For CPG Companies, Supply Chain Complexity Increases, Inefficiencies Continue

Press enter to search
Close search
Open Menu

For CPG Companies, Supply Chain Complexity Increases, Inefficiencies Continue

A recent survey Hitachi Consulting and AMR Research found out from manufacturers that lower costs are behind the need improve responsiveness, but success is limited because of resistance to change and company culture.

Survey responses from over 160 manufacturers in eight industry segments show that most companies understand the need to respond to shorter product lifecycles, higher customer expectations, fluctuating inventory levels and changing costs -- what Hitachi Consulting refers to as Building the Market Responsive Company. But few recognize the effect of that strategy on the manufacturing infrastructure, or the trade-offs needed between efficiency and responsiveness, noted Tim Vaio, leader of the Industrial Products group for Hitachi Consulting, the IT and consulting company of Tokyo-based electronics company Hitachi, Ltd.

The 2009 Supply Chain Responsiveness Survey aimed to help companies better understand the business processes and technologies needed to become more responsive to market changes, and to find out which supply chain business practices result in real business benefits. The study also probed how companies detect change, the levers they use to respond to change, and the barriers to responsiveness.

The research revealed a 1 percent improvement in return on assets for every four years of investment in supply chain excellence. Among the additional findings were:

--Demand variability is still affecting forecast accuracy
--Cost pressure is the biggest factor driving companies to be more responsive
--In spite of years of investments, order lead times haven’t improved
--Complexity is increasing in the form of higher outsourced volumes, item complexity and SKU proliferation

“One of the biggest surprises in these results,” noted Vaio, “is that respondents said the top barrier to improving responsiveness is their own culture. We believe this indicates that most performance measures are inhibiting change by rewarding siloed behavior.To become responsive, companies need to take a holistic approach across all supply chain functions and develop processes and metrics that reward end-to-end supply chain success.”

“Cracking the nut requires a focus in three areas: culture, right-sizing complexity and rethinking financial reward systems. Culture is the biggest barrier to achieving agility,” said Lora Cecere, VP of value services at AMR Research, in a recent article, “A Four-Step Program for Supply Chain Agility.” Cecere headed the research project at AMR Research.

“With ever-increasing volumes of data, a global economy, demanding customer requirements, focus on cost reductions and ever-more complex business processes, the goal of remaining Market Responsive is a significant one,” added Vaio. “The wake-up call for everyone who views this data is that company culture is still a huge factor in adopting, or rejecting, the customer-first mindset across the supply chain. No matter how successful you may be at driving costs down, the companies having real success over the long term are those focused on customer satisfaction.”