New research underscores the supply chain’s growing role as a driver for value creation and source of competitive advantage in the global context.

The lessons on how businesses survived a serious economic downturn are becoming more evident, highlighting the supply chain’s growing role as a driver for value creation and a source of competitive advantage in the global context and, in turn, the changing requirements for supply chain leaders to deliver excellence.

In a recent survey of 750 supply chain managers in a variety of industries worldwide, respondents overwhelmingly said they view supply chain improvements as critical for operating cost reduction. In fact, 88 percent of respondents consider supply chain improvements as important or very important for ensuring operating cost reduction, according to the findings, published in a new SCM World study titled Chief Supply Chain Officer Report 2011.

Of interest in the global institute for supply chain executives’ report is that 80 percent of respondents also rank supply chain improvements as an important or very important means for value creation through increasing revenue, while 61 percent view such improvements as very important for value creation through long-term equity improvements such as enhanced customer service and loyalty. Eighty-three percent of respondents strongly believe that supply chain excellence creates value through customer service, developing customer loyalty.

“Such results provide a strong signal that viewing supply chain improvement as a foundation for value creation is no longer limited to the more progressive and innovative supply chain companies and that there is now a widespread view (and we expect corresponding action) amongst supply chain executives to ‘go after’ value creation,” the report states. “Ultimately, in today’s business environment organisations whose supply chain efforts are only confined to operating cost reduction are likely to be left behind the competition.”

Information visibility and lead time reliability improvements are the two levers that senior-level supply chain professionals most associate with helping deliver value, with 79 percent ranking these two factors as either important or very important.

“The most striking data gathered in this research, however, points to the surge in efforts to extend supply chains into the customer bases of emerging economies,” the study states, underscoring how emerging markets are now full-fledged growth markets.

An overwhelming 80 percent of supply chain executives now sell and ship to emerging economies, while approximately 38 percent asserted that their global supply chain strategy is primarily oriented around selling and delivering to these regions.

Not only are most companies selling and delivering substantial amounts of business outside their home country, but the portion reporting an increase over the last year equates to approximately 10 times the share that reported a decrease.

“What seems increasingly clear is that globalisation of supply chain is a matter of building physical networks and relationships that are equally capable of finding and exploiting cost advantages as well as discovering and serving new markets,” according to the report. “A brake on this leveling of the global economy, however, remains in areas where high leverage work among functions like planning, product design and management remain centralised for most companies.”

Design work is less likely to be conducted outside the home country, with more than half of respondents saying that less than 10 percent of design work is executed abroad.

“What seems increasingly clear is that globalisation of supply chain is a matter of building physical networks and relationships that are equally capable of finding and exploiting cost advantages as well as discovering and serving new markets,” according to the report.

Findings in SCM World’s study reveal that the traditional picture of emerging markets — a means to deliver low-cost sourcing — is no longer accurate, with a vast majority of respondents viewing globalization and emerging economies as a two-way street: markets to source from and to sell to.

“A recurring theme during the study has been change. That is, change in the role of supply chain; how it delivers value, how it serves new markets and how the skill set is now evolving,” the report concludes. “Supply chain is now at the forefront of the business, serving customers and delivering top line growth. If your supply chain is not ready to meet these new dynamics, then it is most probable that your business will fall short in the competitive game.”

Resource

The Chief Supply Chain Officer Report 2011 (free download)
by Hau Lee, Kevin O’Marah and Pier Luigi Sigismondi
SCM World, May 24, 2011