Chain of Thought

In the Eye of the Supply Chain Hurricane

While nobody would pretend that the economy has fully recovered, from a supply chain standpoint, things are actually relatively stable, according to Dwight Klappich, research VP with analyst firm Gartner. Speaking at the recent Momentum 2010 conference hosted by Manhattan Associates, Klappich observed that, supply chain-wise, we appear to be in the eye of a hurricane. Consider:

● supply chain costs are down

● inventory levels are down

● there is an excess of capacity

● demand is down

● supply is plentiful

● service levels are high

● risks are under control.

A question Klappich has been hearing a lot from his clients is: If things are stable, then why invest in supply chain management right now? In a recent study of supply chain leaders, Gartner (in partnership with Supply Chain Digest) sought to find the answer to that question, and others like it.

The number one driver of supply chain projects at companies right now, accoridng to the survey, is improving efficiency and/or productivity (an earlier survey had reducing operating costs as the top answer). As Klappich explained, that shift in responses indicates that many companies feel they've slashed costs as much as they can. Now they're focusing on mechanisms to maintain those lower levels of cost.

The main obstacles to achieving supply chain goals, according to the survey, are:

1. accuracy of demand forecasts (cited by 58% of respondents)

2. complexity of supply chain network (42%)

3. lack of internal cross-functional collaboration (38%).

Given the billions spent on supply chain planning over the last 20 years, why is forecast accuracy still a problem? Klappich asked the audience, somewhat rhetorically. He cited what he calls the carpenter analogy: You can hand a state-of-the-art cutting tool to an average homeowner, but that won't make him a master carpenter. We have great supply chain planning tools now, he noted, but we're still learning how to use them.

Not surprisingly, then, investment priorities for improving supply chain management find improving planning processes at the top of the list, garnering 20% from the respondents. Second was aligning supply chain management with the corporate business strategy (11%), and third was improve supply chain visibility (10%).

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