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  First Thoughts

    Dan Gilmore

    Editor

    Supply Chain Digest



 
June 29, 2016

Highlights of the Gartner-SCDigest Supply Chain Study 2017


Companies Again Overrate Supply Chain Performance, Where Companies Spend Supply Chain IT Dollars by Maturity Level and More

 

I am just back from a "Megatrends" presentation for hardware store chain/co-op True Value during its core carrier meeting, led by John Bowersox, son of legendary supply chain academic Dr. John Bowersox of Michigan State.

It was a good time, and while I obviously can't report what I heard there, the chain is getting supply chain religion in a number of areas, and making rapid and quantifiable strides. Hope to tell the True Value story some day.

 

For 10 years now SCDigest has partnered with the analysts at Gartner on a supply chain study based on a survey of our readership.

While the research was conducted earlier in the year, it was again sort of unvelied in a big way in May at the Gartner Supply Chain Executive Conference in Phoenix, with the research led as usual by Gartner's Dwight Klappich.

Gilmore Says....

The fourth point comes in part from data from the survy showing big differences the state of the relationships and level of collaboration between the supply chain and the IT functions across companies.

What do you say?

Click here to send us your comments
 

As important context, a lot of what Gartner does these days is connected in some way to an ever-growing list of "maturity models," the first of which was a core supply chain framework, or more accurately a "Demand Driven Value Network " (DDVN) maturity model.

Released several years ago, the original model had four levels, but has now expanded to five. The basic concept has been spun out to similar maturity models for Sales & Operations Planning, Logistics and a few more areas.

If you aren't familiar with that DDVN model, the five levels are: Level 1 - React (business unit focused, often misaligned or siloed objectives); Level 2 - Anticipate (some supply chain functional performance improvements over Level 1); Level 3 - Integrate (integrated, cross functional supply chain decision-making); Level 4 - Collaborate (profitable demand-driven fulfillment through internal and some external collaboration); and Level 5 - Orchestrate (profitable shared value creation through innovation across internal/external networks).

Gartner will tell you very few if any companies are really at level 5, though some companies certainly rate themselves there.

That maturity model almost always becomes important with Gartner research and analysis because survey respondents are asked to self-rate themselves as being in one of those five levels, and then many of the responses are analyzed based on that segmentation. In this survey, 13% said they were Level 1, 31% Level 2, 37% Level 3 and 15% Level 4, and just 4% Level 5, but that was up from 1% last year.

As is almost an iron rule, companies tend to overrate their supply chain prowess, as indicated in the chart below,which is primarly meant to show the self-ratings have been consistent over time.

 



 

So why did I make the comment about overrating supply chain performance? Because again this year, a combined 45% rated their performance as above average, versus just 18% below average. While I suppose it's possible that the SCDigest reader responses that drive this survey are in fact from above average performers, my guess is the obvious rule that just 50% can really be above average and the other 50% below applies here too. The "50% problem," I have called it in the past.

 

So returning to the use of the maturity model to analyze other responses, the chart below looks at how respondents say companies spend their supply chain IT budgets by level of Gartner maturity.

 

 

 

 

As can be seen, companies at lower levels of supply chain maturity tend to spend a lot more of their available IT budgets on "running the business" than they do on "gowing the business" or "transforming the business" versus more mature companies. The implication of course is that this will eventually put the lower maturity companies at a competitive disadvantage.

 

So why is this? Seems to me there are three possibilities: (1) lower maturity companies simply spend less on supply chain IT, and so innovation is just cut out of the dollar pool; (2) lower maturity companies are less efficient in IT spend, so they have to spend relatively more just to keep the ship moving; or (3) lower maturity companies just lack an innovation gene overall in their supply chain or even total company DNA, so it isn't a high priority.

 

I would be interested in your take on this.

Finally for this column, at the end of the day, what are Gartner's recommendations for improving supply chain performance?

 

As seen in the slide below, top of the list is to first recognize that technology really can deliver competitive advantage in supply chain - and that company's doubt that proposition to their peril.

 

The second point has to do first with getting serious above assessing and then improving your company's level of supply chain maturity, and next adopting what Gartner calls a "bi-modal" supply chain strategy - pursuing both costs savings/efficiency and innovation/growth at the same time. That's not easy, but I agree essential.

The fourth point comes in part from data from the survy showing big differences in the state of the relationships and the level of collaboration between the supply chain and the IT functions across companies. No surprise there.

