the importance of these supply chain levers in supporting value creation. The first observation is that almost all the levers stipulated have been identified as significant. In other words, supply chain executives have been using multiple levers to help support value creation.

These levers include:

“ Ultimately, in today’s business

environment organisations whose supply chain efforts are only confined to operating cost

reduction are likely to be left behind the

competition ”

► Lead time reduction

► Lead time reliability improvement

► Information visibility

► Supplier collaboration

► Inventory turn increase

► Timely, accurate and comprehensive performance management

► Demand management (like forecasting and demand shaping through promotions)

► Capacity flexibility

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Figure 2 below shows that all the levers proposed in the survey were identified as extremely important by more than 25% of respondents; while 66-78% of respondents ranked each lever as important or very important. These levers were also identified as important drivers for operating cost reduction and a significant driver of value creation.

Two levers, however, stood out from the rest. Seventy nine per cent of respondents identified information visibility and lead time reliability improvements as either important or very important. Information visibility is a means for companies to coordinate their supply chain operations to increase efficiency, reduce waste and improve response time reliability. Hence, information visibility becomes the foundation for all other levers. but it is imperative to note that lead time reliability improvements require other attributes too, such as having the right distribution and logistics partners; having the right level of safety capacity or inventory; and having reliable manufacturing processes.

5.5%

3.9%

1.3%

2.0%

1.1%

1.3%

1.1%

2.0%

0.7%

1.4%

0.9%

20.3%

21.1%

5.6%

5.4%

3.1%

6.8%

5.9%

7.7%

1.9%

3.4%

3.8%

41.3%

38.5%

24.6%

26.4%

19.5%

20.1%

20.1%

20.3%

16.2%

18.2%

14.8%

25.2%

28.2%

44.0%

40.0%

48.6%

42.7%

42.4%

38.8%

42.0%

36.3%

39.8%

7.6%

8.3%

24.6%

26.2%

27.7%

29.1%

30.6%

31.2%

39.2%

40.7%

40.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Postponement

Partnership incen8ve ali#nment

Capacity flexibility

Inventory turn increase

Timely, accurate and comprehensive performance measurement

Pead 8me reduc8on

Qupplier collabora8on

Customer Collabora8on

Informa8on visibility

Remand mana#ement Bforecas8n#, demand shapin# throu#h promo8on etcF

Improvin# lead 8me reliability

5

4

3

2

1

Figure 2: How important are each of the following levers to supporting value creation through supply chain impro-vement? (1=not important, 5=extremely important)

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Figure 3

14.6%

2.7%

2.5%

1.0%

3.0%

2.5%

1.1%

25.3%

10.9%

9.0%

5.4%

8.9%

6.0%

3.0%

33.0%

29.7%

25.8%

24.1%

20.0%

21.8%

12.5%

20.0%

39.1%

39.6%

44.0%

40.0%

37.2%

33.3%

7.2%

17.6%

23.0%

25.6%

28.0%

32.5%

50.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Peverage opportuni8es created from external disturbance or disasters

(such as earthquakes, major supply chain disrup8ons, Ure etc

Premium pricing

Expanded offerings of value-‐added services

Qtronger supplier rela8onships

Expansion to new market segments within exis8ng geographies or new

geographies

Zew product introduc8on

Customer service leading to customer loyalty

5

4

3

2

1


Ways to Create Value through High-Performing Supply Chains

High performing supply chains can enable companies to create value in multiple ways:

as Figure 3 reveals, the overwhelming majority of the supply chain executives surveyed felt that supply chain excellence helps to build value through customer service and, in turn, customer loyalty. There is a link between this observation and the importance of supply chain levers as discussed previously. Viewed by supply chain executives alongside lead time reliability improvements as one of the two most important levers to support value creation, information visibility takes two directions; gaining visibility from supply chain partners and providing visibility to supply chain partners. Given that the latter of these directions and lead time reliability are both customer service oriented, it is rather unsurprising that enhanced customer service is identified by supply chain executives as the most important way in which value is created. Strong customer loyalty is the bridge through which customers repeat business or expand their relationship to cover other products or services, and is also the way in which customers offer priority treatment. Indeed, 83% assign high or very high value to supply chain excellence creating value through customer service (leading to enhanced customer loyalty).

► New product introduction ► Premium pricing ► Expanded offerings of value-

added services ► Customer service leading to

customer loyalty

► Expansion to new market segments within existing geographies or expansion to new geographical markets

► Leveraging opportunities created from external disturbance or disasters (such as earthquakes, major supply disruptions, fire, etc.)

► Stronger supplier relationships

Figure 3: At your company, what is your assessment of the value created by having a high performance supply chain (1=no value, 5=very high value)

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Respondents also suggest other ways in which value creation can occur through supply chain excellence. The most frequent such response, which applies to

some industries more than others, is the retailer relationship. Indeed, strengthening the retailer relationship, being able to serve retailers better and collaborating with retailers are all proven ways to improve sales.

The second most frequent response was new product introduction, with 70% of respondents stating that supply chain excellence is of high or very high value in this regard. Indeed, supply chain excellence can help speed up new product introduction or increase the probability of a successful new product introduction. Finally, new market expansion is also regarded as a high value result of supply chain excellence, smoothening the penetration of new markets through efficient and reliable deliveries and, in turn, allowing the effective customisation of products tailored to new market needs. Indeed, 68% of respondents ranked new market expansion as a high or very high value result of running a high-performance supply chain.

Important Factors for Ways to Create Value through Supply Chain Excellence

The underlying factors that contribute to the success of the aforementioned areas of value creation will be examined herein. Figure 4 reveals the key factors respondents felt important and relevant in driving corresponding means of value creation.

as indicated earlier, building customer loyalty through customer service is the most highly rated means for value creation through supply chain excellence. Success comes from the ability to convert customer loyalty to revenue gains and is dependent upon whether the customer views service as a criterion for making sourcing decisions and/or a positive customer service experience leading to repeat purchases. When all such factors exist, strong value creation is a potential outcome.

Figure 4: Which of the following are relevant factors that link supply chain excellence and successful new product introduction (1=no value, 5=very high value)

“ Strong customer loyalty is the bridge

through which customers repeat

business or expand their relationship to

cover other products or

services ”

Figure 4

Figure 5

4.4%

1.9%

4.8%

3.4%

1.9%

2.1%

9.0%

6.5%

9.2%

6.6%

4.6%

3.7%

22.1%

26.3%

21.2%

19.8%

17.9%

16.3%

43.7%

39.7%

39.2%

40.0%

43.7%

39.0%

20.9%

25.6%

25.7%

30.2%

31.8%

38.8%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Fast response to engineering changes

Avoid cost over-‐runs

Hroduct development cycle 8me reduc8on

Ability to manage product transi8ons Bthe simultaneous

phasing out of eKis8ng product and

Ability to ramp up fast

On-‐schedule product introduc8on

5

4

3

2

1

18.4%

37.6%

44.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Oriented primarily around sourcing from emerging markets

Oriented primarily around selling delivering to emerging markets

About equally sourcing from and selling to emerging markets

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In the case of new product introduction, speed and reliability are still what matter, where speed refers to efficient product introduction and capacity ramp up when a product takes off. Of interest is that respondents also identified product transition management (the simultaneous management of the ramping down of current products and the ramping up of new products) as highly important.

With regard to new geographical market expansion, the ability to customise products for local needs or regulatory requirements and efficient distribution of the products to the customers are both viewed as highly relevant. Since many of the new geographical markets are in emerging economies, where customer tastes and requirements are potential drivers, and logistics and distribution infrastructure lesser developed, it is no surprise that supply chain executives view being able to customise products for local needs and subsequently distribute them efficiently as important drivers of success. It should be noted that some respondents made specific reference to the importance of designing the right service to go with the product in new markets.

Chapter Summary and Key Takeaways

► Supply chain executives view supply chain improvement as crucial for operating cost reduction, with 51% ranking such improvements as extremely important and a further 37% selecting important

► Information visibility and lead time reliability improvements are the two levers which senior-level supply chain professionals most associate with helping deliver value, with 79% ranking these two factors as at least important

► Eighty three per cent of respondents strongly believe that supply chain excellence creates value through customer service (leading to customer loyalty), ranking such a lever as at least important

► New Product Introduction ranked highly amongst respondents as a means of driving value through a high-performing supply chain, with 70% selecting a rating of important or above

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GLObaLISaTION aND EMERGING ECONOMIES

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Globalisation – Managing the Big Picture

For many years the notion of “supply chain globalisation” was synonymous with “low cost country sourcing”, especially where emerging economies were concerned. New data shows that this old image is no longer accurate, with an overwhelming majority of supply chain professionals approaching globalisation today as a two way street; both sourcing from and selling to. Figure 5 illustrates that over 80% of the 750 supply chain executives surveyed report selling

and shipping to emerging markets, with a large portion (38% of the total sample) saying that their supply chain strategies for emerging markets were primarily oriented to selling and delivering in these markets. In contrast, only 18% described their strategies for emerging markets as primarily oriented to sourcing from such locations.

