chief supply chain officer r

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The Chief

Supply Chain Ofcer

Report 2011A research study by:

Dr. Hau Lee, Chirmn, SCM World

Kevin OMarah, Group Vice President,Supply Chin Reserch, Gartner

Executive Summary by:

Pier Luigi Sigismondi,Chief Supply Chain Ofcer, Unilever

www.scmworld.com | SCM World, RptureWorld Compny


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ChainOfcerReport2011

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INTRODUCTION

SCM World, the global institute for supply chain learning, trainingand development, brings you the results of its 2011 Chief SupplyChain Ofcer (CSCO) study.

This yers CSCO Report is collortion etween Dr. Hu Lee, Chirmn,SCM World nd Kevin OMrh, Group Vice President, Supply Chin Reserch,Grtner nd includes n eecutive summry y Pier Luigi Sigismondi, ChieSupply Chain Ofcer at Unilever.

Developed to scertin the priorities nd strtegies senior-level supplychin proessionls re undertking in 2011 nd eyond, this report looks tounderstnd how compnies re positioning their supply chin orgnistionsto deliver growth.

Over 750 glol eecutives completed the survey, including SCM Worldmemers nd non-memers, with over 50% o respondents t VP-levelnd ove within their orgnistions.

This yers report is sponsored y E2open, leding provider o cloud-sed supply chin mngement solutions. The report sponsor hs no

inuence over the survey design or results.

We are sure you will nd this highly informative reading. Please do nothesitate to contact SCM World to discuss any of the ndings in greaterdetil.

Yours sincerely,

Dr. Hau LeeChirmn

SCM World

Kevin OMarahGroup Vice President,

Supply Chin ReserchGartner


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TabLE Of CONTENTS

Eecutive Summryby Pier Luigi Sigismondi, Chief Supply Chain Ofcer, Unilever

Supply Chin Mngement nd Vlue Cretion

Glolistion nd Emerging Economies

Sustinility

Tlent Mngement nd Skills Development

Conclusion nd Recommendtions

aout SCM World

4

5

12

23

32

45

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In the weeks ollowing the Jpnese erthquke nd tsunmi in Mrch, the eyesof the business world were rmly focused on the global supply chain. In thetermth o those trgic events, mny usinesses hve suered shortges insupply nd production incpcity, s well s lck o inventory nd inevitleclosures cross distriution networks.

all this hs served to position the supply chin even higher s key usinesssset. Tht is, s strtegic driver o vlue or the usiness tht delivers tngilecompetitive dvntge. We s supply chin leders re no longer eclusivelytechnicl, opertionl people with sole ocus on driving cost reduction. Intodys climte, we ply undmentl role in enling the compny growthgend through cross-unctionl enggement nd eternl prtnership with oursuppliers nd customers. and nowhere is this more evident thn in times ocrisis where resilience, exibility, speed and responsiveness across the end-to-end vlue chin mke ll the dierence.

So ginst this ckdrop, it is my plesure to write the introduction or the ChieSupply Chain Ofcer Report 2011. This years report has been co-authored by Dr.Hu Lee, Chirmn o SCM World nd Thom Proessor o Opertions, Inormtionnd Technology t the Stnord Grdute School o business, longside Kevin

OMrh, Group Vice President, Supply Chin Reserch, Grtner.

both Hu nd Kevin hve designed this report to drw out the criticl insightstht eecutive supply chin proessionls re prioritising cross our key res:vlue-driving supply chin mngement, glolistion, sustinility ndtalent management. As you will discover, the ndings identify a series of keydevelopments which suggest chnge in supply chin strtegy rom three orour yers go.

Highlights o this study include: Emerging markets are now fully-edged growth markets with an

overwhelming 80% o respondents selling nd delivering to emergingeconomies

Sustinility incresingly orms prt o the DNa or high perormingsupply chins, with 65% o respondents chrcterising pressure romsenior mngement nd the ord s the source o sustinility eorts

Tlent cquisition nd ledership development represent key chllengescross supply chin mngement, with 90% o respondents greeingtht it is t lest n importnt issue

In sum, this years research ndings serve to underline supply chains growingrole s driver or vlue cretion nd source o competitive dvntge in theglol contet nd, in turn, the chnging requirements or supply chin ledersto deliver ecellence. Consequently, there is no dout tht tlent mngementwill ecome n incresing priority s industry looks to develop uture lederstht cn drive overll usiness perormnce.

I feel very energised by these new perspectives and hope you will nd themeqully inspiring in continuing your own journey towrd supply chin ecellence.

Yours sincerely,

Pier Luigi SigismondiChief Supply Chain Ofcer

ExECUTIVE SUMMaRY by Pier Luigi Sigismondi, Chief Supply Chain Ofcer, Unilever


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SUPPLY CHaINMaNaGEMENT aNDVaLUE CREaTION


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SUPPLY CHaIN MaNaGEMENT aND VaLUE CREaTION

Supply chin mngement is viewed s key driver to enhnce thecompetitiveness o compnies. Trditionlly, supply chin ecellence hs enledcompanies to operate lean and efciently, thereby reducing waste and resourcesused. Operting cost reduction in the orm o lower processing cost, higher sset

utilistion nd reduced inventory cn result in higher mrgins or compnies.but ltely, innovtive compnies hve used supply chin ecellence s mensto support new usiness development, resulting in compnies gining moremarket share and revenues; increased protability; improved customer servicend loylty; nd enhnced shreholder vlue. Such vlue cretion spects osupply chin hve ecome new competitive ground or most compnies toaspire to. Indeed, the super-agile and efcient supply chains of companies likeSeven-Eleven Jpn, amzon.com, Dell, Zr nd Li & fung re viewed s thedriving orce or the usiness success.

