MEGA TRENDS IN SUPPLY CHAIN

BACKGROUND OF THE RESEARCH PAPER

PRTM management, a consulting subsidiary of PWC conducts and publishes an annual survey on Global supply
chain trends.
The survey consists of participants from all across the globe including Europe, Americas and Asia.
The purpose of the survey is to capture the challenges the industry faces and response to those
challenges.
The study also measures current trends and opportunities over next three years.
INTRODUCTION
After recession in 2008-09, the demand supply equations were disrupted.
Which resulted in poor forecast ability.
The companies then were forced to change their strategies and tightly manage their inventories.
Eventually efficient supply chain management became a competitive advantage.
RESEARCH METHODOLOGY
The study includes online questionnaire which is supplemented by a series of interview with the participants.
Survey participants
Near to 350 manufacturing and service companies participated in the survey.
The participants are from different sectors including aerospace, industrial and automotive equipment, consumer goods,
retail, telecommunications, etc.
About 40% of the respondents are senior executives in supply chain management. 15% out of those are at CXO
level.
Three major regions America, Europe and Asia are proportionately represented by the respondents.
RESEARCH METHODOLOGY
Survey participants (continued)
About two-thirds of survey participants are companies with annual revenues greater than $1 billion
More than 10% of the participants belong to companies with revenues less than $100 million
26%
23%
17%
11%
8%
15%
Industry affiliation
E&TC
Automotive, Aerospace
Consumer goods
Health care
Logistics
Other
43%
30%
28%
Geographical distribution
Europe
Americas
Asia
26%
23%
17%
11%
8%
Company size by revenue
>5 Bn
$1 Bn to $5 Bn
$500 Mn to $1 Bn
$100 Mn to $500 Mn
Less than $100 Mn
TREND 1: TOP CHALLENGES TO SUPPLY CHAIN FLEXIBILITY
Market transparency and greater price sensitivity have
led to lower customer loyalty. Product
commoditization reduces true differentiation in the
consumer and B2B environments
Rapid ramp up or ramp down of capacities seems to
be a big challenge for many participants
A lack of robust forecasting and planning
tools contributes to the problem
Companies are focusing primarily on deepening
collaboration with key customers to reduce unanticipated
changes in demand
Understand the market rate of demand in real time
TREND 2: NEED OF GLOBAL CUSTOMER AND SUPPLIER NETWORK
More than 85% expect the complexity of their supply chains to grow significantly by 2012
More than three-fourths expect an increase in the number of international customer
locations
More than two-thirds expect a higher number of products or variants
Geography plays an vital role in identifying drivers of complexity of the global supply chain
Nearly 30% of respondents expect the number of manufacturing facilities to decline until
2012, this reflects companys inclination more towards outsourcing to external partners
EXAMPLE P&G END TO END SUPPLY CHAIN
Objective
Fully optimized end-to-
end process from
supplier to customer
Cross functional
approach to integrate
key stakeholders across
the supply chain
Stakeholders
Supply network
management, brand
planning, site planning,
warehouse and
distribution
management, customer
service logistics,
operations
management, product
launch management,
and work system
management
Implementation
ERP System including
Electronic quality
releases and a self
billing function
Noticeable Changes
More than a 20%
increase in
manufacturing
productivity
18% reduction of
regional inventory while
keeping customer
service levels high
Decline in material lead
times by as much as
50%
Drop in the total
delivered cost of more
than 12%
TREND 3: MARKET DYNAMICS DEMAND REGIONAL, COST-OPTIMIZED
SUPPLY CHAIN CONFIGURATIONS
Ideal way to deliver an improved gross margin
Reducing End-to-end supply chain cost
Globalising SC operations
Outsourcing
Building regional Supply chain to satisfy consumers
and beat competition
TREND 3 CONTINUED
Industry response (Solution)
Out-sourcing
Off-shoring
Shortcoming
Reduction in material & labour cost achieved, however, reduction in process or management cost is yet to be seen.
TREND 4: RISK MANAGEMENT INVOLVES THE END-TO-END
SUPPLY CHAIN
Need of risk management
Due to the recession during 2008-09, it became difficult for companies to find a reliable supplier.
There was a risk of supplier closing down the operation which would cut off the critical component supply.
At the same time, finding new alternate supplier was becoming increasingly costlier.
Hence it became a management challenge to mitigate the risk across supply chain.
Industry response (Solutions)
Since the demand of end product was volatile, the companies started transferring the risk to their supply chain
partners (VMI concept).
Around 65% to 75% participants have made advanced inventory management or improved delivery to
customers top priority.
Companies also try to reduce the asset base through sale or lease back program or outsourcing.
Dispatching the product asap is also seen as reduction in inventory hence reducing the risk.
TOP RISK MANAGEMENT STRATEGIES
TREND 5: EXISTING SUPPLY CHAIN ORGANIZATIONS ARE NOT TRULY
INTEGRATED AND EMPOWERED
Companies need to address many different supply chain challengesdemand volatility, increasing
complexity and globalization, greater cost pressures, and more extensive supply chain risks.
Inability to make quick decisions in response to sudden changes in demand or comparable
challenges.
Putting increased emphasis on finding and training top talent with end-to-end supply chain
knowledge.
TOP CHALLENGES FACING SUPPLY CHAIN ORGANIZATIONS
Breaking barriers
(Needed Flexibility in
SC)
Flexibility in SC affected
due to volatile demand and
supply.
Rapid Globalisation
Need for Global customer
and Global Supplier
network
TREND 2008-2010 VS 2010-2012
Green Supply Chain to gain
importance in future
Importance shifted to cost
optimization through
outsourcing
Product quality and safety,
supply chain delivery and
security given importance
in risk management.
Risk management involves
end to end supply chain
Requirement of talent to
handle global supply chain
Lack of integrated Supply
Chain
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