This data point says a lot about how the global supply chain has evolved in recent years both in terms of the maturation of these emerging economies and in terms of the sophistication and strategic impact of the supply chain discipline. In the first instance, we were interested to learn not only how much activity was being managed globally across the value chain, but whether the trend was increasing or decreasing. For sourcing, manufacturing or assembly activities, a great many companies are heavily dependent on non-home country work. Figures 6 and 7 illustrate that around a quarter of all companies say they source and manufacture abroad for between 75-100% of their total volumes, while a minority (17% and 30% respectively) do less than 10% of such work in non-home country locations. Furthermore, the portion of respondents who see these volumes increasing is dramatically higher – five to one and eight to one respectively. It is clear that global sourcing and manufacturing both remain and, more importantly, are still growing fast.

“ ... over 80% report selling and shipping to emerging markets, with a large portion saying that their supply chain strategies for emerging markets were primarily oriented to selling and

delivering in these markets ”

Figure 5: Your supply chain strategy for emerging markets is

Figure 4

Figure 5

4.4%

1.9%

4.8%

3.4%

1.9%

2.1%

9.0%

6.5%

9.2%

6.6%

4.6%

3.7%

22.1%

26.3%

21.2%

19.8%

17.9%

16.3%

43.7%

39.7%

39.2%

40.0%

43.7%

39.0%

20.9%

25.6%

25.7%

30.2%

31.8%

38.8%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Fast response to engineering changes

Avoid cost over-‐runs

Hroduct development cycle 8me reduc8on

Ability to manage product transi8ons Bthe simultaneous

phasing out of eKis8ng product and

Ability to ramp up fast

On-‐schedule product introduc8on

5

4

3

2

1

18.4%

37.6%

44.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Oriented primarily around sourcing from emerging markets

Oriented primarily around selling delivering to emerging markets

About equally sourcing from and selling to emerging markets

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Figure 8

Figure 9

50.5%

18.0%

12.1%

10.9%

8.5%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%

21.7%

14.6%

18.3%

19.4%

26.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%


Other value chain activity, however, is less likely to be done outside of the home country, in particular design work. Over 50% of respondents state that less than 10% of design work is being done abroad (Figure 8) and, although 30% are increasing this share year-on-year, a big majority (63%) plan no change at all.

Despite much talk of the armies of engineers graduating each year from Chinese and Indian universities, most companies around the world would still rather keep their creative duties close to headquarters. a similar observation relates to the exercise of direct managerial control. Despite large flows of activity in sourcing and manufacturing abroad, the overwhelming majority of companies have only minor portions of either direct report staff or owned facilities located outside of the home country. The implication supporting much anecdotal evidence is that analysis and/or capital-intensive work tends to cluster close to home. arms length relationships with third party suppliers or partners may enable substantial material conversion and movement outside of the home country, but most fixed costs and heavily invested resources (employees, property, plant and equipment) are kept under a much closer watch.

Figure 6: What percentage of your sourcing is drawn from outside your home country? (defined as headquarter location and seat of executive management)

Figure 7: What percentage of your manufacturing / assembly / production is conducted outside your home country?

Figure 8: What percentage of your design activities is conducted outside your home country

Figure 6

Figure 7

16.6%

13.5%

20.9%

22.2%

26.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%

30.1%

11.2%

13.5%

20.8%

24.4%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%

Figure 6

Figure 7

16.6%

13.5%

20.9%

22.2%

26.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%

30.1%

11.2%

13.5%

20.8%

24.4%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%

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The most striking data gathered in this research, however, points to the surge in efforts to extend supply chains into the customer bases of emerging economies. Not only do most companies sell and deliver substantial amounts of business outside their home countries (Figure 9), but the share that reports an increase over the last year is nearly 10 times that which reports a decrease (Figure 10). This ratio of increase to decrease is the highest of any activity on which we collected data. What seems increasingly clear is that globalisation of supply chain is a matter of building physical networks and relationships that are equally capable of finding and exploiting cost advantages as well as discovering and serving new markets. a brake on this leveling of the global economy, however, remains in areas where high leverage work among functions like planning, product design and management remain centralised for most companies.

Figure 9: What percentage of your sales/deliveries goes to customers outside your homes country?

Figure 8

Figure 9

50.5%

18.0%

12.1%

10.9%

8.5%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%

21.7%

14.6%

18.3%

19.4%

26.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Below 10%

10%-‐50%

25%-‐50%

50%-‐75%

75%-‐100%

Figure 10

Figure 11

42.6%

5.5%

51.9%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

About the same

Decreasing

Increasing

1.9%

3.8%

2.1%

3.3%

3.8%

6.1%

5.2%

10.6%

7.7%

11.0%

1.8%

4.4%

2.3%

3.5%

4.2%

6.3%

4.4%

9.4%

10.6%

12.5%

1.5%

1.9%

1.9%

2.3%

2.9%

3.2%

3.9%

7.4%

20.3%

36.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Brazil

Japan

Canada

Italy

United Kingdom

India

France

Germany

USA

China

1

2

3

Figure 10: Compared to last year, non-home sales / deliveries are

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Globalisation – Country Winners and Losers

The research asked supply chain professionals to name their top three non-home country locations in terms of sourcing, manufacturing/assembly/production and sales. across all industries, China emerged well ahead in terms of sourcing, with nearly 37% of respondents calling it their number one non-home country location (see Figure 11). Overall, 60% cited China as their number one, two or three sourcing location. The closest follower was the USA, identified as the number one non-home country sourcing location by 20% of respondents and 39% listing the USa as number one, two or three. Well down the list was Japan which, despite its economic might, was identified as a top three sourcing location by only 10% of all respondents. What emerges from this data is that China, the USa and Germany appear far more integrated into the world’s manufacturing supply chains than competing territories, most notably Japan.

“ What emerges… is that China, the USa and Germany appear far more integrated into the world’s manufacturing supply chains than

competing territories, most notably Japan ”

Figure 10

Figure 11

42.6%

5.5%

51.9%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

About the same

Decreasing

Increasing

1.9%

3.8%

2.1%

3.3%

3.8%

6.1%

5.2%

10.6%

7.7%

11.0%

1.8%

4.4%

2.3%

3.5%

4.2%

6.3%

4.4%

9.4%

10.6%

12.5%

1.5%

1.9%

1.9%

2.3%

2.9%

3.2%

3.9%

7.4%

20.3%

36.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Brazil

Japan

Canada

Italy

United Kingdom

India

France

Germany

USA

China

1

2

3

Figure 11: What are the top three countries you source from?

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When the topic moves from sourcing to manufacturing/assembly/production, a new entrant makes the top three list, Mexico. Looking at Figure 12, although only 6% of respondents cite Mexico as their number one non-home country

manufacturing location, a further 8% list it as their number two location and another 6% their third. India is also referenced, but not as a top location, with only 2% stating it to be their number one non-home country for manufacturing. almost 7% identify India as their number two manufacturing location and just over 7% cite it as their number three. China still emerges as a clear leader in non-home manufacturing, but there is certainly room for additional emerging markets, with many apparently happy to consider India or Mexico as their secondary or tertiary locations for owned or contract manufacture. What is surprising, however, is the relative absence of emerging economies often discussed as potential winners in a global supply chain. among those less prominent than expected were Poland and Hungary, neither of which made the top five as a first, second or third favourite for non-home country manufacturing. Even more surprising was the absence of brazil, which does not even make the top seven.

“ China still emerges as a clear leader in non-home manufacturing, but there is certainly

room for additional emerging markets,

with many apparently happy to consider India or Mexico ”

Figure 12: What are the top three non-home countries you manufacture / assemble / produce in?

