December 1 1998 by Michael Winkleman
Supply chain management has tightened its hold on the corporation—but respondents to a Chief Executive/Ryder Integrated Logistics poll say some links are still missing.
For those who toil in the trenches of supply chain management, strengthening its links with software, building the chain through extranets, threading and rethreading its connections with new, long-term, shared-risk/shared-benefit alliances, the supply chain movement has done nothing less than revolutionize business—bringing leaps in productivity, drastic reductions in cost, and the happiest customers money can buy.
That’s, of course, a somewhat insular view, the choir singing to itself. But, according to the 417 Chief Executive readers who responded to a recent Chief Executive/Ryder Integrated Logistics survey, it’s not too far off base. Supply chain management has clearly made some inroads. It’s well accepted; its uses, intentions, and results are clear. The empowerment capabilities of information technology and, in particular, extranets are well known. Respondents expect greater impact in the next three years than they’ve experienced in the last three—–and they’re already more than likely to be tagging their strategic plans, their search for competitive edge, and their overall business performance to an increasingly integrated supply chain.
Still, some links are missing: Most companies are less than satisfied with their current logistic staffs—which are still most likely to be found only at the largest companies. The majority of respondents don’t believe they’ve yet gotten enough value for their supply chain management investment. Most respondents say they don’t know enough about the subject. And hardly anyone’s got a real handle on supply chain costs.
But, as with most new developments, comfort comes with exposure (see chart, below). Therefore, those respondents who know the most are also the most involved in supply chain management decision making. They see the strongest connections between the supply chain and business performance, are happiest with the payback on their investments, and are the most enthralled with technological developments that keep supply chain management humming. And this contentment is highest in specific industries, such as retail (see chart, right), where the applications for supply chain management and the penalties for being behind the curve—are clearest.
- Seventy percent of respondents see their supply chain as an integrated business process, rather than a series of individual, disconnected components. Similarly, 80 percent said integrating their supply chains was critical to their company’s overall business performance, 80 percent said logistics delivered a competitive advantage to their organization, and 64 percent said they considered logistics an important factor in formulating overall corporate strategy.
- Projecting into the next century, 61 percent of respondents expect their supply chain to be somewhat more integrated than it is today and 32 percent expect to be part of an entirely virtual, extended corporation.
- While 40 percent believe they’ve got a keen understanding of the impact their supply chain has on their business, and 21 percent say they understand as much as they need to, 38 percent feel they don’t yet know enough.
- And fully 67 percent said they either don’t know or aren’t sure they know their total supply chain costs.
- General reading remains the key source of information about supply chain management for 75 percent of respondents. But 47 percent say they’re also turning to technical sources, and 50 percent cited Chief Executive. Roughly a third of respondents said they tapped technical staff and consultants and attended seminars and courses to learn more.
- Though the largest number of respondents said “increasing customer satisfaction” was their primary goal in managing their supply chains (followed by reducing total costs and gaining competitive advantage), the 58 percent who indicated they’d out-sourced some portion of their supply chain said reducing cost was the key reason (followed by increasing customer satisfaction and gaining competitive advantage).
- Eight-six percent of respondents credited information technology with helping their companies achieve these goals; 44 percent said the Internet was particularly helpful, and 40 percent praised their extranets.
- Nonetheless, only 28 percent felt their company had performed well in supply chain management, a mere 12 percent said they considered their logistics staff “terrific,” and only 36 percent were satisfied with the payback they’d received from their investments in logistics over the past three years.
- Not too surprisingly, the biggest companies have the strongest links. Respondents at companies with annual revenues greater than $3 billion are considerably more likely to see their supply chains as integrated business processes than are their counterparts at companies smaller than $100 million (80 percent compared to 66 percent). Similarly, CEOs at the largest companies feel they’ve got a stronger understanding of the supply chain’s impact on their business than those at the smaller companies (53 percent vs. 38 percent). They’re happier with their company’s supply chain management performance (51 percent vs. 26 percent) and the payback they’ve received from their supply-chain investment (44 percent vs. 30 percent). They pay closer attention to logistics when formulating corporate strategy (73 percent vs. 61 percent), are more likely to outsource some of their supply chain services (71 percent vs. 58 percent), and generally employ technology more broadly for supply chain purposes, including, for example, warehousing and distribution, transportation routing and scheduling, and logistics network modeling. The big-company CEOs are also more likely to have done a stint in logistics or to consider themselves supply chain experts (44 percent vs. 26 percent) and to have a senior-level logistics expert on staff (82 percent vs. 26 percent).
- But regardless of company size, roughly half of all respondents are heavily involved in making decisions about supply chain management, nearly two-thirds of respondents believe logistics has had a major impact on their corporate performance during the last three years, and about 80 percent believe that impact will increase in the three years ahead.