Is it true tht more supply chin eecutives re using supply chin ecellence s mens to crete vlue, or is this limited to the innovtors? Does supply chin

ecellence relly enle vlue cretion? In wht wys do compnies cretevlue using supply chin mngement nd wht ctors drive the success othe dierent wys or vlue cretion? This report ddresses these mtters inorder to id compnies, on n opertionl level, to steer their supply chins orusiness vlue cretion.

as shown in figure 1, overll usiness vlue nd compny equity cn e cretedthrough incresing revenues, vlue-dded services nd operting cost reduction.Such vlue cretion nd cost reduction cn e supported y the use o supplychin levers s perormnce drivers or the usiness, wherey vlue cn ecreted nd key usiness drivers met through supply chin ecellence. as such,understnding wht the usiness drivers re nd their reltionship therein with

supply chin levers ecomes criticl in helping compnies design the journey torelise success.

Around this specic focus area, the Chief Supply Chain Ofcer 2011 surveyposed the ollowing questions:

1 How importnt do supply chin eecutives view supply chin improvementss key or vlue cretion versus operting cost reduction?

2 How importnt re supply chin levers in supporting vlue cretion?

3 Wht re the wys in which vlue cn e creted through supply chinecellence?

4 For each way of creating value, what drivers play signicant roles for itssuccess?


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3.1%

1.3%

0.7%

.1%

.1%

2.3%

27.9%

1.%

9.0%

3.7%

0.1%

3.9%

2.2%

0.1%

51.1%

0.0% 10.0%20.0%30.0%0.0%50.0%0.0%

4a6uecrea8onthrough6ongtermequity

improvement(suchasenhancingbrand

equity)

4a6uecrea8onthroughincreasing

revenue

Gpera8ngcostreduc8on

5

3

2

1

Figure 1: How important is itfor you as a CSCO to focus onsupply chain improvementsfor the following? (1=notimportant, 5=extremelyimportant)


Importance of Supply Chain Improvements

Rther epectedly, supply chin eecutives view supply chin improvementss criticl or operting cost reduction, with figure 1 illustrting tht 88% o

respondents view supply chin improvements s importnt or veryimportnt or ensuring operting cost reduction. However, wht is

perhps surprising is tht 80% o respondents lso rnk supply chinimprovements s n importnt or very importnt mens or vluecretion through incresing revenue, while 61% correspondingly viewsuch improvements s very importnt or vlue cretion through longterm equity improvements (such s enhnced customer service ndloylty). Such results provide strong signl tht viewing supply chinimprovement s oundtion or vlue cretion is no longer limitedto the more progressive nd innovtive supply chin compnies ndtht there is now widespred view (nd we epect correspondingction) mongst supply chin eecutives to go ter vlue cretion.Ultimtely, in todys usiness environment orgnistions whosesupply chain efforts are only conned to operating cost reduction are

likely to e let ehind the competition.

Importance of Supply Chain Levers and Value Creation

The literture is rich with the mny est prctices nd levers through whichcompnies gin control o their supply chins, while pst surveys hve ocusedon identiying wht these levers re. O interest in this report is the importnceof these supply chain levers in supporting value creation. The rst observation isthat almost all the levers stipulated have been identied as signicant. In otherwords, supply chin eecutives hve een using multiple levers to help supportvlue cretion.

These levers include:

Ultimtely, intodys usinessenvironment

orgnistions whose

supply chin eorts

are only conned

to operting cost

reduction re likely

to e let ehind the

competition

Led time reduction

Led time reliility

improvement

Inormtion visiility

Supplier collortion

Inventory turn increse

Timely, ccurte ndcomprehensive perormncemngement

Demnd mngement (likeorecsting nd demnd shpingthrough promotions)

Capacity exibility


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Figure 2 below shows that all the levers proposed in the survey were identieds etremely importnt y more thn 25% o respondents; while 66-78% orespondents rnked ech lever s importnt or very importnt. These leverswere also identied as important drivers for operating cost reduction and a

signicant driver of value creation.

Two levers, however, stood out rom the rest. Seventy nine per cent o respondentsidentied information visibility and lead time reliability improvements as eitherimportnt or very importnt. Inormtion visiility is mens or compnies tocoordinate their supply chain operations to increase efciency, reduce wastend improve response time reliility. Hence, information visibility becomesthe foundation for all other levers. but it is impertive to note tht led timereliility improvements require other ttriutes too, such s hving the rightdistriution nd logistics prtners; hving the right level o sety cpcity orinventory; nd hving relile mnucturing processes.