Figure 12

7.2%

2.1%

4.1%

2.1%

4.1%

4.5%

5.8%

6.2%

7.2%

8.2%

6.7%

3.6%

2.2%

1.7%

1.3%

3.6%

8.1%

5.3%

6.7%

15.6%

1.9%

2.1%

2.4%

2.6%

2.8%

4.0%

6.0%

7.6%

9.9%

34.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

India

Canada

Brazil

Poland

Hungary

France

Mexico

Germany

USA

China

1

2

3

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Design activities which, as noted above, are still far less likely to happen abroad, are nonetheless increasingly being done away from the headquarter location. Figure 13 shows that the countries winning business on this dimension include the USa, China and India, each of which sees dozens of companies locating substantial design work within their borders, but also Germany and the United Kingdom. This group of countries was consistently among the top five cited as a number one, two or three location for design work, with the USa and China essentially tied at the top and the United Kingdom and Germany tied in fourth place. One observation this data suggests is that globalisation is in fact reaching past the traditional image of looking for low cost labour. While some design work can be classified as low-cost labour (in particular things like CaD support in India and design activity for ODM electronics businesses in China) it is fair to assume that reliance on designers in Germany, the United Kingdom and the USa is based on something other than cheap wages. Earning surprisingly little respect from respondents were the countries of the former Soviet sphere of influence, where only Poland, Hungary and Czech Republic received meaningful mention, while Russia was not cited at all as a top three design location. It is apparent that a strong engineering educational foundation is not enough to drive business in the global supply chain.

Figure 13

3.9%

3.4%

2.8%

1.7%

2.8%

7.3%

7.9%

9.0%

0.6%

11.2%

2.6%

2.2%

2.2%

2.2%

3.1%

7.5%

6.6%

10.5%

21.5%

9.6%

2.4%

3.4%

2.7%

3.0%

3.9%

6.6%

6.6%

10.2%

17.7%

18.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Italy

Japan

Canada

Netherlands

France

United Kingdom

Germany

India

China

USA

1

2

3

Figure 13: What are the top three non-home countries your design work is in?

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Figure 14

Figure 15

1.7%

2.6%

4.9%

3.2%

7.8%

11.0%

3.2%

9.0%

13.1%

5.2%

4.6%

2.8%

4.4%

3.1%

10.3%

10.8%

5.7%

5.7%

13.1%

6.9%

0.4%

1.6%

2.0%

2.3%

3.6%

5.7%

6.4%

10.7%

11.4%

31.4%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

India

Russia

Japan

Brazil

France

United Kingdom

Canada

China

Germany

USA

1

2

3

2.48

4.06

3.81

2.51

2.84

2.42

3.59

3.58

2.59

3.33

2.59

2.75

2.71

2.32

2.84

2.53

2.96

2.66

2.09

2.76

2.48

4.06

3.81

2.51

2.84

0 1 2 3 4 5

South Africa

China

India

Russia

Brazil

Cost

Reliability

Risk

Future poten8al

Average


Supply chain strategies aimed at selling outside the home country should reflect market attractiveness. Unsurprisingly, the world’s biggest single market, the USa, was far and away the top choice for companies’ number one destination for selling and distribution activities. Equally predictable is that Germany, France and the United Kingdom all show up close to the top as delivery targets for supply chain strategists. Emerging markets, however, also feature prominently among non-home countries high on the radar of supply chain strategists. China is identified as the number one non-home country market for almost 11% of respondents and number two or three for an additional 13% (see Figure 14). but India, which was rarely mentioned as a top market, was nonetheless identified as a second or third most important market by 6% of those surveyed. brazil shows in a virtual dead heat with Japan as a target market, and even Russia which saw no traction as a supply partner, was among the top ten target markets among our survey respondents. The much discussed bRIC countries are clearly as engaged in this increasingly connected global supply chain as the developed countries and it is by no means a matter of chasing low cost labour around the world.

Figure 14: What are the top three countries you sell / deliver to?

“ The much discussed bRIC countries are clearly as engaged in this increasingly connected global supply chain as the developed countries

and it is by no means a matter of chasing low cost labour around the world ”

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Emerging Economies and Supply Chain Strategy – Reputation Matters

To understand what is driving decisions about engaging partners abroad, we asked for assessments of key qualitative factors that might influence choices about where to source product or where to carry out manufacturing and assembly operations. The data confirms most of what conventional wisdom might predict, but indicates a few gaps that are surprisingly large, as well as a few that are surprisingly small. Figure 15 shows that, from a sourcing perspective for instance, China offers the lowest cost, but only by a relatively thin margin over India, which came second for cost competitiveness. This narrowing gap is expected what with Chinese labour, real estate and administrative costs rising rapidly in recent years. China, however, still retains a huge lead over India when it comes to being identified as a top sourcing country. On other dimensions of attractiveness as a sourcing location, however, China and India appear essentially tied, with near identical scores for risk and future potential. India is marginally behind China from a reputation perspective it seems, but still lags substantially in a share of the total sourcing pie. The implication is that India will likely gain ground.

In contrast, the other two bRIC countries – brazil and Russia – fared dramatically worse in the opinions of the 750 supply chain professionals surveyed. brazil, for instance, is far behind both India and China in cost competitiveness, but only slightly better than India in terms of reliability and risk. Even on the dimension of future potential, brazil trails both China and India. Russia is worse on all dimensions, with a poor showing for cost competitiveness as well as dismal assessments for reliability and risk. We also gathered data on South africa to see whether the african opportunity was meaningful to the wider supply chain community and, although its reliability and risk appear reasonable, its score concerning cost position appears unlikely to attract much business as a global sourcing hub.

Figure 14

Figure 15

1.7%

2.6%

4.9%

3.2%

7.8%

11.0%

3.2%

9.0%

13.1%

5.2%

4.6%

2.8%

4.4%

3.1%

10.3%

10.8%

5.7%

5.7%

13.1%

6.9%

0.4%

1.6%

2.0%

2.3%

3.6%

5.7%

6.4%

10.7%

11.4%

31.4%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

India

Russia

Japan

Brazil

France

United Kingdom

Canada

China

Germany

USA

1

2

3

2.48

4.06

3.81

2.51

2.84

2.42

3.59

3.58

2.59

3.33

2.59

2.75

2.71

2.32

2.84

2.53

2.96

2.66

2.09

2.76

2.48

4.06

3.81

2.51

2.84

0 1 2 3 4 5

South Africa

China

India

Russia

Brazil

Cost

Reliability

Risk

Future poten8al

Average

Figure 15: From a sourcing perspective, average rating out of 5 against the following criteria (1=poor, 5=excellent)

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The story for supply chain professionals considering bRIC countries for manufacturing is essentially the same as we see in sourcing. Figure 16 reveals that China and India have substantial cost advantages and, although Brazil’s reputation for quality is significantly better than that of India, the overall attractiveness of these locations clearly favours the “IC” in bRIC.

Emerging markets are more than full partners in the globalisation of supply chain, driving huge swings of activity away from home countries in search of cost advantages and specific skills abroad. Not all emerging economies are created equal, however, with a clear leader in China and a fast approaching challenger in India. What may finally close the loop in global supply chains is the increasing importance of emerging markets as sales and distribution targets for companies. Russia may be a loser on the supply side but its appeal as an end market will open doors for suppliers in that country to compete for a slice of the pie.

Figure 16: From a manufacturing perspective, average rating out of 5 against the following criteria (1=poor, 5=excellent)

Figure 16

Figure 17

2.63

3.13

2.86

2.51

3.1

2.43

4.06

3.76

2.5

2.78

0 1 2 3 4 5

South Africa

China

India

Russia

Brazil

Cost

Quality

11.2%

16.2%

35.0%

45.7%

65.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Push by some leading suppliers

Pressure from ac8vists and similar stakeholders

Pressure from government

Pressure from customers

Pressure from senior management and board

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► Over 80% of supply chain executives report selling and shipping to emerging markets with a large portion – 38% of the total – saying that their supply chain strategies for emerging markets are primarily oriented to selling and delivering in these markets

► Design work is less likely to be conducted outside the home country, with over half of the respondents asserting that less than 10% of design work is executed abroad

► Not only are most companies selling and delivering substantial amounts of business outside their home country, but the portion reporting an increase over the last year equates to approximately ten times the share that reports a decrease

► China emerges as the leader in terms of sourcing, with nearly 37% of respondents naming it their number one non-home priority

► With regard manufacturing/assembly/production, Mexico is on the rise as a non-home country, with 6% citing the nation as their number one location, 8% as their number two location and 6% asserting Mexico as their third most important foreign manufacturing country

23© SCM World 2011

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SUSTaINabILITY

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SUSTaINabILITY

Sustainability has become a new battleground of supply chain competitiveness, with high profile initiatives recently taken by the likes of Wal-Mart and Nike to take sustainability performance of the supply chain to a higher level. Sustainability often includes both environmental responsibility and social responsibility; the former referring to control and containment of the carbon footprint, energy usage and pollution of the supply chain, and the latter focusing on the health, safety and treatment of labour, as well as contributing to the well-being of local communities. Indeed, Wal-Mart has discovered that, although there are potentially great savings to be gained from sustainability efforts internally, the potential is much greater with their extended supply chain.

