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Copyright 2005 by The McGraw-Hill Companies, Inc. Click here for terms of use.
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Creating the roadmap to change.
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Define the Supply Chain Strategy 1 2 Set the priorities for change Process Architecture 3 Design the solution Adapt the supply chain Operate the supply chain
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Performance Collaboration Management
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Developing and executing the roadmap can be time-consuming and resource-intensive but is the key to supply chain maturity and is well worth the effort. A highly mature supply chain is one that has achieved advanced capability across each of the core disciplines (see Figure 6-2). Research by PRTM s benchmarking subsidiary, The Performance Measurement Group, LLC (PMG), finds that there is a strong correlation between supply chain maturity and superior performance. Companies with mature supply chains experience
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A 40 percent profitability advantage, where profitability is expressed as earnings before income and tax as a percentage of revenue Average total supply chain costs just above 8 percent of revenue, versus 10 percent for companies with less mature supply chain practices Superior customer service, with 25 percent less inventory investment
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There is a strong correlation between supply chain maturity and superior performance.
Advancing your company s supply chain performance means moving from where you are today to a future state that includes next-generation processes and infrastructure, including information systems. Technology is only one part of the story and it isn t the first chapter. Throughout this book we have noted where the five core disciplines can and should be enabled by effec-
CHAPTER 6 A Roadmap to Change
F I G U R E 6 2
Stages of supply chain process maturity.
Stage 4: Cross-Enterprise Collaboration Stage 3: External Integration Strategic partners throughout the global supply chain collaborate to: Identify joint business objectives and action plans Enforce common processes and data sharing De ne, monitor, and react to performance metrics A collaborative supply chain strategy enabled by advanced information technology enables: Alignment of supply chain partners business objectives and associated processes Real-time planning, decision making, and response to customer requirements
Supply Chain Performance
Stage 2: Internal Integration Stage 1: Functional Focus A companywide process and data Supply chain model exists and is processes and measured at data ows are company, process, well documented and diagnostic and understood levels Resources are managed at the department level and performance is measured at the functional level Resources are managed both functionally and cross-functionally
tive information systems, but we ve deliberately avoided structuring them around systems. Why Clearly, a high-performance supply chain depends on integrating processes and data both inside the enterprise and with trading partners. Yet many companies are ill-prepared to take advantage of the power of the tools that enable integration because their strategy is unclear, their processes are weak, their organization lacks required skills and capabilities, or the companies they want to partner with aren t ready to do so. Positioning a company to excel in the next generation requires addressing these issues. In addition, while much of today s technology has existed for several years, it hasn t evolved enough to support the way supply chains actually operate. Many of the information systems that came into being at the height of the Internet bubble were like solutions looking for problems to solve. Those that were focused too narrowly or attempted to create a market where none existed disappeared when the bubble burst. The survivors are now being refined to address the way companies really work,
Strategic Supply Chain Management
as opposed to a technologist s opinion as to how they should operate.1 In the next generation, we believe applications will be far better aligned with what companies want and need. To understand the appropriate role of systems in creating your roadmap, think of creating a ladder that will allow you to climb from where you are today to the next generation. If the core disciplines form the sides of the ladder, then the supporting systems are the rungs that allow you to climb. Although it is possible to ascend a ladder with no rungs, you would have to pull yourself along with great effort to do so. Now imagine the rungs with no supporting sides there is no way to climb at all! This is what happens when companies attempt to achieve the characteristics of the next-generation supply chain without focusing on the core disciplines first. Perhaps the most interesting finding of our research is the benefit of the synergy that results from integration of best practices and effective information systems. It s not surprising that mature processes, combined with advanced technologies, lead to better performance. What is surprising, however, is that companies that implement sophisticated technology such as an advanced planning system without the same level of attention paid to their processes and organization actually perform worse than those that make no use of advanced technology at all.2
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