5.5%

3.9%

1.3%

2.0%

1.1%

1.3%

1.1%

2.0%

0.7%

1.4%

0.9%

20.3%

21.1%

5.6%

5.4%

3.1%

6.%

5.9%

7.7%

1.9%

3.4%

3.%

41.3%

3.5%

24.6%

26.4%

19.5%

20.1%

20.1%

20.3%

16.2%

1.2%

14.%

25.2%

2.2%

44.0%

40.0%

4.6%

42.7%

42.4%

3.%

42.0%

36.3%

39.%

7.6%

.3%

24.6%

26.2%

27.7%

29.1%

30.6%

31.2%

39.2%

40.7%

40.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

ostponement

artnershipincen8veali#nment

Capacityflexibility

Inventoryturnincrease

Timely,accurateandcomprehensive

performancemeasurement

Pead8mereduc8on

Quppliercollabora8on

CustomerCollabora8on

Informa8onvisibility

Remandmana#ementBforecas8n#,

demandshapin#throu#hpromo8onetcF

Improvin#lead8mereliability

5

4

3

2

1

Figure 2: How important areeach of the following leversto supporting value creationthrough supply chain impro-vement? (1=not important,5=extremely important)


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14.6%

2.7%

2.5%

1.0%

3.0%

2.5%

1.1%

25.3%

10.9%

9.0%

5.4%

.9%

6.0%

3.0%

33.0%

29.7%

25.%

24.1%

20.0%

21.%

12.5%

20.0%

39.1%

39.6%

44.0%

40.0%

37.2%

33.3%

7.2%

17.6%

23.0%

25.6%

2.0%

32.5%

50.1%

0.0% 10.0%20.0%30.0%40.0%50.0%60.0%

Peverageopportuni8escreatedfrom

externaldisturbanceordisasters

(suchasearthquakes,majorsupply

chaindisrup8ons,Ureetc

remiumpricing

Expandedofferingsofvalue-added

services

Qtrongersupplierrela8onships

Expansiontonewmarketsegments

withinexis8nggeographiesornew

geographies

Zewproductintroduc8on

Customerserviceleadingtocustomer

loyalty

5

4

3

2

1


Ways to Create Value through High-Performing Supply Chains

High perorming supply chins cn enle compnies to crete vlue in multiplewys:

as figure 3 revels, the overwhelming mjority o the supply chin eecutives

surveyed elt tht supply chin ecellence helps to uild vlue through customerservice nd, in turn, customer loylty. There is link etween this oservtionnd the importnce o supply chin levers s discussed previously. Viewed ysupply chin eecutives longside led time reliility improvements s one othe two most importnt levers to support vlue cretion, inormtion visiilitytkes two directions; gining visiility rom supply chin prtners nd providingvisiility to supply chin prtners. Given tht the ltter o these directions ndled time reliility re oth customer service oriented, it is rther unsurprisingthat enhanced customer service is identied by supply chain executives as themost importnt wy in which vlue is creted. Strong customer loylty is theridge through which customers repet usiness or epnd their reltionshipto cover other products or services, nd is lso the wy in which customers

oer priority tretment. Indeed, 83% ssign high or very high vlue to supplychin ecellence creting vlue through customer service (leding to enhncedcustomer loylty).

New product introduction

Premium pricing

Epnded oerings o vlue-dded services

Customer service leding tocustomer loylty

Epnsion to new mrket segmentswithin eisting geogrphies orepnsion to new geogrphiclmrkets

Leverging opportunities cretedrom eternl disturnce ordissters (such s erthqukes,major supply disruptions, re, etc.)

Stronger supplier reltionships

Figure 3: At your company,what is your assessment ofthe value created by havinga high performance supplychain (1=no value, 5=veryhigh value)


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Respondents lso suggest other wys in which vlue cretion cn occur throughsupply chin ecellence. The most requent such response, which pplies to

some industries more thn others, is the retiler reltionship. Indeed,strengthening the retiler reltionship, eing le to serve retilers

etter nd collorting with retilers re ll proven wys to improvesles.

The second most requent response ws new product introduction,with 70% o respondents stting tht supply chin ecellence is o highor very high vlue in this regrd. Indeed, supply chin ecellence cnhelp speed up new product introduction or increse the proility o successul new product introduction. finlly, new mrket epnsionis lso regrded s high vlue result o supply chin ecellence,smoothening the penetration of new markets through efcient andrelile deliveries nd, in turn, llowing the eective customistion oproducts tilored to new mrket needs. Indeed, 68% o respondents

rnked new mrket epnsion s high or very high vlue result orunning high-perormnce supply chin.

Important Factors for Ways to Create Value through

Supply Chain Excellence

The underlying ctors tht contriute to the success o the orementionedres o vlue cretion will e emined herein. figure 4 revels the key ctorsrespondents elt importnt nd relevnt in driving corresponding mens o vluecretion.

as indicted erlier, uilding customer loylty through customer service is the

most highly rted mens or vlue cretion through supply chin ecellence.Success comes rom the ility to convert customer loylty to revenue ginsnd is dependent upon whether the customer views service s criterionor mking sourcing decisions nd/or positive customer service eperienceleding to repet purchses. When ll such ctors eist, strong vlue cretionis potentil outcome.