To what extent is sustainability part of supply chain management’s DNa? What are the sources that drive companies’ sustainability efforts? Do we see substantial differences in the environmental versus social dimensions of sustainability? What have been the results and what is the future outlook?

Just as many big initiatives in supply chain improvement, the strongest driving force of sustainability initiatives derive from top management; namely, senior management and the board, with Figure 17 revealing that 65% of respondents characterise pressure from senior management and the board as the source of their sustainability efforts. Having top management as the source often means that the support of top management is also in place, which is important for the success of such efforts. The second source of sustainability efforts is pressure from customers (46%), followed by pressure from government (35%). The role of activists and similar stakeholders, and of leading suppliers, tends to be small. In this dynamic market, many companies feel pressure from customers and the government to pay attention to sustainability, but it is even more often the case that top leaders of firms see the need and lead the efforts themselves.Why would the board, as the top leader of a company, push for sustainability?

Figure 17: How would you characterise the source of your sustainability efforts?

Figure 16

Figure 17

2.63

3.13

2.86

2.51

3.1

2.43

4.06

3.76

2.5

2.78

0 1 2 3 4 5

South Africa

China

India

Russia

Brazil

Cost

Quality

11.2%

16.2%

35.0%

45.7%

65.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Push by some leading suppliers

Pressure from ac8vists and similar stakeholders

Pressure from government

Pressure from customers

Pressure from senior management and board

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It turns out that the overwhelming majority (75%) is concerned with creating a positive customer image and enhancing brand equity – see Figure 18. Interestingly, some companies are directing their sustainability efforts due to customer pressure directly, while many more due to top management. but the reason for such direction at board-level also lies in positively winning customers through brand image. However, many respondents (42%) also feel that the board is concerned with sustainability in order to satisfy government regulations, pursuing sustainability due to governmental pressure directly or indirectly. In general, company boards appear very sensitive to a variety of sources that require them to pursue sustainability: to fend off shareholder or external PR concerns; to ensure no disruption of supply; to ensure return on investment through cost savings; and to deliver return on investment through sales increase. However, the most significant underlying forces that drive companies’ sustainability efforts are customer pressure and image or government pressure and regulations, which then result in top management leading such efforts.

The Six Sigma process cycle is a good framework for us to look at when considering the sustainability efforts of companies. Just like quality improvements, the Six Sigma process calls for the Measure, Identify, analyse, act cycle. Firstly, it is necessary to measure the characteristics and quality of the process in order to gauge any errors, which can then be identified and resolved. This is the fundamental approach for quality management and, similarly with sustainability, we have to start with measurement. Of course, it goes without saying that performance measurement is not useful if it is not used by management, so this is about management having visibility over performance measures.

SUSTaINabILITY

Figure 18: What is your judgement of your board’s view on sustainability?

Figure 18

Figure 19

22.0%

30.1%

30.5%

32.0%

42.2%

75.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

To fend off shareholder or external PR concerns

To ensure no disrup8on of supply

To have return on investment through sales increase

To have return on investment through cost savings

To sa8sfy government regula8ons

To create posi8ve customer image and enhance brand equity

27.8%

27.5%

26.4%

29.0%

24.1%

30.1%

75.0%

77.3%

76.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%

Qocial sustainability measures Bsuch as viola8ons of labor compliance)

Carbon footprint measures

Qustainability measures Bsuch as viola8ons of environmental standards or government

regula8ons)

Internally

Immediate suppliers

Extended suppy network

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Indeed, a significant majority puts performance visibility measures in place, with 75% of respondents claiming they have visibility of environmental sustainability performances (Figure 19), such as violations of environmental standards or government regulations across their internal operations. 77.3% have visibility of the carbon footprint across their internal operations, while 76.1% have similar visibility of their social sustainability measures, such as violations of labour compliances across their internal operations. There is therefore a strong sense of success regarding the first step of the Six Sigma process for sustainability efforts across internal operations.

New measureSystem update

Structural correction

TrackingVisibilityaccessibility

Resolution executionCommunication

Restoration to in-control

What is out of control?What if scenariosDiagnosis/Root causeanalysis

SUSTaINabILITY

Six Sigma Improvement Cycle

Measure

analyse

IdentifyactFigure 18

Figure 19

22.0%

30.1%

30.5%

32.0%

42.2%

75.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

To fend off shareholder or external PR concerns

To ensure no disrup8on of supply

To have return on investment through sales increase

To have return on investment through cost savings

To sa8sfy government regula8ons

To create posi8ve customer image and enhance brand equity

27.8%

27.5%

26.4%

29.0%

24.1%

30.1%

75.0%

77.3%

76.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%

Qocial sustainability measures Bsuch as viola8ons of labor compliance)


Qustainability measures Bsuch as viola8ons of environmental standards or government

regula8ons)

Internally

Immediate suppliers

Extended suppy network

Figure 19: How do you gain visibility of …?

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However, on analysing visibility externally across immediate suppliers or the extended supply network, it is a different story. There is far greater concern regarding violations of environmental standards, government regulations or labour compliances, with Figure 20 highlighting that only 19-30% have visibility over such matters. additionally, most respondents do not have visibility over immediate suppliers or the extended network regarding carbon footprint violations either. This represents a significant vacuum and, although it probably requires much greater effort to gain such visibility compared with internal operations, it is the external environment which potentially represents the most vulnerable part of the overall supply chain. Companies therefore need to work on the visibility of the extended supply chain to even begin the Six Sigma process cycle for sustainability.

The second step of the Six Sigma process cycle is identification, which requires monitoring systems to check, verify and validate performance measures and, in effect, turn visibility into a monitoring process. Similar to visibility, around 80% of respondents are monitoring their internal operations with respect to violations in the environmental and social front, as well as carbon footprints. Significantly less (between 20-29%), however, are monitoring immediate suppliers or the extended supply network on such measures. Once again, a large vacuum exists.

Once errors are identified and assignable causes and opportunities are analysed, the quality improvement process then moves to the act step, where any faults are resolved, process modifications are made and products are potentially redesigned for quality improvement. Unfortunately, companies sometimes fail to act in making such necessary sustainability investments. Respondents were invited to describe the obstacles by rating them on a scale of one to five, with five being the most valid. Figure 21 illustrates that the three top barriers to action are: a lack of resources (45% with rating of four or five); no measurable returns (45%); and lack of customer care and price pressure (42%). To a lesser extent appears the lack of knowledge and expertise to pursue improvement projects (35%).

SUSTaINabILITY

Figure 20

Figure 21

19.7%

19.9%

21.8%

22.9%

28.8%

27.8%

81.6%

81.0%

79.1%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Social sustainability measures (such as viola8ons of labour

compliance)

Sustainability performance

measures (such as viola8ons of

environmental standards or


Internally

Immediate Suppliers

Extended supply network

13.0%

7.5%

14.6%

4.7%

3.9%

12.6%

32.1%

27.5%

27.8%

21.3%

18.2%

32.3%

28.6%

33.6%

28.0%

36.5%

29.2%

27.6%

16.3%

18.5%

19.9%

23.2%

24.5%

14.8%

10.1%

12.8%

9.7%

14.3%

24.3%

12.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Lack of resources

Lack of knowledge and exper8se to pursue improvement projects

Customers do not care and price pressure

Supplier resistance

Internal resistance

No measurable returns

1

2

3

4

5

Figure 20: How have you implemented monitoring systems in place …?

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It has been observed that, with customer pressure directly or indirectly, companies react by moving forward with sustainability efforts, either directly or through top management leadership. but the reverse is also true. When there is lack of customer pressure, sustainability efforts can stall. In order for companies to make concrete steps in implementing sustainability projects, the right level of resources has to be there and a clearly quantifiable measure of returns should also be in place.

