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Supply Chain Priorities: Seven Things That Matter Most

By Jeff Bodenstab6 Oct 2015

A recent Gartner study, conducted annually, sheds some light on what matters most to top executives in supply chain technology. I attended the Supply Chain Technology User Wants and Needs Study delivered by Dwight Klappich at the Gartner Supply Chain Executive Conference two weeks ago in London, where he laid out Gartner’s latest findings about the things that matter most in supply chain performance.

Fundamentals matter. Regardless of the trend du jour” in supply chain, Klappich says that “strategic gravity” consistently pulls companies back to the fundamentals. These gravitational forces include the need to reduce costs, increase efficiency and productivity, make process improvements, attain growth, and improve service. So in the end, fundamentals matter.

Maturity matters. Gartner found that companies with more mature supply chain planning processes and technology outperformed less mature businesses. Gartner says that 60% of companies who achieve “Level 4” in their “demand-driven maturity model” consistently outperformed their peers. How are Level 4 companies different?

  • Level 4 features an “outside-in” supply chain, responding to market signals. Lower level maturity supply chains are “inside out.”  High performing companies build market-driven strategies.
  • Level 4 is characterized by multi-level process orchestration with collaborative, network-wide value creation. Levels 1, 2, and 3 have functional silos.
  • More mature companies spend more on growing and transforming their business. At lower levels of maturity, companies struggle to make progress because a significant portion of their IT budget (70% at Level 1) is earmarked to just running the business.

SCM IT matters. Gartner reports that higher-performing supply chains are twice as likely to have a strong SCM/IT strategy, rather than just a series of opportunistic, targeted initiatives. They have a global architecture and strategy to coordinate projects and assets. Where companies focus their IT is also strategically important because IT spend translates into supply chain readiness. Less mature companies focus IT investments on manufacturing, procurement and workforce management. More mature companies are targeting analytics and performance management, big data and predictive analytics, mobility technologies, and visibility and event management.

Demand variability matters. Demand variability (or demand volatility) is the number-one barrier to success, seven years running now.  Successful companies focus on overcoming it. Their demand modeling solutions let them separate signal from noise to recognize demand patterns.

Capable software matters. Having the right software for the job matter. Just because a mega-suite vendor may offer a bunch of applications doesn’t mean it provides a good supply chain platform to meet the company’s needs. Companies especially seek best-of-breed when searching for transformative apps.

Complexity matters. Supply chains are getting more complex for everyone—but everyone is reacting differently. Low maturity companies look to avoid or reduce complexity; Level 4 companies exploit it for competitive advantage.  Their supply chain planning solutions allow them to maintain the right level of inventories. They pursue analytics to help find hidden data.

Klappich summarizes:

  • Recognize that technology is a source of competitive advantage
  • Focus on adaptive applications
  • Invest in the new, don’t just polish the old
  • Move beyond execution to enhanced decision-making
  • Reallocate investments from running the business to growing and transforming the business

Click below to read a brief on Digital Transformation in Supply Chain Planning.

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