Gartner Study Identifies Supply Chain User Wants and Needs
The annual Gartner Supply Chain Technology User Wants and Needs Study, now its tenth year, is one of this industry’s most comprehensive studies of supply chain users. This year it included more than 473 people spanning the globe. Here are some key questions it answered:
Does supply chain maturity matter? Yes, says Gartner analyst and report author Dwight Klappich. 90% of high maturity companies (stage 4 and stage 5) report supply chain leadership ahead of their peers. And 40% of lower maturity companies (stage 1) report that they are behind their peers.
Where are leading companies focusing? On cost reduction? No, they are focusing on business growth and also on process improvements and innovation. Improving overall supply chain efficiency is well down the list.
What are the obstacles to achieving improved supply chains? What do companies need to focus on to get better? (See graph above) Forecast accuracy and demand volatility is the # 1 obstacle again this year across companies at all maturity levels. Other obstacles depended on company maturity. High maturity companies see cost mitigation as an area under control and are therefore more outward focused – on customer demands and network complexity. But lower maturity companies say their biggest obstacle is a risk-intolerant corporate culture and management/leadership support for making the innovations needed to move ahead. This issue is almost nonexistent at mature companies, who say they don’t see management support as a concern. Gartner also says that less mature companies are often also mired in focusing on cost, because it is something they understand and can control. To get to the next level, the study shows that these companies need to free up resources to focus on growth, transformation and agility.
Does technology maturity impact overall maturity? Yes, there is a high correlation. Low maturity companies are internally focused and functionally siloed. Medium maturity companies transition to improving end-to-end processes and trading partner connectivity. High maturity companies start to also focus on multi-enterprise process orchestration. These companies see supply chain (and supply chain planning) technology as a competitive advantage.
What do typical supply chain IT portfolios look like? For lower maturity companies, Gartner found that most often they consist of a fragmented portfolio of independent SCM IT assets managed vertically by functional silo. More mature companies are more likely to have a global overarching SCM IT architecture and manage their applications horizontally across functional domains as part of an end-to-end business processes. To be clear, Klappich says that does not mean picking a single provider like Oracle or SAP. “That’s a platform decision, not an IT strategy,” he says.
Where are higher maturity companies investing? High maturity businesses invest their supply chain IT budget in a mix of projects that span three objectives, Klappich says: to run, grow and transform the business. Conversely, lower maturity companies spend most of their budget on simply running the business.
The top emerging technologies where companies are investing (or are planning to invest in the next two years) include cloud, digital business, “big data” and multichannel commerce. On the last one, an interesting finding was that more than just retailers are investing in multichannel. “Companies outside retail are very rapidly looking at how they can adopt multichannel commerce concepts within their businesses,” Klappich says. Even outside of retail, companies want to allow all channels in their business to have visibility into inventory in other parts of the distribution network. Smart machines (robotics) and sharable economy were still very low on the list, with few short-term investment plans.
What about the organizational relationship between the supply chain and IT teams? Klappich says that there is a “convergence of technology and business more than ever in my entire career …. You can’t have this divide between supply chain and IT. It’s a team sport now.” He says that when supply chain has a contentious relationship with IT, supply chain performance suffers and projects are more likely to fail, compared to companies where they are working well together and are achieving higher performance. Klappich recommends more fostering of this strategic relationship.
Klappich finished with a list of recommendations for companies aspiring to improve their supply chain and their business:
- Recognize technology is a source of competitive advantage
- Embrace supply chain maturity and bimodal (core + agile) as strategic imperatives
- Build a collaborative, high functioning SCM/IT organization
- Invest in the new; not just polish the old
- Reallocate investments from running the business to growing and transforming the business