In supply chain sustainability, the need to act often requires working with suppliers for improvement. Such a form of supplier collaboration in turn requires both “sticks” and “carrots.” Regarding the “sticks”, companies appear to react to supplier breaches in sustainability standards by warning and then taking punitive actions, while some act even more promptly without warning. Warning or not, Figure 22 shows that most companies use reduced business as the “stick” (73% would reduce business after warning and 56% would reduce business without warning), while some act even more drastically, terminating the business relationship with suppliers (36% after warning and 42% without warning).

Very few companies use monetary fines as a means to penalise suppliers (12% with our without warning). Indeed, the impact of sustainability breaches is often not something that one can measure financially. This could explain why few companies use monetary fines as a means to pressure suppliers (which could also have the added effect of setting a precedent for other suppliers). Indeed, faced with the risk of reduced business or termination of relationships, suppliers are far more sensitive to the pressure from customers on sustainability. This actually gives further credence to the observation earlier that many companies pursue sustainability due to a direct or indirect push by customers.

SUSTaINabILITY

Figure 21: What do you see as the major obstacles on sustainability investments?

Figure 20

Figure 21

19.7%

19.9%

21.8%

22.9%

28.8%

27.8%

81.6%

81.0%

79.1%

0.0% 20.0% 40.0% 60.0% 80.0% 100.0%

Social sustainability measures (such as viola8ons of labour

compliance)

Sustainability performance

measures (such as viola8ons of

environmental standards or


Internally

Immediate Suppliers


13.0%

7.5%

14.6%

4.7%

3.9%

12.6%

32.1%

27.5%

27.8%

21.3%

18.2%

32.3%

28.6%

33.6%

28.0%

36.5%

29.2%

27.6%

16.3%

18.5%

19.9%

23.2%

24.5%

14.8%

10.1%

12.8%

9.7%

14.3%

24.3%

12.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Lack of resources

Lack of knowledge and exper8se to pursue improvement projects

Customers do not care and price pressure

Supplier resistance

Internal resistance

No measurable returns

1

2

3

4

5

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Figure 22

Figure 23

41.9%

35.5%

55.9%

72.7%

11.7%

12.5%

0.0% 20.0% 40.0% 60.0% 80.0%

No warning. Immediate ac8on taSen as

Warning first, followed by

Monetary fines

Reduced business

Immediate termina8on of business rela8onship

7.6%

21.5%

31.6%

43.6%

47.7%

66.3%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Price premiums

\eger terms and condi8ons

Public recogni8on (similar to "Qupplier of the Year")

You inAest in training and educa8on

Increased business engagements

Preferred supplier (priority for future business)

Figure 22

Figure 23

41.9%

35.5%

55.9%

72.7%

11.7%

12.5%

0.0% 20.0% 40.0% 60.0% 80.0%

No warning. Immediate ac8on taSen as

Warning first, followed by

Monetary fines

Reduced business

Immediate termina8on of business rela8onship

7.6%

21.5%

31.6%

43.6%

47.7%

66.3%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Price premiums

\eger terms and condi8ons

Public recogni8on (similar to "Qupplier of the Year")

You inAest in training and educa8on

Increased business engagements

Preferred supplier (priority for future business)

Figure 23 reveals how companies have also used a variety of incentives to serve as “carrots” for sustainability improvements. Stronger business relationships in the form of preferred supplier status or increased business engagements are the positive incentives that most companies seem to use (66% and 48% respectively). Other positive incentives include: supporting suppliers with investment in training and education (44%); public recognition (similar to a ‘Supplier of the Year award’- 32%); and improved terms and conditions (21.5%), while very few use price premiums as an incentive (8%). It is interesting that companies neither like to use direct monetary fines nor monetary rewards for “sticks” and “carrots”.

SUSTaINabILITY

Figure 22: If suppliers are found to have breaches in sustainability standards, what are the penalties?

Figure 23: What incentives do you put in place to support sustainability improvements of your suppliers?

“ The most effective means is still to pressure suppliers through business volumes or termination of the business relationship ”

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Figure 24

Figure 25

8.4%

5.9%

12.2%

7.7%

18.3%

23.9%

28.6%

35.2%

23.1%

26.1%

34.2%

36.1%

29.9%

34.4%

20.3%

18.3%

17.3%

13.8%

19.2%

13.5%

15.2%

12.0%

8.9%

15.6%

21.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Zew or improAed sales opportuni8es

Qupplier rela8ons<ip improAement

Customer sa8sOac8on improAement


deduced Aiola8ons oO goAernment regula8ons and laws

1

2

3

4

5

16.0%

11.8%

11.0%

18.8%

16.1%

34.7%

38.9%

40.6%

37.5%

46.8%

40.0%

39.7%

41.0%

36.1%

31.9%

6.7%

7.8%

6.2%

5.2%

3.4%

2.6%

1.8%

1.2%

2.4%

1.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

Customers


Immediate suppliers

Internal product design

Internal opera8ons

1

2

3

4

5

Figure 24: What kind of results have you obtained from your sustainability efforts? (1=insignificant, 5=substantial)

Rather, potential impact to the business relationship tends to be the strongest means to penalise or to incentivise suppliers. The Six Sigma Process Cycle then reverts to measurement, where the results of a company’s actions are then measured and understood. It is therefore vital to observe the results that

respondents have secured and, interestingly, they have been quite positive in multiple ways. again, respondents assessed the different dimensions by a scale of insignificant to substantial, with five signifying most substantial. Analysing Figure 24, the most significant impact is customer satisfaction improvement (47%), followed by reduced violations of government regulations (44%). Other benefits include supplier relationship improvement (34.5%); new or improved sales opportunities (32%); and operating cost reduction (31%). These results echo the earlier conclusion as to why companies pursue sustainability. It was indicated above that this is due to customer or governmental pressure, which results in top management leadership pushing sustainability improvements. Indeed, such improvement efforts result in greater customer satisfaction levels and reduced breaches of regulations and standards. Ultimately, customer relationships and business opportunities form the most important cornerstone of all sustainability activities.

It is gratifying to see a significant number of respondents indicating that they are stepping up their efforts on sustainability initiatives. It is also insightful to see that their initiatives are taking multiple directions, with no single path significantly dominating any other. Respondents were asked to rate the outlook of sustainability efforts on a scale of one to five, with five representing a significant increase in efforts. As can be seen from Figure 25, companies are increasing efforts across internal operations (63%); internal product design (56%); immediate suppliers (51%); the extended supply network (51%); and customers (51%). Hence, there is no single direction to which companies gravitate as they recognise that sustainability improvements must be worked on in multiple ways. The important point here is that the results do indeed indicate that sustainability forms an integral part of a company’s supply chain improvement journey.

SUSTaINabILITY

“ Ultimately, customer

relationships and business

opportunities with customers form

the most important cornerstone of

all sustainability activities ”

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SUSTaINabILITY

Figure 25: What is the future outlook on sustainability efforts? (1=significantly reduce efforts, 3=no change, 5=significantly increase efforts


► Sixty five per cent of respondents characterise pressure from senior management and the board as the sources of sustainability efforts

► a mere 19-30% have visibility over immediate suppliers regarding potential violations of environmental standards, governmental regulations or labour compliances

► Most companies use reduced business as a penalty for supplier breaches of standards, with 73% asserting they would reduce business after a warning and 56% doing so without a warning

► as a means of incentivising suppliers, 66% of respondents offer preferred supplier status as a business relationship while 48% offer the prospect of increased business engagements

Figure 24

Figure 25

8.4%

5.9%

12.2%

7.7%

18.3%

23.9%

28.6%

35.2%

23.1%

26.1%

34.2%

36.1%

29.9%

34.4%

20.3%

18.3%

17.3%

13.8%

19.2%

13.5%

15.2%

12.0%

8.9%

15.6%

21.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Zew or improAed sales opportuni8es

Qupplier rela8ons<ip improAement

Customer sa8sOac8on improAement


deduced Aiola8ons oO goAernment regula8ons and laws

1

2

3

4

5

16.0%

11.8%

11.0%

18.8%

16.1%

34.7%

38.9%

40.6%

37.5%

46.8%

40.0%

39.7%

41.0%

36.1%

31.9%

6.7%

7.8%

6.2%

5.2%

3.4%

2.6%

1.8%

1.2%

2.4%

1.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0% 50.0%

Customers


Immediate suppliers

Internal product design

Internal opera8ons

1

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TaLENT MaNaGEMENT aND SKILLSDEVELOPMENT

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Much discussion has centred on the topic of supply chain talent of late; how to find it, develop it and retain it. Underlying much of the talk is an implicit assumption that today’s supply chain professional needs far more general business acumen than the materials management technician of old. To understand how real this problem is, and where meaningful change might be possible, respondents were asked a series of questions about what types of skills are valued, how they are identified and managed and whether there are any consistent weak points in the system of people development that feeds our profession. The net takeaways are that institutional skill development is severely lacking not only on the job but also prior to any hiring decisions, while problems are most acute at the middle management level.

