Visit Our Sponsors
Increasing customer satisfaction through supply chain visibility and reducing costs through automation of manual processes are top priorities for manufacturers and retailers alike, according to the results of a recent survey conducted by AMR Research.
Survey results and client interaction show that many laggard organizations are still focused on becoming more agile and responsive from a reactive perspective. They are also focused on supply-side processes. Leaders, on the other hand, improve perfect order performance through a focus on supply excellence, but they also introduce an outside-in view of the customer and demand to minimize risks and reduce uncertainty. In the process, they drive profitable perfect orders and optimize the costs to service rather than just the costs to deliver.
In a recent survey, we studied 250 organizations across various manufacturing and retail sectors, with a focus on the execution of orders between manufacturers and their channel partners or retail customers. We highlight four results in this article:
1. Top priorities and business goals
2. Performance gaps
3. Implementation challenges
4. IT investments.
The bottom line is that companies have focused their IT investments on ERP deployments, but ERP has not filled all the multi-enterprise value chain performance gaps. At the same time, ROI is elusive to companies that have adopted best-of-breed collaborative tools to supplement ERP.
Overall business goals differed by industry. Retail and consumer products were focused on sales growth and customer satisfaction. High-tech companies, meanwhile, are seeking to improve customer loyalty through better service levels. While both industrial manufacturers and automotive aftermarket suppliers clearly identified optimization of overall supply chain costs as their top priority, details highlighted the diversity of their priorities and investments that they are planning to address the challenges.
Reducing stockouts, inventory, and transaction costs emerged as key business challenges. By industry sector the order execution processes identified to address these challenges differed slightly:
Consumer goods--Streamline the returns process, improve customer satisfaction via order visibility, have better finished goods visibility, improve transportation costs
High-tech--Improve customer satisfaction via order visibility, improve warehouse costs, adhere to custom customer requirements
Industrial products--Better finished goods visibility, improve customer satisfaction via order visibility, improve warehouse costs, adhere to custom customer requirements
Automotive aftermarket--Improve warehouse costs, improve transportation costs, better demand visibility, streamline the returns process
Clearly there are many organizations that still struggle with the basics in collaboration, both internally and with their trading partners. This lack of collaboration and visibility across the multi-enterprise supply chain inhibits the ability to be flexible and responsive in satisfying customer orders.
Performance gaps: We asked manufacturing respondents to list their most important order execution process in order to improve collaboration with their retail/channel partners, and then how well they felt they were performing in each of these areas.
The largest gaps were in visibility and cost reduction. This identifies the lack of maturity in being able to access and share critical data. Opportunities to reduce costs are in warehouse, transportation, and returns processes.
Implementation challenges: Regarding the implementation of technology purchased, respondents felt the software and implementation costs were too high, software was not user friendly, and integration and data synchronization were a struggle. Lack of skilled resources added to the frustration, and few felt that they achieved a return on investment. Yet in our interaction with software vendors, both major ERP players and best-of-breed providers, we see comprehensive and technologically advanced applications available. There is clearly an opportunity for the performance gaps identified to be addressed, but technology alone will not be sufficient. Companies do not feel they have gained value from the applications they have purchased and implemented, illustrating the fact that the problem lies more in execution and implementation than the software itself. Yet there are still significant plans to invest in additional technologies.
Software investments: Although collaborative planning processes such as VMI and CPFR can provide high ROI, survey results showed that software to support order fulfillment currently has the highest usage, with inventory optimization likely to be the top purchase in the next 12 to 18 months. What this illustrates is the importance placed on the ability to execute more quickly and to have the inventory available to improve customer satisfaction.
Opportunities exist to close those gaps: Across the manufacturing and retail companies surveyed, the results highlighted challenges and frustrations that represent the opportunities for internal supply chain and IT teams, software vendors, and systems integrators to address the performance gaps and ultimately help organizations achieve their goals. Supply chain teams should focus on the following:
1. The definition and automation of end-to-end business process needs across the entire value chain. Current initiatives and supporting technologies are fragmented and address problems in silos. The business case needs to address an end-to-end process rather than a function within a silo.
2. Implementation efforts should be sequenced in manageable bites to ensure early success, build confidence, and create momentum.
3. Speeding up and streamlining processes and reducing errors through application of lean principles and smart use of technology is key. This includes transforming the supply chain through reducing back-office administrative functions and freeing up resources for more analytical and strategic functions, as well as supporting growth without increasing head count.
4. Master data management is another focus. Business owners and IT need to jointly define the framework and own the data, especially where systems are more heterogeneous and global in nature.
Software vendors and SIs, meanwhile, have the following opportunities:
1. Prove they understand the various industry business processes and can enable successful projects and ROI, Launching small, quick, value-creating projects will build trust and confidence in the application and in the vendor's ability to execute.
2. Provide an educational framework to facilitate knowledge transfer, both internally and for clients.
3. Assist with data synchronization and master data management, which are still major impediments to successfully implementing collaborative applications.
Recommendations for manufacturers in making technology decisions:
In the selection of applications to address multi-enterprise collaboration or internal process improvements, plan for continuous change. Today's apps and the vendor landscape are rapidly changing in an evolving global market. While there may not be a perfect solution today, the returns on investment can high if deployed effectively.
1. Consider alternative software models. Since deployment alternatives are maturing in this market, minimize the use of capital and improve project TCO through the use of software as a service (SaaS) and hosted alternatives for deployment of collaborative tools where feasible. When engaging in this type of solution, protect yourself to ensure sufficient contract clarity on the migration of data to migrate to other in-house solutions in the future.
2. Pursue feasible, tactical projects. With the changes in the market and the solution maturity of major applications, buy applications tactically based on your business requirements, and ensure an ROI in less than two years.
3. Identify internal and partner capabilities. Match technology requirements to your and your trading partner's organizational capabilities, as well as the key business requirements. Determine these first before engaging in discussions with providers.
4. Go for short-term gain while looking to the future. As the market matures, keep a close eye on application evolution. The rapid evolution of application capabilities is good news for users, and it provides you with a roadmap for the future.
5. Look for technology and domain expertise in a vendor. Since many organizations are limited by the skill level of employees in the supply chain organization, focus not only on the application capabilities, but also on the domain expertise of the vendor. Carefully consider the selection of applications based upon the provider's training expertise, networking opportunities at user group meetings, and familiarization of the applications by third-party system integrators.
6. Develop a cross-functional strategy and team. Develop specific requirements by core process and the impact on partner networks, master data management, other projects in process, and the IT infrastructure.
Enjoy curated articles directly to your inbox.