Saturday, May 14, 2005

Supply Chain Management - Comes out at the top in survey of management tools

In a survey by Bain & Company of management tools, executives told Bain that they are more satisfied with their supply-chain management systems than with any tool other than strategic planning. Also the survey mentions that two-thirds of those surveyed say that "insufficient customer insight" is hurting their performance. Another interesting bit of information from the survey - 90% of Bain's sample of executives said they think IT can still create significant competitive advantages for them. This together with some of the statistics that I had quoted in a previous blog article, bodes well for practitioners of supply chain management. Thanks to my friend, Badrinarayan Krishnamachari, currently at Oracle, who alerted me to an article in the economist (subscription required) which referenced this survey. Here are some points that I picked up from the survey:
  1. Executives surveyed were more satisfied with their supply-chain management systems than with any tool other than strategic planning. On the other hand, only 42% of respondents—and only 60% of those from large companies—believe they have the capability to manage a global supply chain effectively. This points to continued focus in improving supply chain performance through management tools.
  2. When ranked according to usage by companies, supply chain management was ranked only 14th. This is partially because a few of the companies, that were surveyed, were in industries like finance, where supply chain management is not relevant. Supply Chain Management usage has increased from 31% in 1999 to 56% in the 2005 survey. That is an impressive increase.
  3. Nearly two thirds of survey respondents agree with the statement “Insufficient customer insight is hurting our performance.” Slightly more than half agree that their companies “focus on new customers when we should retain and grow our existing ones.” CRM, as traditionally defined, helps some in understanding customers. Insight into customer behavior, which is critical for customer insight, is an active area in supply chain management. For example, customer segmentation and making the trade-off between customer service level and inventory cost for each of the segments is an active area of investment by supply chain solution providers and their customers. Some 72% of companies relied on segmentation in 2004, tying it for fifth in popularity; its satisfaction score, at 3.97, is tied for fourth highest.
  4. 86% of respondents believe that “innovation is more important than cost reduction for long-term success.” This according to the survey is not borne out by the actions of the respondents. This will be an area to watch out for ...
What do you think?
Karthik Mani

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