Supply Chain Talent Gap

The first question asked whether talent acquisition and development is truly a problem and, if so, how serious. Figure 26 clearly confirms that there is a problem, with over 90% of respondents calling it at least “an important challenge”. Interestingly, the portion who described talent acquisition and development “one of their top challenges” was four times the percentage saying that it was not a problem. Considering how many fire drills the typical supply chain professional faces on a daily basis, it seems significant that over a third of those surveyed classified staffing as such an important challenge. This data suggests we have an issue here which, while unlikely to be as urgent as the typical plant or shipping emergency, is nonetheless perceived to be of great importance.

TaLENT MaNaGEMENT aND SKILLS DEVELOPMENT

Figure 26: The acquisition and development of supply chain talent in your organisation is

Figure 26

Figure 27

8.6%

34.9%

56.5%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Not a challenge

One of your top challenges

An important challenge

14.8%

22.1%

63.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Become easier now than three years ago

Become more difficult in the past three years

Always been a challenge

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To the question of whether this problem is worsening, the data indicates a clear, albeit not overwhelming, trend to the negative. Figure 27 not only shows that 22% of respondents believe the issue to have become more of a challenge over the past three years against 14% who say it has become easier, but that the majority (63%) describe it as a perennial problem. It is likely that depressed economic conditions since 2008 have softened the job market for supply chain professionals as they have elsewhere, which may explain the portion of companies citing easier talent acquisition recently. With this caveat in mind, it seems significant that more find hiring to have actually worsened than eased. as the economy reignites, one wonders whether this gap will begin to really hurt.

Digging into the lifecycle of talent management offers some clues as to where we have our biggest challenges. Finding talent up-front is a clear pain point, with 17% of respondents rating this task as most challenging. Things appear to be less problematic with those already on board where, developing talent and measuring and differentiating skills is increasingly easy. Where the lifecycle of talent again poses management problems is with career progression. Respondents fairly decisively defined “offering talented staff a compelling career progression” as their biggest overall challenge. Following this pressure point, many also found retaining talent to be an issue. One implication of this data is that personnel development procedures in supply chain organisations may still be tuned to bringing on board and managing technical skills rather than broader business skills. This hypothesis might explain the relative ease of measurement and basic development, as traditional skills dominate the early part of a typical supply chain career, but then break down as responsibilities broaden to include business decision making.

Figure 27: The acquisition and development of supply chain talent has

“ … personnel development

procedures in supply chain organisations may still be tuned to

bringing on board and managing technical skills rather than broader business

skills ”

TaLENT MaNaGEMENT aND SKILLS DEVELOPMENTFigure 26

Figure 27

8.6%

34.9%

56.5%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Not a challenge

One of your top challenges

An important challenge

14.8%

22.1%

63.1%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0%

Become easier now than three years ago

Become more difficult in the past three years

Always been a challenge

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This hypothesis is further supported by data from another question which asked where in the reporting hierarchy of organisations the challenge of talent management is most problematic. as Figure 28 highlights, 39% of respondents selected mid management as the point at which talent management is most difficult. Only 17% said the issue was worst at senior management level and a mere 7% felt the problem was worst at entry level. It is therefore evident that respondents encounter an impasse achieving career progression at that point where basic skills are no longer enough but senior authority has not yet been gained. Not only is the offering of compelling career progression a problem, but general management of talent at this crucial juncture is also difficult. These people are of course the most active in interacting with outsiders, including customers and suppliers, as well as acting as mentors and caretakers for the base of the organisation.

an interesting angle also involves the sophistication of supply chain professionals outside the organisation with whom professionals need to collaborate, whether they be suppliers, service partners or customers. after all, much of what supply chain wrestles with is inter-enterprise collaboration. The data indicates more trouble with customers and materials suppliers than with service providers. It is hardly surprising that service providers fare relatively well in this assessment as so many strive to offer “solutions” to their customers, but the gap is, if anything, smaller than one might expect. also surprising is the virtual tie in the data between materials suppliers and customers. Customers, one could assume, might expect more of the burden for collaborative problem-solving to fall on suppliers. The data, however, shows little difference. It is possible that suppliers still see themselves more narrowly than their own marketing pitches typically claim.

Figure 28: Talent management is

“ Respondents encounter an impasse … at the point where basic skills are no longer enough but senior authority has not yet been gained ”


Figure 28

Figure 29

7.4%

17.4%

36.2%

39.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

More of a problem at entry level posi8ons

More of a problem at senior leadership posi8ons

Similar across all levels

More of a problem at mid level func8onal posi8ons

13.3%

54.1%

12.4%

6.6%

35.8%

38.1%

45.3%

25.1%

34.0%

5.9%

32.5%

41.4%

12.0%

1.5%

7.8%

19.1%

4.8%

0.4%

1.9%

7.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Professional experience, consul8ng

Professional experience, industry

University degrees

[ssocia8on cer8Uca8on B[PLCS, LSM, SCC etc)

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2

3

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5

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Filling the Gap – Sources of Talent

One remedy to the problem of finding talent might be to look for external markers of skill that could reliably be used to screen wider pools of recruitment. Four categories of such external markers were put forward to respondents:

► Professional Associations providing certification – such as APICS, ISM or Supply Chain Council

► Universities, graduate or undergraduate

► Previous professional experience, specifically in industry

► Previous professional experience, specifically in consulting

The aggregate data shows a strong preference for professional experience within industry. an overwhelming 54% described this as the most useful external marker for talent (see Figure 29). The gap between industry experience and the second most valued marker, a university degree, was huge. It is clear that supply chain organisations would rather build their teams with raw material taken from competitors than try to build it from scratch with general supply chain skills. University pedigree and consulting background scored reasonably well across the research sample, with a slight edge to university training as a second screen after industry experience.

Figure 29: Please rate the following external markers of talent (1=least valuable and 5=most valuable


Figure 28

Figure 29

7.4%

17.4%

36.2%

39.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

More of a problem at entry level posi8ons

More of a problem at senior leadership posi8ons

Similar across all levels

More of a problem at mid level func8onal posi8ons

13.3%

54.1%

12.4%

6.6%

35.8%

38.1%

45.3%

25.1%

34.0%

5.9%

32.5%

41.4%

12.0%

1.5%

7.8%

19.1%

4.8%

0.4%

1.9%

7.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Professional experience, consul8ng

Professional experience, industry

University degrees

[ssocia8on cer8Uca8on B[PLCS, LSM, SCC etc)

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2

3

4

5

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The most surprising and telling information comes from the data for association certifications. These entities, many of which have been established for decades and which generally have thousands of paying members, are specifically chartered to advance professional skills. They are, in fact, meant to solve the talent management problem for both the employer and the employed by providing training, testing and certification against a raft of traditional technical supply chain management skills. Despite this, respondents decisively rated association certification at the bottom of the stack. The explanation for this poor showing may lie in the governance of most of these bodies. Many are non-profit organisations run by boards with a small number of professional administrators or permanent staff. Their decision making process is thus somewhat political and can be slow. It is possible that changes affecting the profession are only gradually working their way into the mission and curricula of these organisations. Whatever the cause, it is apparent that associations which should be particularly useful for mid-career professionals are missing the mark.

We also wanted to get some idea of which associations, universities and consulting firms provided the best hunting ground for talent. Respondents were asked to name the top three of each, in order of preference, and although the data is by no means scientific, it does offer some idea as to the leading institutions. Figure 30 reveals that at the top of the list are two universities with established supply chain programmes as well as top tier business schools: Stanford and MIT, both of which also have strong engineering schools and established supply chain research programmes. Michigan State University also scores very well with 21 total mentions by respondents, including 10 as a first preference. Harvard, which lacks the engineering base common to most of the schools on the list, scores well, perhaps because of its strong and large Mba programme, while Cranfield, Penn State and Arizona State all appear frequently in the research, presumably because of their dedicated supply chain functional depth. Rounding out the 10 featured here are Cambridge University, INSEaD and Michigan, none of which can be said to be specialists in supply chain but all of which have deep, established programmes with strength in some combination of business, economics and engineering.


