Companies Eye Supply Chains

Posted by Mark Brousseau

Economic pressures are forcing companies to employ their supply chains, primarily the sourcing and procurement functions, to contain costs and boost revenue, according to the 2009 Global Survey of Supply Chain Progress from CSC, Supply Chain Management Review, the Council of Supply Chain Management Professionals (CSCMP) and Michigan State University (MSU).

The survey, completed by supply chain executives representing more than 20 industries and every major geographical segment of the world, shows the extent to which the economy has impacted the supply management function. Survey respondents cited an immediate need to cut costs as the top economic pressure on their supply chains. An overwhelming 88 percent of respondents have set objectives for purchasing to generate cost savings in the next 12 months.

This enhanced focus on supply chain management (SCM) demonstrates its use as a counter-cyclical tool for improved business performance.

"The global economic downturn has impacted every aspect of business operations, and supply chain is no exception," said Chuck Poirier, author of several books on SCM and a partner in CSC's Global Business Solutions and Services group. "In the face of a renewed focus on cost reduction, supply chain management continues to show a positive impact on business performance. During the past year companies have turned to their supply chains to cut costs and grow revenues. To a large degree, the supply chain has delivered, helping companies get through some tough times."

The survey shows 33 percent of respondents indicate they leveraged supply chain initiatives to reduce costs between one to five percent in the last three years. Twenty-seven percent report realizing even higher cost reductions, ranging from six to 10 percent. "These results were comparable to last year's," said Poirier. "However, the most significant improvement over 2008 was in the number of respondents who reported no impact - or did not know the impact - of supply chain initiatives on costs. That number dropped significantly, from 22 percent in 2008 to 13 percent in this year's survey."

In spite of the difficult economy, 32 percent of respondents saw their revenues increase between one to five percent in the past three years as a result of supply chain initiatives, while another 24 percent identified revenue increases in the six to 10 percent range.

"That's a total of 56 percent, a significant number given the current downturn," noted Poirier. "We see this trend as evidence of the fact that supply chain is finally becoming entrenched as a company-wide improvement effort. Leaders are implementing strategic supply chain efforts to transform business processes to achieve near-optimum operating conditions. At the same time, most firms identified as followers and laggards have not reached the limit of what can be done to enhance financial performance with their supply chains."

While a majority of respondents indicate they are already using their supply chain to trim logistics costs, source more strategically and generate additional savings by leveraging the purchasing function, companies that are considered supply chain leaders are going a step further: accelerating revenue generation by integrating the supply chain organization with key internal groups such as finance, IT and product development. "The leaders, in short, understand the central role supply chain management can play in the company's business success and are playing that role to the fullest," said Poirier.

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