In our survey, titled “Supply Chain Profitability: Is it driving your business?”, we examined companies on their insight in profitability and the place & role of Supply Chain Management within their organisation. Please ask for a copy.
You can also read the summary of our survey titled "Channel Segmentation in the Consumer Packaged Goods Market". We are happy to send you the full report and discuss with you about the findings.
Our survey has confirmed our feeling that addressing supply chain issues is becoming increasingly important to improve company profits.
Creating insight in the operations is the key to improvements. Whilst many organisations measure profitability at a product level, they do not measure at a customer or service channel level. Furthermore, less than half the companies surveyed compared their profitability with industry benchmarks and a mere fraction compared this at the customer or service channel level.
The survey respondents recognised Information Technology is important to assist companies to get visibility of their supply chains, but the focus has been on improving internal systems rather than on products that enhance collaboration between organisations. Recent years have seen developments of the necessary hardware and software capable of supporting integrated supply chains, but investments for the medium and long term have tailed off as the market place hardens.
Improving the Supply Chain understanding is on the agenda for the majority of businesses, but collaboration between organisations still not firmly yet. Payment and reward mechanisms are no incentive to minimise overall supply chain costs as many distributors still insist on either cost-plus mark-up arrangements or percentage of their customer’s turnover. We found only one respondent in our survey that tied distributor payments to profitability – a true indicator of their commitment to collaboration.
Finally, our respondents felt that the difficulties in exploiting opportunities for full supply chain integration is the competitive corporate culture within organisations, and it is this fear of losing competitive advantage that the industry has to overcome if the benefits of integration are to be realised.
Our 2002 survey has identified how to develop and operate multiple channel supply chains. This has been accomplished by examining how channel segmentation can be supported by business functions and structure, sales and marketing strategies, reporting mechanisms, forecasting and technological capability.
Increased channel segmentation is likely to occur in the years to come, driven primarily from the retailers need to continually improve upon their value proposition to customers. Consequently, firms need to look at developing a multi-channel supply chain strategy capable of supporting this divergence of offer. To achieve this, firms must examine and develop the following:
- A multi-channel vision and supply chain strategy
- Alternative approaches to categorising and segmenting different retail channels
- The ability to differentiate value propositions to customer by channel
- The most appropriate methods of aligning the business structure to the requirements of operating multiple channels and the development of cross functional teams
- Strategies for linking sales and marketing strategies in a manner appropriate to the needs of the different service offerings
- Performance metrics capable of measuring total supply chain performance, for reporting and in diagnosis of supply chain issues.
- Such metrics should be capable of measuring cross functional operations
- Information Technology & Communicative solutions and processes to enable increases in supply chain visibility and responsiveness
- Forecasting Systems appropriate to the specific demand characteristics of each channel
Additionally firms must recognise the importance of developing closer relationships with trading partners and work towards increasing levels of trust both internally and externally. Only by focussing on all of these issues can the successful development of multi-channel operations be ensured.