Among the myriad demands placed on businesses today, a growing proportion of pressures come from the customer. Buyers expect faster delivery at lower price points even as the processes governing B2B and B2C interactions become more complex - an issue made worse by volatile market conditions and the rapid pace of business technology evolution.
A recent PricewaterhouseCoopers survey of 500 supply chain management experts explored some of these challenges more in-depth, while highlighting insight from supply chain leaders. If any single theme cane be extracted from the study, it's the importance of moving from legacy strategies in order to better respond to change.
"In business-to-business relationships, long-term loyalty and predictable order flow seem to have become relics of the past," the report stated. "At the same time, customers are tightening their requirements in terms of throughput time and perfect-order delivery while demanding continuous reductions in supply chain cost."
Market conditions make it difficult to isolate best practices that would work in every environment, but analysts were able to identify several keys to supply chain management success:
- Businesses that see the supply chain as a strategic asset achieve 70 percent improved performance
- Supply chain management leaders focus on quality delivery, cost-efficiency and flexibility
- Customer segmentation is essential for meeting highly diverse demands
- Leaders often outsource production and delivery tasks such as managed file transfer but retain control of foundational processes
- Highest performing companies invest more heavily in supply chain management technology with robust features
Supply chain success factors: A closer look
While some of the above points are general business culture issues, two in particular are immediately actionable. The first relates to how organizations can effectively outsource tasks. Analysts noted, for instance, that organizations typically outsource 60 percent of their warehouse and logistics activities as well as 50 percent of their manufacturing activities. Meanwhile, they maintain tight control over factors that have the potential to drive innovation (research and development).
This signals a need for more thorough evaluation of IT services and an understanding of how they can be put to use for a specific goal. As PwC noted, outsourcing can be an effective way of streamlining activities that would be time-intensive for internal staff. In addition, organizations can benefit from leveraging third-party services in cases where specialized expertise is necessary. One example would be the implementation of a new B2B integration solution - organizations that have worked with the platform before would be able to more quickly deploy the software.
This ultimately frees up internal teams, which can then allocate more time toward research, strategic planning or core IT and business processes.
The other key issue is that supply chain managers more readily invest in innovative technology. This can be broken down into two primary types of investments: Those intended to streamline processes and those that are meant to meet new market demands. For example, PwC suggested that most companies have basic supply chain management capabilities, but leaders differentiate themselves by incorporating tools such as analytics into their solutions. This enables higher visibility and ultimately leads to process improvement opportunities that would otherwise be missed. Valuable procurements are typically built around the following factors:
- Supply chain flexibility
- Partner visibility
At the same time, leading survey respondents showed a clear focus on investments that helped them operate under ethical and sustainable models. Other research has already showed a paradigm shift in the healthcare sector that emphasizes ethics, and PwC's suggestions show that this has become a prominent concern for all industries. Many organizations have even mandated that they will only work with partners that adhere to high ethical standards and there has been a similar growing interest in solutions that reduce carbon footprints.
Strategy: Connecting the dots
There are numerous factors at play in driving success, but perhaps more important than any individual component is the way that organizations put everything together. Unfortunately, one of the barriers to actively connecting the dots may lie within a company's organizational structure.
New York Times columnist Adam Bryant recently touched on the issue, highlighting Microsoft's attempts to reorganize the company. Much of the challenge stems from a business culture perspective, as different departments can develop a tribe-like mentality rather than seeing themselves as part of the whole business. Bryant highlighted comments from several leaders he spoke to in interviews for his Corner Office column and extracted three steps to creating a more unified organization:
- Develop a "one company" culture
- Create clear, simple performance metrics
- Communicate frequently to employees
"So I reorganized the company. It used to be organized around lines of business - international, U.S.-based, data collection - and there used to be senior vice presidents who led each of those big businesses," Kathleen L. Flanagan, chief executive of Abt Associates, told Bryant. "I took those senior V.P. positions away and hired one executive vice president for global business who shared my vision for what I call One Global Abt."
Flanagan's efforts were designed to break down departmental walls to enable a higher level of collaboration among all business units at her company. This allowed employees to occasionally look up from their daily tasks and better understand how they connected to the big picture.
At the same time, it is important for employees to understand the effectiveness of their individual contributions to larger organizational goals. Bryant highlighted comments from Shivan S. Subramaniam, who said his company uses three primary performance indicators: profitability, client retention and client acquisition. This ensures employees are measured on the same factors regardless of which office they're working from.
The final item on Bryant's list is especially important for ensuring that all of those within an organization understand the big picture and what the company is ultimately trying to accomplish. Hilton Worldwide CEO Christopher J. Nassetta warned that it is important for business leaders to keep communicating, even when it feels like they're conveying the same messages.
Putting all of these together can be a tall task, particularly when departmental silos already exist. However, working toward unification can produce a number of benefits, one of which is more widespread user acceptance of new technology. For example, when the company adopts new software that will likely affect normal operations, it's important for IT and business leaders to convey why those changes are necessary, explain the benefits of those new tools and supplement with post-deployment training to ensure they are used optimally.
Now that you've got the framwork, get the blueprint for supply chain success. View our complimentary eBook below: