Supply Chain Cost Reduction is Manufacturing’s Top Priority

Reducing overall supply chain costs is manufacturing’s number one supply chain priority in the coming year, according to IDC Manufacturing Insights’ 2012 U.S. Supply Chain Survey of 350 companies. 80% of respondents gave that answer, while nearly 55% suggest supply chain agility is second and 52% suggest improving product quality and safety is the third most important priority.

When asked to rate the level of importance of new technology areas, big data/analytics came out on top, followed by mobility, cloud computing/software as a service and social business tools.

While manufacturers face increasing complexity as customer demand diversifies and supply globalizes, supply chain organizations are adapting to respond to requirements such as:

• Complex and extended global supply networks;

• Volatile demand;

• Growing regulation, particularly in the area of traceability;

• Pressure to be more agile and increase the clock speed of the supply chain;

and

• The “rise” of the savvy consumer.

To address these challenges, IDC has found:

• Manufacturers continue to increase the amount of low-cost country sourcing. IDC recommends revisiting the profitable proximity sourcing approach and how that concept, supported by IT, can ensure sourcing decisions to create a competitive edge.

• Most manufacturers view their supply chains as focused primarily on product quality, yet their supply chain priorities usually start with reducing costs, followed by responding to supply or demand changes, ahead of product quality and customer service.

• With IT-based solutions for demand planning and forecasting and production scheduling viewed as key to manufacturers’ business performance over the next year, this could signal a genuine shift to a more holistic approach to integrated business planning, inclusive of fulfillment excellence.

• Big data and mobility are the most important new technologies for manufacturers’ supply chains. IDC believes there is substantial value to how manufacturers can use these to improve their agility and customer service.

“According to our findings, the key supply chain challenge facing all manufacturers today is the juxtaposing of complex and extended supply networks with increasingly fast and volatile demand networks—and the increasingly ineffective role for inventory as a way to buffer cadence mismatches,” said Simon Ellis, IDC Manufacturing Insights practice director.

“While there is anecdotal evidence to suggest that 2012 may indeed represent the most challenging time in the history of the manufacturing supply chain, significant opportunities also abound in terms of the supply chain this year. For example, consumer-facing manufacturers have an opportunity to redefine their core relationship with the consumer through mobile and social media tools; or the ability to apply next-generation analytics to massive new sources of data (both structured and unstructured).”

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