Figure 4: Which of the following are relevant factors that link supply chain excellence andsuccessful new product introduction (1=no value, 5=very high value)

Strong customerloylty is the ridge

through which

customers repet

usiness or epnd

their reltionship to

cover

other products or

services

4.4%

1.9%

4.%

3.4%

1.9%

2.1%

9.0%

6.5%

9.2%

6.6%

4.6%

3.7%

22.1%

26.3%

21.2%

19.%

17.9%

16.3%

43.7%

39.7%

39.2%

40.0%

43.7%

39.0%

20.9%

25.6%

25.7%

30.2%

31.%

3.%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Fastresponsetoengineeringchanges

Avoidcostover-runs

Hroductdevelopmentcycle8me

reduc8on

Abilitytomanageproduct

transi8onsBthesimultaneous

phasingoutofeKis8ngproductand

Abilitytorampupfast

On-scheduleproductintroduc8on

5

4

3

2

1


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In the cse o new product introduction, speed nd reliility re still whtmatter, where speed refers to efcient product introduction and capacity ramp upwhen a product takes off. Of interest is that respondents also identied producttrnsition mngement (the simultneous mngement o the rmping down

o current products nd the rmping up o new products) s highly importnt.

With regrd to new geogrphicl mrket epnsion, the ility to customiseproducts for local needs or regulatory requirements and efcient distribution ofthe products to the customers re oth viewed s highly relevnt. Since mnyo the new geogrphicl mrkets re in emerging economies, where customertstes nd requirements re potentil drivers, nd logistics nd distriutioninrstructure lesser developed, it is no surprise tht supply chin eecutivesview eing le to customise products or locl needs nd susequently distriutethem efciently as important drivers of success. It should be noted that somerespondents made specic reference to the importance of designing the rightservice to go with the product in new mrkets.

Chapter Summary and Key Takeaways

Supply chin eecutives view supply chin improvement s crucil oroperting cost reduction, with 51% rnking such improvements setremely importnt nd urther 37% selecting importnt

Inormtion visiility nd led time reliility improvements re thetwo levers which senior-level supply chin proessionls most ssocite

with helping deliver vlue, with 79% rnking these two ctors s tlest importnt

Eighty three per cent o respondents strongly elieve tht supplychin ecellence cretes vlue through customer service (leding tocustomer loylty), rnking such lever s t lest importnt

New Product Introduction rnked highly mongst respondents s mens o driving vlue through high-perorming supply chin, with70% selecting rting o importnt or ove


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GLObaLISaTIONaND EMERGINGECONOMIES


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GLObaLISaTION aND EMERGING ECONOMIES

Globalisation Managing the Big Picture

for mny yers the notion o supply chinglolistion ws synonymous with lowcost country sourcing, especilly whereemerging economies were concerned. Newdt shows tht this old imge is no longerccurte, with n overwhelming mjorityo supply chin proessionls pprochingglolistion tody s two wy street;oth sourcing rom nd selling to. figure 5illustrtes tht over 80% o the 750 supplychin eecutives surveyed report selling

nd shipping to emerging mrkets, with lrge portion (38% o the totlsmple) sying tht their supply chin strtegies or emerging mrkets wereprimrily oriented to selling nd delivering in these mrkets. In contrst, only18% descried their strtegies or emerging mrkets s primrily orientedto sourcing rom such loctions.

This dt point sys lot out how the glol supply chin hs evolved inrecent yers oth in terms o the mturtion o these emerging economiesnd in terms o the sophistiction nd strtegic impct o the supply chindiscipline. In the rst instance, we were interested to learn not only howmuch ctivity ws eing mnged glolly cross the vlue chin, utwhether the trend ws incresing or decresing. for sourcing, mnucturingor ssemly ctivities, gret mny compnies re hevily dependent onnon-home country work. figures 6 nd 7 illustrte tht round qurter

o ll compnies sy they source nd mnucture rod or etween 75-100% o their totl volumes, while minority (17% nd 30% respectively)do less thn 10% o such work in non-home country loctions. furthermore,the portion o respondents who see these volumes incresing is drmticllyhigher ve to one and eight to one respectively. It is clear that globalsourcing nd mnucturing oth remin nd, more importntly, re stillgrowing st.

... over 80% report selling nd shipping toemerging mrkets, with lrge portion sying

tht their supply chin strtegies or emerging

mrkets were primrily oriented to selling nd

delivering in these mrkets

Figure 5: Your supply chain strategy for emerging markets is

1.4%

37.6%

44.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0%

Orientedprimarilyaroundsourcing

fromemergingmarkets

Orientedprimarilyaroundselling

deliveringtoemergingmarkets

Aboutequallysourcingfromand

sellingtoemergingmarkets


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50.5%

18.0%

12.1%

10.9%

8.5%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Below10%

10%-50%

25%-50%

50%-75%

75%-100%


Other vlue chin ctivity, however, is less likely to e done outside o thehome country, in prticulr design work. Over 50% o respondents sttetht less thn 10% o design work is eing done rod (figure 8) nd,lthough 30% re incresing this shre yer-on-yer, ig mjority (63%)pln no chnge t ll.

Despite much tlk o the rmies o engineers grduting ech yer romChinese nd Indin universities, most compnies round the world would stillrther keep their cretive duties close to hedqurters. a similr oservtionrelates to the exercise of direct managerial control. Despite large ows ofctivity in sourcing nd mnucturing rod, the overwhelming mjorityo compnies hve only minor portions o either direct report st or ownedcilities locted outside o the home country. The impliction supportingmuch necdotl evidence is tht nlysis nd/or cpitl-intensive work tendsto cluster close to home. arms length reltionships with third prty suppliersor prtners my enle sustntil mteril conversion nd movementoutside of the home country, but most xed costs and heavily investedresources (employees, property, plnt nd equipment) re kept under much closer wtch.

