According to the results of a new JDA study, manufacturers and retailers recognize that their global supply chains have become incredibly complex – but most are still relying on outdated tools and ineffective processes to manage the complicated end-to-end value chain.
There is keen understanding of the challenges and opportunities by those surveyed however, and while the gap between where they are today and where they need to be in the future to meet their customers’ expectations and thrive in highly competitive environments remains large most companies are exploring advanced techniques such as segmentation this year.
These findings, and others, are highlighted in the JDA Vision 2015 Supply Chain Market Study, a new report prepared for JDA Software Group, Inc. by Talant. This study is based on a global survey of 255 executives across 17 countries, representing a wide range of retailers and manufacturers.
The executives in JDA’s study are taking action to leverage more effective tools and practices to support optimal operations. Fifty-eight percent of respondents named “integration of a best-in-class S&OP process” as a strategic priority for the next 12 months, while 46 percent of respondents reported that their strategic priorities included “increasing agility in production planning processes.”
“It’s no secret that retailers’ and manufacturers’ supply chains have become increasingly complicated – often spanning thousands of miles and dozens of trading partners,” said Kevin Iaquinto, chief marketing officer at JDA. “JDA Vision 2015 demonstrates that while executives acknowledge that complexity, they have been slow to adopt best practices and best-in-class technology solutions to manage their increasingly sophisticated challenges in key areas including production planning and scheduling, supply chain planning and execution, demand management and transportation. Until they improve their utilization of technology – and their adoption of proven best practices – both manufacturers and retailers will continue to struggle in optimizing their end-to-end supply chains.”
Planning and Execution
When asked about their priorities for optimizing inventory management, the top two responses were “improving service levels” (named as a top-three priority by 93 percent) and “moving inventory closer to demand” (88 percent). However, organizations lack a clear way to measure and improve effectiveness in this area; respondents provided at least 25 different metrics they apply to measure inventory management performance.
In addition, most companies are not implementing advanced technology tools in this area today. Fifty-nine percent of executives cited “deploying automation” to manage inventory as a key initiative for the future. The top three supply chain planning and execution goals of all respondents can be addressed by advanced software solutions: integration of a best-in-class S&OP process with the inventory planning process (cited by 100 percent), improving planner productivity through better exception management and increased automation (93 percent), and rationalizing the product offering portfolio (90 percent).
To meet the needs of today’s price-conscious and innovation-driven consumers, both retailers and manufacturers have invested heavily in more frequent product launches, as well as more aggressive sales promotions.
For new products, 59 percent of responding companies either develop no forecast at all or rely on a backward-looking forecast developed by the sales and marketing team. Even more surprising, only 3 percent reported that their organization used any sort of algorithmic technology to forecast the effects of sales promotions.
Transportation is literally where the rubber meets the road in terms of profitability – yet, on average, JDA’s survey respondents reported that 33 percent of all customer orders require expediting, which erodes margins significantly. A surprising number of companies are failing to employ the powerful tools and best practices that can address this issue.
Only 26 percent of transportation organizations employ a shared services model for centralized transportation management, and only 46 percent have created a core carrier program.
In addition, just 43 percent of firms employ commercially available software solutions to optimize their transportation moves.