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CSC/SCMR Survey Points to Solid Gains

CSC/SCMR Survey Points to Solid Gains. From: Poirier and Quinn, Supply Chain Management Review , Jan/Feb 2006. Five Levels of SC Evolution. Level 1: Enterprise Integration Focus on functional and process improvement Emphasis on logistics and sourcing

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CSC/SCMR Survey Points to Solid Gains

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  1. CSC/SCMR SurveyPoints to Solid Gains From: Poirier and Quinn, Supply Chain Management Review, Jan/Feb 2006

  2. Five Levels of SC Evolution • Level 1: Enterprise Integration • Focus on functional and process improvement • Emphasis on logistics and sourcing • Benefits: reduction in number of suppliers and LSPs; rationalization of product offerings; leveraging buying volume • Stovepipe mentality – little centralization

  3. Level 2: Corporate Excellence • Look more to outsource SC activities • Purchasing/procurement transitions to strategic sourcing roles (overall corporate leverage) • Focus on most strategic vendors • E-purchasing of lower-value categories • Demand management becomes important – some form of sales and operations planning (S&OP)

  4. Level 3: Partner Collaboration • Inter-enterprise focus • Network with few, carefully selected business allies • Who participate in S&OP sessions, collaborative designs, etc. • WMS and TMS introduced – increase visibility and communication throughout SC • Marketing and sales enter picture • Benefits: reduced cycle time; faster time to market; better asset utilization

  5. Level 4: Value Chain Collaboration • Supplier and customer collaboration blossoms: CRM and SRM with serious data sharing and development of joint strategies • Activity-based costing and balanced scorecards emerge • E-commerce, e-business and cyber-communication techniques enable end-to-end visibility • Collaborative Design and Manufacturing (CDM) and Collaborative Planning, Forecasting, and Replenishment (CPFR) appear

  6. Level 5: Full Network Connectivity • More theoretical than actual • Characterized by communication connectivity across the total SC network • “unprecedented levels of order accuracy and cycle-time reductions across end-to-end networks that are completely electronically enabled”

  7. The Survey • Sample • Eight-page survey instrument – self assessment of SCM stage • Readers of SCMR and clients of Computer Sciences Corp. • 120 respondents: 56% from corporate or independent businesses; 22% from SBU or wholly owned subsidiaries; 22% from groups or multiple division • 18 industries

  8. Results • Exhibit 2 reveals SC evolution by business application • Generally, 40-50% of firms are in Levels 1 or 2 – still internally focused • 30-40% are in Level 3 – beginning to partner (esp. in inventory and logistics) • Under 20% are in Levels 4 or 5 • Most advanced industries: chemicals, high technology, retail, and aerospace and defense

  9. “We remain concerned that companies are placing so much emphasis on technology rather than first making necessary process changes.” • “True collaboration remains a difficult concept for many to accept, especially when it comes to sharing what’s perceived to be sacrosanct internal information with external business allies.”

  10. Exhibit 4 reveals technology used to advance SCM • Majority using: ERP (62%); inventory planning systems (52%); web-based applications (48%); WMS (46%) • 43% have implemented: advanced planning, forecasting and scheduling systems; and e-procurement systems

  11. Factors that played greatest role in any success achieved to date: • Visible and active leadership commitment to the initiatives • Performance measures being aligned to desired outcomes

  12. Exhibits 5 and 6: impacts last 3 years • Cost reduction • 28% report 1-5% cost reduction • 36% report 6-10% cost reduction • 11% report 11-20% and 3% report > 20% • Revenue increase • 29% report gain of 1-5% • 19% report gain of 6-10% • 8% report 11-20% and 5% report >20% • 37% did not know – implying that focus of SCM remains on improving bottom line via cost reduction

  13. Supply Chain Strategies • 35% of the companies did NOT have a SC strategy • 30% had a SC strategy that had been integrated into company business plan • 21%: SC strategy is comprehensive across entire corporation • 17%: SC strategy is shared and common with SC partners

  14. Vulnerability Review Areas • Inventory planning & inv. level • International freight movement • New import or customs regulations • Critical trading partner vulnerabilities • Unstable global sourcing points • Visibility into trading/outsourcing partner shipments

  15. Summary • Wide variance in evolution among industries and among business application areas – need to think and connect outside walls of firm • Well documented cost reduction results, and more firms recognizing revenue impacts • Technology solutions selected before process improvements were made

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