Figure 6: What percentage of your sourcing isdrawn from outside your home country? (denedas headquarter location and seat of executivemanagement)

Figure 7: What percentage of your manufacturing /assembly / production is conducted outside your homecountry?

Figure 8: What percentageof your design activitiesis conducted outside your

home country

16.6%

13.5%

20.9%

22.2%

26.8%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Below10%

10%-50%

25%-50%

50%-75%

75%-100%

30.1%

11.2%

13.5%

20.8%

24.4%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

Below10%

10%-50%

25%-50%

50%-75%

75%-100%


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The most striking dt gthered in this reserch, however, points to thesurge in eorts to etend supply chins into the customer ses o emerging

economies. Not only do most compnies sell nd deliver sustntilmounts o usiness outside their home countries (figure 9), ut the shretht reports n increse over the lst yer is nerly 10 times tht whichreports decrese (figure 10). This rtio o increse to decrese is thehighest o ny ctivity on which we collected dt. Wht seems incresinglycler is tht glolistion o supply chin is mtter o uilding physiclnetworks and relationships that are equally capable of nding and exploitingcost dvntges s well s discovering nd serving new mrkets. a rkeon this leveling o the glol economy, however, remins in res wherehigh leverge work mong unctions like plnning, product design ndmngement remin centrlised or most compnies.

Figure 9: What percentageof your sales/deliveries goesto customers outside yourhomes country?

21.7%

14.6%

18.3%

19.4%

26.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0%

Below10%

10%-50%

25%-50%

50%-75%

75%-100%

42.6%

5.5%

51.9%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Aboutthesame

Decreasing

Increasing

Figure 10: Compared to last year,non-home sales / deliveries are


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Globalisation Country Winners and Losers

The reserch sked supply chin proessionls to nme their top three non-home country loctions in terms o sourcing, mnucturing/ssemly/production nd sles. across ll industries, Chin emerged well hed interms o sourcing, with nerly 37% o respondents clling it their numerone non-home country loction (see figure 11). Overll, 60% cited Chin stheir numer one, two or three sourcing loction. The closest ollower wsthe USA, identied as the number one non-home country sourcing locationy 20% o respondents nd 39% listing the USa s numer one, two orthree. Well down the list ws Jpn which, despite its economic might, wsidentied as a top three sourcing location by only 10% of all respondents.Wht emerges rom this dt is tht Chin, the USa nd Germny pperr more integrted into the worlds mnucturing supply chins thncompeting territories, most notly Jpn.

Wht emerges is tht Chin, the USa nd Germny pper rmore integrted into the worlds mnucturing supply chins thn

competing territories, most notly Jpn

1.9%

3.8%

2.1%

3.3%

3.8%

6.1%

5.2%

10.6%

7.7%

11.0%

1.8%

4.4%

2.3%

3.5%

4.2%

6.3%

4.4%

9.4%

10.6%

12.5%

1.5%

1.9%

1.9%

2.3%

2.9%

3.2%

3.9%

7.4%

20.3%

36.6%

0.0% 5.0% 10.0%15.0%20.0%25.0%30.0%35.0%40.0%

Brazil

Japan

Canada

Italy

UnitedKingdom

India

France

Germany

USA

China

1

2

3

Figure 11: Whatare the top threecountries you sourcefrom?


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When the topic moves rom sourcing to mnucturing/ssemly/production, new entrnt mkes the top three list, Meico. Looking t figure 12, lthoughonly 6% o respondents cite Meico s their numer one non-home country

mnucturing loction, urther 8% list it s their numer two

loction nd nother 6% their third. Indi is lso reerenced, utnot s top loction, with only 2% stting it to e their numerone non-home country or mnucturing. almost 7% identiy Indis their numer two mnucturing loction nd just over 7% citeit s their numer three. Chin still emerges s cler leder innon-home mnucturing, ut there is certinly room or dditionlemerging mrkets, with mny pprently hppy to consider Indi orMeico s their secondry or tertiry loctions or owned or contrctmnucture. Wht is surprising, however, is the reltive senceo emerging economies oten discussed s potentil winners in glol supply chin. among those less prominent thn epected

were Poland and Hungary, neither of which made the top ve as arst, second or third favourite for non-home country manufacturing.Even more surprising ws the sence o brzil, which does noteven mke the top seven.

Chin stillemerges s cler

leder in non-home

mnucturing, ut

there is certinly

room or dditionl

emerging mrkets,

with mny pprently

hppy to considerIndi or Meico

Figure 12: What are the top three non-home countries you manufacture / assemble / produce in?

