Despite a more complicated global supply chain, both manufacturers and retailers still rely on outdated tools and ineffective processes to manage the complicated end-to-end value chain. This is according to a new study by JDA Software Group in which 58% of respondents named “integration of a best-in-class S&OP process” as a strategic priority for the next 12 months. Forty six percent of respondents reported that their strategic priorities included “increasing agility in production planning processes.”
“While executives acknowledge complexity, they have been slow to adopt best practices and best-in-class technology solutions to manage their increasingly sophisticated challenges in key areas, including production planning and scheduling, supply chain planning and execution, demand management and transportation, “said Kevin Iaquinto, chief marketing officer at JDA.
“Until they improve their utilization of technology, and their adoption of proven best practices, both manufacturers and retailers will continue to struggle in optimizing their end-to-end supply chains,” Iaquinto added.
Supply Chain Planning and Execution: Innovation Needed, But Not Supported
When asked about their priorities for optimizing inventory management, the top two responses were “improving service levels” (named as a top-three priority by 93%) and “moving inventory closer to demand” (88%).
However, organizations lack a clear way to measure and improve effectiveness in this area; respondents provided at least 25 different metrics they apply to measure inventory management performance. In addition, most companies are not implementing advanced technology tools in this area today.
Fifty-nine percent of executives cited “deploying automation” to manage inventory as a key initiative for the future. The top three supply chain planning and execution goals of all respondents can be addressed by advanced software solutions: integration of a best-in-class S&OP process with the inventory planning process (cited by 100%), improving planner productivity through better exception management and increased automation (93%), and rationalizing the product offering portfolio (90%).
Demand Management: Product Launches and Promotions Require More Accurate Forecasting
To meet the needs of today’s price-conscious and innovation-driven consumers, both retailers and manufacturers have invested heavily in more frequent product launches — as well as more aggressive sales promotions.
However, the survey revealed that companies lack a scientific way to forecast the effects of these expensive initiatives. For new products, 59% of responding companies either develop no forecast at all — or rely on a backward-looking forecast developed by the sales and marketing team. Even more surprising, only 3% of executives reported that their organization used any sort of algorithmic technology to forecast the effects of sales promotions.
Transportation Management: Cost Overruns Can Be Addressed via Partnerships, Technology
Transportation is literally where the rubber meets the road in terms of profitability — yet, on average, survey respondents reported that 33%t of all customer orders require expediting, which erodes margins significantly.
A surprising number of companies are failing to employ the powerful tools and best practices that can address this issue. Only 26% of transportation organizations employ a shared services model for centralized transportation management, and only 46% have created a core carrier program.