Figure 30

Figure 31

2

4

2

5

8

2

4

0

5

3

2

1

3

4

8

4

7

11

7

7

4

5

3

2

5

7

7

10

10

17

0 2 4 6 8 10 12 14 16 18

INSEAD

Univ. of Michigan

Cambridge

Arizona State

Penn State

Cranfield School of Management

Harvard

Michigan State University

MIT

Stanford

#1

#2

#3

0

0

3

20

18

16

2

1

3

27

18

35

5

9

9

14

15

87

0 20 40 60 80 100

CILT

CPSM

CIPS

ISM

SCC

APICS

#1

#2

#3

Figure 30: Please indicate your top three University preferences

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Figure 30

Figure 31

2

4

2

5

8

2

4

0

5

3

2

1

3

4

8

4

7

11

7

7

4

5

3

2

5

7

7

10

10

17

0 2 4 6 8 10 12 14 16 18

INSEAD

Univ. of Michigan

Cambridge

Arizona State

Penn State

Cranfield School of Management

Harvard

Michigan State University

MIT

Stanford

#1

#2

#3

0

0

3

20

18

16

2

1

3

27

18

35

5

9

9

14

15

87

0 20 40 60 80 100

CILT

CPSM

CIPS

ISM

SCC

APICS

#1

#2

#3

among the associations, opinions were far more polarised with only three entities identified by large numbers of respondents. As can be seen from Figure 31, by far the most commonly cited number one preference for certification bodies was APICS. APICS is officially the Association for Operations Management, although the acronym originally stood for american Production and Inventory Control Society. boasting over 40,000 members, this body has been in existence for over fifty years with a mission to educate supply chain professionals. It was cited as the number one choice 87 times, substantially more than the second and third most common top choices; Institute for Supply Management (ISM) and the Supply Chain Council (SCC). In fact all other named associations outside of these three accounted for only 71 total mentions as top choice. The concentration of opinion around these three held for second and third preferred associations among respondents. What is clear from the data is that aPICS, as well as ISM and SCC, are well known and well regarded. What is problematic, however, is the poor state of satisfaction among the very individuals these bodies are meant to serve; that is, mid-career professionals needing skill development.

Previous experience with consulting organisations should indicate some familiarity with conceptual models of supply chain, technology enablement and other important skills like change management, project management and governance. as such, consulting backgrounds offer a marker for some skills that are generally hard to find elsewhere. Looking at Figure 32, Accenture features prominently, achieving the most mentions as first, second or third preference consultancy among hiring supply chain organisations. Following closely were McKinsey and SaP.


Figure 31: Please indicate your top three Association certification preferences

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The story of these top three consulting firms as markers of talent is reflective of the wider challenge playing out in the supply chain talent discussion. SAP is first and foremost a software company selling and installing ERP (Enterprise Resource Planning) systems to thousands of companies around the world. Consultants from SaP should bring deep knowledge of technology enablement, business process design and project management; skills that assume a sound business strategy exists before process and system design commences. McKinsey on the other hand is the quintessential strategy consulting firm with general business expertise built on the back of thousands of Mbas around the world. Consultants from McKinsey work on the assumption that someone will follow their strategic advice with appropriate technical plumbing. accenture tops this list perhaps in part by virtue of its sheer size, but also because it promises to bring both strategy and technology in equal measure to its clients. The wider supply chain talent challenge is all about building business value on a technical foundation. This list of consulting pedigree preferences reflects that aim. Looking at the other firms receiving frequent mentions from our respondents, one sees the same mix of skills implicit in these well known names: IbM, Deloitte, aT Kearney, Oracle, bCG, KPMG and PRTM.

Figure 32: Please indicate your top three sources of professional experience by consultancy


Figure 32

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2

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2

0

7

7

5

2

7

3

3

2

4

1

7

6

7

4

10

3

3

3

4

5

7

8

13

17

19

0 5 10 15 20

PRTM

KPMG

BCG

Oracle

AT Kearney

Rel9ige

IBM

SAP

McKinsey

Accenture

#1

#2

#3

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Essential Supply Chain Skills

When someone hears the term “supply chain”, some immediately think logistics and transportation, while others think sourcing and procurement. aPICS, as discussed above, casts the net more widely to encompass operations, a term that is both established yet vague. Survey respondents were asked to identify specifically which skills are essential, which are nice to have and which are not

part of supply chain at all. The model applied to this effort was the eleven station supply chain talent model developed and published by aMR Research several years ago and maintained with the help of a group of practitioners from industry and by a team of researchers at Gartner. This model includes seven functional skills ranging from the obvious (plan, source, make, deliver) to the emerging (new product development and launch, customer management, post-sales support) as well as four enabling skill sets (governance, change management, performance management and technology enablement).

at the aggregate level, the data shows a discipline in transition with large percentages of responses citing as “essential” the four core skills of supply chain: plan, source, make and deliver. Figure 33 reveals that, among these four, planning came top with 85% of respondents identifying this skill as essential. This is no surprise as supply chain organisations, whether all-encompassing with thousands of direct reports or shared service overlay with only a handful of staff, must invariably provide the core demand forecasting, inventory planning and production scheduling skills needed to coordinate orders across the business. Only 1% of respondents went so far as to say the planning is “not part of supply chain”. Planning, it seems, is the nucleus around which the modern supply chain professional is built.

“ Planning, it seems, is the nucleus

around which the modern supply chain professional is built ”


Figure 33

Figure 34

17.6%

28.1%

64.8%

77.4%

52.4%

68.8%

85.0%

47.7%

80.5%

76.4%

37.1%

60.5%

49.1%

27.6%

19.4%

38.2%

28.0%

13.8%

47.9%

17.3%

20.8%

52.2%

21.9%

22.8%

7.6%

3.2%

9.3%

3.2%

1.2%

4.4%

2.2%

2.8%

10.6%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%

NPDL

Post-‐sales support

Customer management

Deliver

Make

Source

Plan

Technology enablement

Performance management

Change management

Governance

Not part of supply chain

Nice to have

Vssen8al

16.0%

42.1%

39.9%

2.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

5%+

2-‐5%

0-‐2%

Zero

Figure 33: Please identify the skills you consider essential, nice to have or not part of the supply chain within your organisation’s talent management

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adjacent core skills like delivery and sourcing are generally considered essential by the great majority, suggesting that the most stripped down version of a modern supply chain professional is someone who can plan materials movement both inbound and outbound. “Make”, a term derived from its bigger brother manufacture, remains something that supply chain still, occasionally at least, does not control. Over 9% of respondents went so far as to say that this is not even part of supply chain. Other research has shown that manufacturing is steadily moving under the sway of the wider supply chain and our data does indeed say that over half of respondents consider manufacturing an essential skill, but still organisational structure seems to stand in the way of a true end-to-end flow of materials from upstream source to ultimate customer delivery.

Customer management, in fact, may be one of the most important breakthroughs evident in the data, identified by almost 65% of respondents as essential. The implications of this very strong preference for customer skills include not only a graduation of supply chain from its heritage as a pure cost centre, but also an appetite for understanding demand as a driver of the entire supply chain. In contrast, lesser weight was assigned to the two other functional skills that round out a complete and closed loop supply chain: post-sales support; and new product design (NPDL) and launch. Despite the fact that customer satisfaction and retention certainly drive repeat buying and profitability, only 28% of respondents felt this skill was essential to supply chain. Worse still, NPDL, which allows all functions a chance to learn and improve with iterative trips through sourcing, ramping, delivering and retiring generations of product, was regarded as “not part of supply chain” more frequently than it was called essential. Supply chain professionals are expected to learn from customers, but apparently not from the full lifecycle of the products they make and deliver.

A key finding in the data points to the high value placed on enabling skills, especially performance management and change management. That these skills are considered essential by four fifths of respondents clearly indicates that most supply chain organisations see their place in the company as a driver of strategy, not merely support for the business. Even technology enablement, a function with a clear owner in the office of the Chief Information Officer, is viewed as essential by nearly half of the population and nice to have by the majority of the rest. These skills are not easy to find in technical training courses and certification programmes, especially when combined with business strategy and process design.