7.2%

2.1%

4.1%

2.1%

4.1%

4.5%

5.8%

6.2%

7.2%

8.2%

6.7%

3.6%

2.2%

1.7%

1.3%

3.6%

8.1%

5.3%

6.7%

15.6%

1.9%

2.1%

2.4%

2.6%

2.8%

4.0%

6.0%

7.6%

9.9%

34.5%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

India

Canada

Brazil

Poland

Hungary

France

Mexico

Germany

USA

China

1

2

3


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18 SCM World 2011


Design ctivities which, s noted ove, re still r less likely to hppenrod, re nonetheless incresingly eing done wy rom the hedqurter

loction. figure 13 shows tht the countries winning usiness on this dimensioninclude the USa, Chin nd Indi, ech o which sees dozens o compnieslocting sustntil design work within their orders, ut lso Germny ndthe United Kingdom. This group o countries ws consistently mong thetop ve cited as a number one, two or three location for design work, withthe USa nd Chin essentilly tied t the top nd the United Kingdom ndGermny tied in ourth plce. One oservtion this dt suggests is thtglolistion is in ct reching pst the trditionl imge o looking or lowcost labour. While some design work can be classied as low-cost labour(in prticulr things like CaD support in Indi nd design ctivity or ODMelectronics usinesses in Chin) it is ir to ssume tht relince on designersin Germny, the United Kingdom nd the USa is sed on something otherthn chep wges. Erning surprisingly little respect rom respondents werethe countries of the former Soviet sphere of inuence, where only Poland,Hungry nd Czech Repulic received meningul mention, while Russi wsnot cited t ll s top three design loction. It is pprent tht strongengineering eductionl oundtion is not enough to drive usiness in theglol supply chin.

3.9%

3.4%

2.8%

1.7%

2.8%

7.3%

7.9%

9.0%

0.6%

11.2%

2.6%

2.2%

2.2%

2.2%

3.1%

7.5%

6.6%

10.5%

21.5%

9.6%

2.4%

3.4%

2.7%

3.0%

3.9%

6.6%

6.6%

10.2%

17.7%

18.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0%

Italy

Japan

Canada

Netherlands

France

UnitedKingdom

Germany

India

China

USA

1

2

3

Figure 13: What arethe top three non-home countries your

design work is in?


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1.7%

2.6%

4.9%

3.2%

7.%

11.0%

3.2%

9.0%

13.1%

5.2%

4.6%

2.%

4.4%

3.1%

10.3%

10.%

5.7%

5.7%

13.1%

6.9%

0.4%

1.6%

2.0%

2.3%

3.6%

5.7%

6.4%

10.7%

11.4%

31.4%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0%

India

Russia

Japan

Brazil

France

UnitedKingdom

Canada

China

Germany

USA

1

2

3


Supply chin strtegies imed t selling outside the home country shouldreect market attractiveness. Unsurprisingly, the worlds biggest singlemrket, the USa, ws r nd wy the top choice or compnies numerone destintion or selling nd distriution ctivities. Eqully predictle is

tht Germny, frnce nd the United Kingdom ll show up close to thetop s delivery trgets or supply chin strtegists. Emerging mrkets,however, lso eture prominently mong non-home countries high on theradar of supply chain strategists. China is identied as the number one non-home country mrket or lmost 11% o respondents nd numer two orthree or n dditionl 13% (see figure 14). but Indi, which ws rrelymentioned as a top market, was nonetheless identied as a second or thirdmost importnt mrket y 6% o those surveyed. brzil shows in virtulded het with Jpn s trget mrket, nd even Russi which sw notrction s supply prtner, ws mong the top ten trget mrkets mongour survey respondents. The much discussed bRIC countries re clerly s

engged in this incresingly connected glol supply chin s the developedcountries nd it is y no mens mtter o chsing low cost lour roundthe world.

Figure 14: Whatare the top threecountries you sell /deliver to?

The much discussed bRIC countries re clerly s engged in this

incresingly connected glol supply chin s the developed countries

nd it is y no mens mtter o chsing low cost lour

round the world


20/47


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21 SCM World 2011


The story or supply chin proessionls considering bRIC countries or

mnucturing is essentilly the sme s we see in sourcing. figure 16revels tht Chin nd Indi hve sustntil cost dvntges nd, lthoughBrazils reputation for quality is signicantly better than that of India, theoverll ttrctiveness o these loctions clerly vours the IC in bRIC.

Emerging mrkets re more thn ull prtners in the glolistion o supplychin, driving huge swings o ctivity wy rom home countries in serch ocost advantages and specic skills abroad. Not all emerging economies arecreted equl, however, with cler leder in Chin nd st pprochingchallenger in India. What may nally close the loop in global supply chainsis the incresing importnce o emerging mrkets s sles nd distriution

trgets or compnies. Russi my e loser on the supply side ut itsppel s n end mrket will open doors or suppliers in tht country tocompete or slice o the pie.

