Are Manufacturers Focusing on the Wrong Actions with Supply Chains?
- September 20th, 2012
- By: Loraine Lawson
When it comes to manufacturing supply chains, there seems to be a serious disconnect between their goals and their priorities.
Supply Chain Digest recently looked at the results of IDC Manufacturing Insights, a report based on a survey of 300 supply chain professionals in manufacturing.
The first confusing finding: Even though more companies in the survey identified as product-centric rather than cost- or service-centric, reducing overall costs came out as the top supply chain priority. The report’s writers, Simon Ellis and Kimberly Knickle, call that a discrepancy between “what we say we do” and “what we do,” according to the article.
The editorial staff at Supply Chain Digest viewed it a bit differently, suggesting that supply chain managers may just see product development as engineering or marketing’s job.
But the editorial staff did see a disconnect in another finding: The leading tactic for improving supply chain responsiveness was to “increase demand forecast accuracy.” By far, it beat out “improving manufacturing execution, factory flexibility, and/or capabilities” and “enabling better supply chain visibility and/or traceability.”
The issue: Improving forecast accuracy won’t actually achieve that goal, as the column explains:
“Ellis and Knickle had the same reaction we did to this data, commenting that ‘What seems a bit odd is the fact that manufacturers still see responsiveness through the lens of increase demand forecast accuracy. Indeed, improving the forecast was the top activity chosen as a way to drive responsiveness, yet it isn’t really going to help companies actually be more responsive, or agile.’”
Although Supply Chain Digest doesn’t mention it, this finding seems particularly out of alignment when you consider the four trends Ellis and Knickle say are most impacting the manufacturing supply chain right now:
- The empowered consumer, which is creating a need for rapid demand fulfillment.
- Complex global supply chain networks.
- Volatile demand as “the new norm,” which requires an agile supply chain
- Growing regulations and compliance pressures
- Increasingly volatile and generally rising direct input costs
Looking at that list, what strikes me is that the these trends should make automation and supply chain visibility a top priority. As we covered in our Supercharging Your Supply Chain series, this is the key to building an agile, responsive supply chain.
But for whatever reason, less than 15 percent of those surveyed cited visibility and traceability as a top priority for driving responsiveness.
Another critical component of an agile supply chain is collaborating with suppliers, but this ranked near the bottom of the priorities list, with less than 10 percent of respondents citing it as a driver.
Jason Busch of Spend Matters also noted this miss-match of goals and drivers, writing:
“We find it somewhat curious that there is still a lot of emphasis on collaborative forecasting/planning in working with suppliers around inventory, yet forecasting and planning has not yet combined with commodity management looking at base/raw materials on a multi-tier level to consider a broader range of factors in controlling costs: Who buys what? At what grade/specification? From whom? Off of what contract? What provider is optimal to provide value added-services to base materials? What do rebate schedules look like? How is material/pricing hedged — or not? How do demand/planning forecasts tie into the purchasing/hedging of raw material inputs (and is demand aggregation information shared with suppy chain partners).”
All good questions that can only be answered through end-to-end supply chain visibility.