Better forecasting needed to build stronger supply chains

May 2, 2005
There’s more evidence that a company’s success is tied very closely to the effective management of their supply chains

There’s more evidence that a company’s success is tied very closely to the effective management of their supply chains. Additionally, according to a recent poll conducted by Harris Interactive for UPS, 80% of the senior corporate executives surveyed say that China will be playing an important role in their company's growth objectives within the next three years, even though few think their supply chains in China are effective right now.

When asked to rate the effectiveness of their supply chains around the world, 66% of the business leaders rated highly their infrastructures in North America and 47% did so for Western Europe. Only 16% were comfortable extending a high effectiveness rating to their supply chain in China.

Most of the executives say they are still trying to handle at least some of their supply chain challenges in-house, despite the fact nearly all admitted their companies are not completely prepared to cope with unexpected disruptions. And to make matters even more interesting, most say their CEOs are paying close attention.

Overwhelmingly, by a margin of 79% to 21%, the business leaders agree that effective management of their supply chains would have "a large impact" on the ability of their companies to achieve their strategic objectives in the future. And fully 70% of those surveyed agree their CEO now views supply chain management as either "very" or "extremely" important.

A large number of the executives surveyed, 37%, say their most important supply chain objective is to stimulate sales and increase market share. And by the same percentage, the respondents agree that better collaboration with suppliers and partners is the single biggest challenge to the effective management of their company's supply chain. Many also admit their companies are only "somewhat prepared" or "not very prepared" to handle a disruption like a terrorist attack or natural catastrophe.

Despite acknowledgment of these issues and problems, 66% of the executives say their companies are still mainly trying to manage their supply chains in-house. And 33% add their companies suffer from "unclear lines of authority" for supply chain management.

"The most commonly cited problem in effective supply chain management is forecasting, which is largely a technology issue," observes Mike Eskew, chairman and CEO of UPS. "And overwhelmingly, these executives understand that collaboration between customers, vendors and suppliers is key, and that's also a technology issue. Technology can solve these problems when it's backed by a trusted partner with the necessary intellectual capital and experience."

A supply chain refers to the broad systems maintained by a company to procure materials and finance, distribute and sell products to customers and then handle returns, repairs and recycling. The growth of Internet commerce and the elimination of trade barriers have expanded marketing opportunities around the world for most companies, while at the same time extending production facilities -- and the complexity of the supply chain -- into countries that may be thousands of miles away from the final market.