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Inventory metrics improved substantially in 2010 over 2009 (though respondents were likely reporting on 2009 numbers), with average inventory turns among the largest firms going from 11.5 in 2009 to 15.1 in this year's report. What Do You Say? Click Here to Send Us Your Comments Click Here to See Reader Feedback

As always, the annual Trends and Issues in Logistics and Transportation report results were unveiled during a presentation at CSCMP's conference in San Diego. This 19th version of the study, led by Dr. Karl Manrodt of Georgia Southern University and Dr. Mary Holcomb of the University of Tennessee, summarizes survey responses from just more than 800 supply chain and logistics practitioners across large, medium, and smaller sized companies.

As usual, the survey results were wrapped around a larger theme, which for 2010 was "The Five Undeniable Truths about the State of the Supply Chain."  According to the report, those truths are:

Truth # 1 - A majority of firms do not have the option of being cost or service focused - they are being compelled to be both: This idea comes from the question the survey asks each year about what drives the business strategy of the respondent's company: cost leadership, product/market innovation, or customer service, tying back to a framework years ago form the book "The Discipline of Market Leaders."

Again this year, "be all things to all people" (meaning cost,product innovation, and service) was the top response, as it was in 2009, but with an even larger share for 2010. 48.2% of respondents selected "all things to all people," up from 36% in the 2009 results.

That was ahead of "customer service," picked by 27% of respondents, down from 40% a year ago. Cost leadership was chosen by 16.8% of respondents, down from 21.3% in 2009, and "product leadership" as the core business strategy came in at just 7.4%. That last number was surprisingly low, perhaps, but up more than three times from the mere 2.2% that selected that as the lead strategy in 2009. (We wonder if perhaps respondents mix up in their minds the business strategy and the supply chain strategy - the "product leadership" number just seems very low for the business, but would make sense in a supply chain context.)

Under the results data set in this section, it was interesting to see that 32.2% of respondents said procurement/purchasing drives inbound transportation choices, and another 17.8% said procurement and logistics rarely interact on such decisions. Only 25% said the two groups meet regularly to make the best decisions jointly.

Source: Trends and Issues in Logistics and Transportation 2010

Truth #2 - End-to-end supply chains with seamless flows of product/material, information and finances are more idea than reality: That conclusion is based in part on survey data showing the level of supply chain visibility is declining, and that even the largest firms recognize they can make major improvements in the level of integration and information sharing with trading partners.

(Supply Chain Trends and Issues Article - Continued Below)

Under this section, it was interesting as always to see the technologies being used to manage transportation (i.e., TMS) across the survey population. The results show very fragmented approaches across ERP, best-of-breed, and even manual systems, as shown in the graphic below. We question though whether the "SaaS" or on-demand category really dipped as a percent in 2010 - our sense is that category in fact went up strongly over the past year.

Source: Trends and Issues in Logistics and Transportation 2010

Truth #3 - Most firms are focused on operations, which is just the tip of the transportation cost pyramid; more strategic and tactical approaches are often left out of the picture:  The report found the following five tactics were the ones being most commonly implemented to reduce transportation costs or effectiveness:

• Improved shipment consolidation
• Sharing capacity forecasts with carriers
• Improved carrier performance tracking
• Improved route planning
• EDI integration

Interestingly, among the transportation strategies that did not have much current support included greater use of 3PLs to manage transportation and beginning to use more "green" carriers, though in the latter case that may simply be the result of such moves not having a big impact on cost or service.

Truth # 4 - Effective inventory management is the supply chain's Mount Kilimanjaro. Trying to scale its height has a low success rate: Consistent with other data, the survey showed tremendous decreases in inventory levels for 2010 - the question is whether such reductions are permanent, or will inventory levels revert to the norm for subsequent years and economic recovery?

Inventory metrics improved substantially in 2010 over 2009 (though respondents were likely reporting on 2009 numbers), with average inventory turns among the largest firms going from 11.5 in 2009 to 15.1 in this year's report. In medium size firms, the improvement was small, going from 16.1 to 17.4 turns per year in 2010, and among small firms turns actually decreased year over year, moving from 11.7 to just 11.2 over the past year.

Another key inventory metric, Days Inventory Outstanding (DIO), showed similar levels of change, though the smaller firms actually showed some small improvement there, which doesn't really jive with the inventory turn numbers.

The report says a still relative lack of systems integration within firms is still a major barrier to improved inventory performance. 

Truth # 5 - Firms have embraced the concept of differentiated service:  The survey showed that not only do a company's "best" customers received better service in terms of quality, damage, and backorders, but that service overall has improved substantially in 2010 over 2009 numbers. The assumption is that in a period in which volumes were dropping over 2008 levels, companies were able to increase service across the board.

The report notes that many firms have difficulty defining who their "best customers" really are, and that the industry has a ways to go to get differentiated service models correct. In fact, a survey from MIT a few years ago in fact found few firms were really using differentiated service models.

A copy of the CSCMP presentation can be found on Dr. Manrodt's personal web site: Trends and Issues in Logistics and Transportation. At press time, we did not yet have a link for the full written report.

Any reaction to this year's Trends report? Any issues with the five "undeniable truths?" Let us know your thoughts at the Feedback button below.

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