“ That these skills are considered essential by four fifths of respondents indicates clearly that most supply chain organisations see their place in the company as a driver of strategy, not merely support

for the business ”

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Managing the Talent You Have

Recalling that measuring and differentiating talent was the least challenging phase of the talent lifecycle, data on approaches to metrics shows a degree of sophistication that is encouraging. almost two thirds of respondents say they use both qualitative and quantitative measures to manage their people. Considering the importance placed on skills sometimes regarded as “soft” like change management, it is no surprise that qualitative measures matter. Of course, traditional core skills like planning and delivery lend themselves to quantitative metrics like forecast accuracy or on-time, in-full delivery. If anything, the bias in favour of qualitative measurement in the results suggests supply chain talent management is resistant to the temptation to reduce performance to the purely numerical standards so easy to come by in much of the daily work of supply chain.

beyond measuring talent, a large majority is willing to invest in training and other education to try to build it. Figure 34 illustrates that only 2% of respondents admitted to spending no money while 16% say they spend over 5% of the fully loaded cost of personnel on training. The overall average spend on training appears to be at least 3% of personnel expenses which is significantly more than the cost of an occasional online course or group workshop. Management appears prepared to put their money where their mouth is on this matter and largely on faith.

Figure 34: How much, as a percentage of fully loaded cost, do you spend on training / skills development / external education?


Figure 33

Figure 34

17.6%

28.1%

64.8%

77.4%

52.4%

68.8%

85.0%

47.7%

80.5%

76.4%

37.1%

60.5%

49.1%

27.6%

19.4%

38.2%

28.0%

13.8%

47.9%

17.3%

20.8%

52.2%

21.9%

22.8%

7.6%

3.2%

9.3%

3.2%

1.2%

4.4%

2.2%

2.8%

10.6%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0%

NPDL

Post-‐sales support

Customer management

Deliver

Make

Source

Plan

Technology enablement

Performance management

Change management

Governance

Not part of supply chain

Nice to have

Vssen8al

16.0%

42.1%

39.9%

2.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

5%+

2-‐5%

0-‐2%

Zero

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as Figure 35 highlights, the percentage of respondents who track performance improvement following training as an ROI measure (22%) is dwarfed by the portion that doesn’t measure ROI at all (60%). Talent development, it seems, is worth paying for.

Coming full circle on the talent lifecycle also calls for a look at what happens when talent is lost. We asked our respondents to rank, in order of severity, the problems they face when talent walks out the door. The findings point to an increasing role for supply chain as a source of strategic value to the competitiveness of companies. Least worrying by a wide margin was lost production, something that should rise to the top in a low skill domain where replacement staff are readily available but work stoppages hurt. More concerning was lost product intellectual property, suggesting that supply chain personnel are part of making the product a success and able to inflict some damage if they walk away with that skill. Still higher ranking as a concern was the cost of transition to a replacement. Skills apparently are not so easily captured in a manual and handed from person to person. The top concern, however, says it all: lost process intellectual property. Coupling this finding with data on preferred markers of talent for new hires (industry experience dominates) and the strong willingness to invest in training clearly shows that top supply chain talent is part of the make-up that makes a company successful.

Talent management is a priority for supply chain professionals because the game is changing from a basic set of technical tasks to an integrated web of business and engineering trade-offs. Senior executives find it difficult to locate these skills in the marketplace and harder still to hold a team together as knowledge builds over the course of a career. Where once there were jobs, we now have a profession.

Figure 35: How do you measure ROI on training expenditures?


Figure 35

21.0%

22.0%

57.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

We track comp6e8onnu86isa8on rates

We track performance improvements of trained staff

We don't

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► Talent acquisition and development truly is a problem, with over 90% of respondents asserting that it is at least “an important challenge”

► Twenty two per cent of respondents claim that talent management has become more of a challenge over the past three years against a mere 14% who believe it has become easier

► Talent development appears to become an issue at middle management level, suggesting a challenge when basic skills are no longer sufficient but senior authority has not yet been gained

► With an overwhelming 54%, the data illustrates a strong preference for professional experience within the industry as an external marker of talent


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In his introductory remarks to this report, Pier Luigi Sigismondi refers to the undoubted changing role of supply chain management, continuing its journey as a fully-fledged driver of business value. Indeed a crisis like that witnessed in Japan this year only serves to put this further into perspective. So with this in mind, it has proved intriguing to analyse some of the results garnered during the course of this study.

Gaining Competitive Advantage through a Value-Driving Supply Chain

Indeed, the discussion surrounding supply chains as a driver of value was a key part of this year’s research. Such a notion was given significantly further credence, with 83% of survey respondents firmly believing that supply chain excellence creates value through customer service, leading to customer loyalty, while 70% also affirmed New Product Introduction (NPI) as a crucial means of delivering that value. With this, we can safely conclude that viewing supply chain as a foundation of value creation is no longer limited to those more innovative companies and that, if your company still only perceives the supply chain as a means of reducing operating costs, then you are likely to fall behind your competitors.

Setting-Up Supply Chains for Growth across Emerging Economies

Evidence of further changing trends in supply chain relates to the findings on globalisation. Traditionally, emerging markets have been seen as the means of delivering low cost country sourcing. The emerging economies were where manufacturers would source from in order to sell to mature markets. However, the data from this year’s study reveals that this long-established picture is no longer accurate, with a vast majority of respondents seeing globalisation and emerging economies as a two-way street: markets where you source from and, importantly, sell to as well. Indeed, over 80% of supply chain professionals reported selling and shipping to emerging markets, while approximately 38% in fact asserted that their global supply chain strategy is primarily oriented around selling and delivering to these regions.

Enhancing the Corporate Brand through Sustainability

Furthermore, when it comes to sustainability, it is widely accepted now that sustainability and Corporate Social Responsibility (CSR) have become a key area of competitiveness and that, in turn, the supply chain has assumed a position to enhance the corporate brand and deliver further value. The findings during this study highlight the now cemented perception that sustainability is a core value driver, with 65% and 46% identifying senior management and customers respectively as the vital source of sustainability efforts. What was an exercise in ticking boxes under strict pressure from regulators and governments is now an initiative led by senior management and the board, recognising the positive image it creates for customers and the subsequent value this can generate.

CONCLUSION aND RECOMMENDaTIONS

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Developing Supply Chain Talent into Future Business Leaders

Finally, as the supply chain function transforms from an operational tool to a bona fide competitive weapon, the need for a revised skill set across the supply chain workforce becomes ever-more critical. board-level responsibilities, strategic decision-making and new internal relationships with other business units symbolise the role of the next-generation supply chain leader and the emerging crop of talent must be properly equipped with these necessary competencies and responsibilities. It is therefore unsurprising to observe that 90% of supply chain executives see talent acquisition and development as at least “an important challenge”. Perhaps adding further weight to the claim lies in the fact that just under 40% of respondents believe talent management to be more of a problem at mid-management level, suggesting companies struggle when basic skills are no longer sufficient, with more “General Manager” type skills now required.

a recurring theme during the study has been change. That is, change in the role of supply chain; how it delivers value, how it serves new markets and how the skill set is now evolving. Supply chain is now at the forefront of the business, serving customers and delivering top line growth. If your supply chain is not ready to meet these new dynamics, then it is most probable that your business will fall short in the competitive game.

CONCLUSION aND RECOMMENDaTIONS

About SCM World

About E2open

SCM World, a RaptureWorld company, is the leading global institute for supply chain executives. Hosting a dynamic and interactive annual programme of end-user and academic-led webinars & events for its members, SCM World is fast becoming the de-facto benchmark for forward-thinking supply chain leaders and their global teams to stay current through cutting edge content.

Organisations from across multiple industry verticals use SCM World to further enhance supply chain learning and development, including the likes of HP, Nestle, Tyco, RIM, xerox, Nike, GlaxoSmithKline, baxter Healthcare, Emerson, Motorola, Levis, The Dow Chemical Co, baSF, applied Materials and many more.

E2open is a leading provider of cloud-based supply chain management solutions. The company provides software and services that enable visibility, collabora-tion and control across large trading partner networks. brand owners and global manufacturers with complex supply chains use the company’s b2b integration ser-vices and supply chain business process management solutions to maintain optimal alignment of supply and demand for lower costs and better service.

E2open customers include The boeing Company, Celes-tica, Cisco, Dell, Hitachi, IbM, LSI Corporation, Motoro-la, Panasonic, Research In Motion, Seagate Technology and Vodafone.

© SCM World, a RaptureWorld Company. all rights reserved.

Documents

The Chief - E2openinfo.e2open.com/rs/e2open/images/CSCO_Report_2011.pdf · 2013-07-16 · This year’s report is sponsored by E2open, a leading provider of cloud-based supply chain