 

There is a ton more from the study but I am out of room. If you would like a copy of the summary slide deck please give me a holler at here.


We will be conducting the 11th annual survey some time later this year - please share your input with us at that time, we need your help as always.

 

Any reaction to this Garter study data? Why do more mature supply chains spend more on innovation or do you disagree? Let us know your thoughts at the Feedback section below.


Your Comments/Feedback

Srihari

Senior Consultant, Infosys
Posted on: May, 22 2016
Great article. I am a little suprised not to see BNSF in the mix while I understand their financial mode/operation is a little different. 

That would only give a complete perspective with all the players in the pool.

Mike O'Brien

Senior editor, Access Intelligence
Posted on: May, 26 2016
Surprised to see Home Depot fall off the list; thought they were winning with Sync?

Julie Leonard

Marketing Director, Inovity
Posted on: Jun, 27 2016
Using the right tool for the right job has always been a best practice and one of the reasons, we feel, that RFID has never taken off in the DC as exponentially as pundits have been forecasting since 2006. While these results may seem surprising to those solely focused on barcode scanning, the adoption of multi-modal technologies in the DC makes perfect sense for greater worker efficiency and productivity.

Carsten Baumann

Strategic Alliance Manager, Schneider Electric
Posted on: Aug, 19 2016

The IoT Platform in this year's (2016) Hype Cycle is on the ascending side, entering the "Peak of Inflated Expectation" area. How does this compare to the IoT positions of the previous years, which have already peaked in 2015? Isn't this contradicting in itself?

Editor's Note: 

You are right, Internet of Things (IoT) was at the top of the Garter new technology hype curve not long ago. As you noted, however, this time the placement was for “IoT Platforms,” a category of software tools from a good number of vendors to manage connectivity, data communications and more with IoT-enabled devices in the field.

So, this is different fro IoT generally, though a company deploying connected things obviously needs some kind of platform – hoe grown or acquired – to manage those functions.

Why IoT generically is not on the curve this year I wondered myself.

 

 

Jo Ann Tudtud-Navalta

Materials Management Manager, Chong Hua Hospital, Cebu City, Philippines
Posted on: Aug, 21 2016

I agree totally with Mr. Schneider.

I have always lived by "put it in writing" all my work life.  I am a firm believer of the many benefits of putting everything in writing and I try to teach it to as many people as I can.

This "putting in writing" can also be used for almost anything else.  Here are some general benefits (only some) of "putting in writing":

1. Everything is better understood between parties involved.  There are lots of people types who need something visual to improve their understanding.
2. Everyone can read to review and correct anything misunderstood.  This will ensure that all parties concerned confirm the details of the agreements as correct.  This is further enhanced by having all parties involved sign off on a hard copy or confirm via reply email.
3. Everything has a proof.  Not to belittle the element of trust among parties involved, it is always safest to have tangible proof of what was agreed on.
4. There will be a document to refer to at any time by any one who needs clarification.
5. The documentation can be useful historical data for any future endeavor.  It provides inputs for better decisions on related situations in the future.
6. This can also be compiled and used to teach future new team members.  "Learn from the past" it is said.

There are many more benefits.  Mr. Schneider is very correct about his call to "put it in writing".





Sandy Montalbano

Consultant, Reshoring Initiative
Posted on: Aug, 24 2016
U.S. companies are reshoring and foreign companies are investing in U.S. locations to be in close proximity to the U.S. market for customer responsiveness, flexibility, quality control, and for the positive branding of "Made in USA".

Reshoring including FDI balanced offshoring in 2015 as it did in 2014. In comparison, in 2000-2007 the U.S. lost net about 200,000 manufacturing jobs per year to offshoring. That is huge progress to celebrate!

The Reshoring Initiative Can Help. In order to help companies decide objectively to reshore manufacturing back to the U.S. or offshore, the nonprofit Reshoring Initiative's free Total Cost of Ownership Estimator can help corporations calculate the real P&L impact of reshoring or offshoring. http://www.reshorenow.org/TCO_Estimator.cfm

Robert

Transportation Manager, N/A
Posted on: Aug, 30 2016
 Good article!  I am sending this to my colleagues who work with me.  We have to keep this in mind.  Thanks!

Ian Jansen

Mr, NHLS
Posted on: Sep, 14 2016
SCM is all about getting the order delivered to the Customer on date/ time requested because happy Customers = Revenue. Using the right tools to do the right job is important and SCM is heavily dependent on sophisticated ERP systems to get right real data info ASP.