Figure 16: From a manufacturing perspective, average rating out of 5 against the following criteria(1=poor, 5=excellent)

2.63

3.13

2.6

2.51

3.1

2.43

4.06

3.76

2.5

2.7

0 1 2 3 4 5

SouthAfrica

China

India

Russia

Brazil

Cost

Quality


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Over 80% o supply chin eecutives report selling nd shipping toemerging mrkets with lrge portion 38% o the totl syingtht their supply chin strtegies or emerging mrkets re primrilyoriented to selling nd delivering in these mrkets

Design work is less likely to e conducted outside the home country,with over hl o the respondents sserting tht less thn 10% odesign work is eecuted rod

Not only re most compnies selling nd delivering sustntil mountso usiness outside their home country, ut the portion reporting n

increse over the lst yer equtes to pproimtely ten times theshre tht reports decrese

Chin emerges s the leder in terms o sourcing, with nerly 37% orespondents nming it their numer one non-home priority

With regrd mnucturing/ssemly/production, Meico is on the rises non-home country, with 6% citing the ntion s their numer oneloction, 8% s their numer two loction nd 6% sserting Meico stheir third most importnt oreign mnucturing country


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SUSTaINabILITY


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24 SCM World 2011

SUSTaINabILITY

Sustinility hs ecome new ttleground o supply chin competitiveness,with high prole initiatives recently taken by the likes of Wal-Mart and Nike to take

sustinility perormnce o the supply chin to higher level. Sustinilityoten includes oth environmentl responsiility nd socil responsiility; theormer reerring to control nd continment o the cron ootprint, energyusge nd pollution o the supply chin, nd the ltter ocusing on the helth,sety nd tretment o lour, s well s contriuting to the well-eing olocl communities. Indeed, Wl-Mrt hs discovered tht, lthough there repotentilly gret svings to e gined rom sustinility eorts internlly, thepotentil is much greter with their etended supply chin.

To wht etent is sustinility prt o supply chin mngements DNa? Whtre the sources tht drive compnies sustinility eorts? Do we see sustntildierences in the environmentl versus socil dimensions o sustinility?

Wht hve een the results nd wht is the uture outlook?

Just s mny ig inititives in supply chin improvement, the strongest drivingorce o sustinility inititives derive rom top mngement; nmely, seniormngement nd the ord, with figure 17 reveling tht 65% o respondentschrcterise pressure rom senior mngement nd the ord s the source otheir sustinility eorts. Hving top mngement s the source oten menstht the support o top mngement is lso in plce, which is importnt or thesuccess o such eorts. The second source o sustinility eorts is pressurerom customers (46%), ollowed y pressure rom government (35%). The roleo ctivists nd similr stkeholders, nd o leding suppliers, tends to e smll.In this dynmic mrket, mny compnies eel pressure rom customers nd the

government to py ttention to sustinility, ut it is even more oten the csethat top leaders of rms see the need and lead the efforts themselves.Why would the ord, s the top leder o compny, push or sustinility?

Figure 17: How would you characterise the source of your sustainability efforts?

11.2%

16.2%

35.0%

45.7%

65.0%

0.0%10.0%20.0%30.0%40.0%50.0%60.0%70.0%

Pushbysomeleadingsuppliers

Pressurefromac8vistsandsimilar

stakeholders

Pressurefromgovernment

Pressurefromcustomers

Pressurefromseniormanagement

andboard


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25 SCM World 2011

It turns out tht the overwhelming mjority (75%) is concerned with creting positive customer imge nd enhncing rnd equity see figure 18.Interestingly, some compnies re directing their sustinility eorts due tocustomer pressure directly, while mny more due to top mngement. but thereson or such direction t ord-level lso lies in positively winning customers

through rnd imge. However, mny respondents (42%) lso eel tht theord is concerned with sustinility in order to stisy government regultions,pursuing sustinility due to governmentl pressure directly or indirectly. Ingenerl, compny ords pper very sensitive to vriety o sources thtrequire them to pursue sustinility: to end o shreholder or eternl PRconcerns; to ensure no disruption o supply; to ensure return on investmentthrough cost svings; nd to deliver return on investment through slesincrease. However, the most signicant underlying forces that drive companiessustinility eorts re customer pressure nd imge or government pressurend regultions, which then result in top mngement leding such eorts.

The Si Sigm process cycle is good rmework or us to look t when consideringthe sustinility eorts o compnies. Just like qulity improvements, the SiSigm process clls or the Mesure, Identiy, anlyse, act cycle. firstly, it isnecessry to mesure the chrcteristics nd qulity o the process in orderto gauge any errors, which can then be identied and resolved. This is theundmentl pproch or qulity mngement nd, similrly with sustinility,we hve to strt with mesurement. O course, it goes without sying thtperormnce mesurement is not useul i it is not used y mngement, so this

is out mngement hving visiility over perormnce mesures.

SUSTaINabILITY

Figure 18: What is your judgement of your boards view on sustainability?

22.0%

30.1%

30.5%

32.0%

42.2%

75.0%

0.0% 10.0%20.0% 30.0%40.0% 50.0%60.0% 70.0% 0.0%

TofendoffshareholderorexternalPR

concerns

Toensurenodisrup8onofsupply

Tohavereturnoninvestmentthroughsales

increase

Tohavereturnoninvestmentthroughcost

savings

Tosa8sfygovernmentregula8ons

Tocreateposi8vecustomerimageand

enhancebrandequity


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26 SCM World 2011

Indeed, a signicant majority puts performance visibility measures in place, with75% o respondents climing they hve visiility o environmentl sustinilityperormnces (figure 19), such s violtions o environmentl stndrds orgovernment regultions cross their internl opertions. 77.3% hve visiility

o the cron ootprint cross their internl opertions, while 76.1% hve similrvisiility o their socil sustinility mesures, such s violtions o lourcomplinces cross their internl opertions. There is thereore strong senseof success regarding the rst step of the Six Sigma process for sustainabilityeorts cross internl opertions.

