The Struggle for World Class Supply Chain Management

While many manufacturers covet world-class status when it comes to supply chain management and collaboration, a minority of them are anywhere near that goal, according to a new study done by the MPI Group, in partnership with the American Small Manufacturers Coalition (ASMC). Three-fourths of more than 800 manufacturers surveyed recognize the importance of supply chain management and collaboration but only 29% of them report that they are near or at world class levels. Nine percent of firms report no progress toward that status.

These are some of the key findings of MPI’s 2011 Next Generation Manufacturing (NGM) Study, which was designed to provide a “scorecard” for U.S. manufacturers by which to measure progress toward world class status. Characteristics that define world class include defining strategies within their organizations, implementing best practices to support those strategies, and then achieving performance improvements that can move them into the next generation.

The study’s authors identify three elements necessary for world class status in supply chain management: strategy, talent and talent development programs. More than half (58%) of the manufacturers surveyed have a company-specific strategy for supply chain management and collaboration but only 15% define that strategy as having full functional involvement and buy-in. About 29% have a generic strategy with little or no functional involvement or buy-in, and 13% have no strategy.

Other key findings:

• Only 15% have both talent and development programs in place to drive supply chain management into the next generation. A majority (59%) of firms report sufficient talent, but just 29% have talent development programs. And 27% of firms have neither talent nor development programs.

• Approximately 11% of manufacturers report that their business systems and equipment are state of the art and can support supply chain management long-term. Another 58% report that their systems and equipment meet current requirements. Nearly one third of manufacturers (31%) have either inadequate systems and equipment or none at all to support world class supply chain management.

• One quarter of manufacturers (27%) spend more than 25% of staff time and resources expediting, firefighting and resolving conflicts with customers and suppliers rather than practicing strategic procurement and supply chain planning and partnering. One quarter of firms (23%) spend less than 5% of their time expediting, firefighting and resolving conflicts.

• Only 25% of manufacturers report having regular monitoring and reviews in place to measure return from supply chain management. One-third (31%) have ad-hoc monitoring and ad hoc reviews and 22% have no measurement systems or reviews.

• Half of firms (53%) indicate their supply chain is able to respond to unexpected customer demand for existing product without delivery delays or excessive inventory. However, the total value of inventory throughout the supply chain has been reduced 10% or more by half of manufacturers (51%).

• Only 20% of manufacturers indicate that strategic suppliers and customers represent a competitive advantage to their supply chain, and just 4% say these supply chain partners participate fully in strategic planning and identifying and responding to new markets.

The study concludes that the journey to world-class status must be planned with the next generation of management in mind. The ability of U.S. manufacturers to identify and develop tomorrow’s leaders will determine their fates.

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