I've worked in a DC with more than 400,000 line items and measured the Productivity of Pickers by how many "picks" per day.

I've learned that one doesn't have to remind Germany about your EDI orders.

Don Benson

Partner, Warehouse Coach
Posted on: Sep, 15 2016
Challenge - to build and sustain effective relationships at the level of the organizations that are responsible for effectively coordinating and colaborating in an otherwise highly competitive environment 

Jade

Admin, Fulfillment Logistics UK Ltd
Posted on: Oct, 02 2016
Of course we all need to up our game. We need to move with the times, and always be one step ahead of what the future will bring.

Mike Dargis

President of asset-based carrier based in the Midwest, Zip Xpress Inc. (at ZipXpress.net)
Posted on: Oct, 03 2016
Thanks for the article, but I know there's a lot more to this issue than just the pay rates. Please check out my blogs on the subject at www.zipxpress.net.

Blaine

Inventory Specialist, Syncron
Posted on: Nov, 16 2016
Lora, great article! I agree that companies choose the 'safe' solution more often than not. My solution is a bolt-on for legacy ERP's and we even face challeneges of customer adoption. Most like to play it safe and choose an ERP upgrade, which is more costly, time consuming, and has lower ROI across the board. Would love to learn more about your company, we are always looking for partnerships.

Blaine
blaine.schultz@syncron.com

Bob McIntyre

National Account Executive, DBK Concepts LLC
Posted on: Nov, 21 2016
This is a game changer in GE's production and prototyping.  It also has huge implications across the GE global supply chain with regard to the management of their support and spare parts network. 

Kai Furmans

Professor, KIT
Posted on: May, 22 2017
I am referencing to the comment that leasing of warehousing equipment (beyond forklift trucks) is a vision for 2030.
Just recently in Europe, such a business model has started, see here: https://next-intralogistics.de/

I am following with a lot of interest, how the business develops.

Stuart Rosenberg

Supply Chain Consultant, First Choice Supply Chain
Posted on: Jun, 05 2017
If we limit the standard on judging or determining the best supply chain to just three calculations it does not tell the entire picture.  Financial performance metrics are valuable as they capture the economic consequences of business decisions.  But supply chain managers make decsions and use organizational resources that impact a company's financial well being.  Where is a firm's earnings over a period of time determined by sales less product costs and general/adminsitrative costs?  Where is the metric for determining the sources and uses of cash from three perspectives - operational, investment and financial?  Where are these supply chain metrics: on-time delivery, lead time, response time to customers, product returns, procurement costs, network distance, inventory carrying costs, forecasting accuracy, sourcing time, etc,.  Without knowing the results of all these supply chain calculations the there must be a question as to the accuracy of the 25 top supply chains.

Dustin Calitz

Project Commercialization Manager, Mondelez
Posted on: Jun, 06 2017
I feel this ranking misses the mark in SC. It does not seem to consider a key indicator in days inventory on hand, which is key to determining a SC company's ability to forecast, manage inventory costs and reduce aged stock. In additiion I realize it's difficult to understand what goes into the customer survey, but would I assume specific metrics are being asked. For examples customer's opinion on service level differentiation and the ability to deliver the right product on time, which should then be allocated a bigger weighting than 10%. It would also be interesting to take a view of the above list's SKU portfolio complexity, seasonality and launches/promotions. I would again assume some companies on the list above have a far more complex SC to manage and lead, ultimately requiring a lot more innovation within a SC to stay ahead of competitors, and ultimately satisfy their customers demands.  I understand above metrics are difficult to measure, as mentioned in the article, but they somehow need to be considered to give a true reflection. 

Michael Hurd

Lean Consultant, Unemployed
Posted on: Jun, 10 2017

A Very Good Article...

While some feel that lean is a scam that pushes for more out of the personnel and out of the companies through reduction of waste and adding value for the customer, there are several things to remember:

1) Lean methodologies are designed and implemented to reduce time wasting, so this may seem that you are working harder as an employee.

2) Lean methdoligies only work when everyone from the janitor to the owner of the company get involved and back the program.

3) Lean methods are there to make you work smarter not harder, although it may feel you are working harder.

4) YES... Sometimes lean methodologies fail! This is due to project overun or taking on too large a problem and trying to fix it all in one go and not taking the smaller problems that are associated with the large problem and fixing them first. Sometimes fixing the small problems leads to resolution of the larger problem.

 
 
 
 
 John

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