New mesureSystem updteStructurl correction

TrckingVisiilityaccessiility

Resolution eecutionCommuniction

Restortion to in-control

Wht is out o control?Wht i scenriosDignosis/Root cusenlysis

SUSTaINabILITY

Six Sigma Improvement Cycle

Mesure

anlyse

Identiyact

27.%

27.5%

26.4%

29.0%

24.1%

30.1%

75.0%

77.3%

76.1%

0.0% 10.0%20.0%30.0%40.0%50.0%60.0%70.0%0.0%90.0%

QocialsustainabilitymeasuresBsuchasviola8ons

oflaborcompliance)

Carbonfootprintmeasures

QustainabilitymeasuresBsuchasviola8onsof

environmentalstandardsorgovernmentregula8ons)

Internally

Immediatesuppliers

Extendedsuppynetwork

Figure 19: How do you gain visibility of ?


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However, on nlysing visiility eternlly cross immedite suppliers or theetended supply network, it is dierent story. There is r greter concernregrding violtions o environmentl stndrds, government regultions orlour complinces, with figure 20 highlighting tht only 19-30% hve visiilityover such mtters. additionlly, most respondents do not hve visiility over

immedite suppliers or the etended network regrding cron ootprintviolations either. This represents a signicant vacuum and, although it probablyrequires much greter eort to gin such visiility compred with internlopertions, it is the eternl environment which potentilly represents the mostvulnerle prt o the overll supply chin. Compnies thereore need to work onthe visiility o the etended supply chin to even egin the Si Sigm processcycle or sustinility.

The second step of the Six Sigma process cycle is identication, which requiresmonitoring systems to check, veriy nd vlidte perormnce mesures nd, ineect, turn visiility into monitoring process. Similr to visiility, round 80%

o respondents re monitoring their internl opertions with respect to violtionsin the environmental and social front, as well as carbon footprints. Signicantlyless (etween 20-29%), however, re monitoring immedite suppliers or theetended supply network on such mesures. Once gin, lrge vcuum eists.

Once errors are identied and assignable causes and opportunities are analysed,the qulity improvement process then moves to the act step, where ny ultsare resolved, process modications are made and products are potentiallyredesigned or qulity improvement. Unortuntely, compnies sometimes ilto ct in mking such necessry sustinility investments. Respondents wereinvited to describe the obstacles by rating them on a scale of one to ve, withve being the most valid. Figure 21 illustrates that the three top barriers to

action are: a lack of resources (45% with rating of four or ve); no measurablereturns (45%); nd lck o customer cre nd price pressure (42%). To lesseretent ppers the lck o knowledge nd epertise to pursue improvementprojects (35%).

SUSTaINabILITY

19.7%

19.9%

21.%

22.9%

2.%

27.%

1.6%

1.0%

79.1%

0.0% 20.0% 40.0% 60.0% 0.0%100.0%

Socialsustainability

measures(suchas

viola8onsoflabour

compliance)

Sustainability

performance

measures(suchas

viola8onsof

environmental

standardsor

Carbonfootprint

measures

Internally

ImmediateSuppliers

Extendedsupply

network

Figure 20: How have youimplemented monitoringsystems in place ?


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It hs een oserved tht, with customer pressure directly or indirectly,compnies rect y moving orwrd with sustinility eorts, either directly orthrough top mngement ledership. but the reverse is lso true. When there islck o customer pressure, sustinility eorts cn stll. In order or compnies

to mke concrete steps in implementing sustinility projects, the right level oresources has to be there and a clearly quantiable measure of returns shouldlso e in plce.

In supply chin sustinility, the need to ct oten requires working withsuppliers or improvement. Such orm o supplier collortion in turn requiresoth sticks nd crrots. Regrding the sticks, compnies pper to rect

to supplier reches in sustinility stndrds y wrning nd then tkingpunitive ctions, while some ct even more promptly without wrning. Wrningor not, figure 22 shows tht most compnies use reduced usiness s thestick (73% would reduce usiness ter wrning nd 56% would reduceusiness without wrning), while some ct even more drsticlly, termintingthe usiness reltionship with suppliers (36% ter wrning nd 42% withoutwrning).

Very few companies use monetary nes as a means to penalise suppliers (12%with our without wrning). Indeed, the impct o sustinility reches is otennot something that one can measure nancially. This could explain why fewcompanies use monetary nes as a means to pressure suppliers (which couldlso hve the dded eect o setting precedent or other suppliers). Indeed,ced with the risk o reduced usiness or termintion o reltionships, suppliersre r more sensitive to the pressure rom customers on sustinility. Thisctully gives urther credence to the oservtion erlier tht mny compniespursue sustinility due to direct or indirect push y customers.

SUSTaINabILITY

Figure 21: What do you see as the major obstacles on sustainability investments?

13.0%

7.5%

14.6%

4.7%

3.9%

12.6%

32.1%

27.5%

27.%

21.3%

1.2%

32.3%

2.6%

33.6%

2.0%

36.5%

29.2%

27.6%

16.3%

1.5%

19.9%

23.2%

24.5%

14.%

10.1%

12.%

9.7%

14.3%

24.3%

12.6%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

Lackofresources

Lackofknowledgeandexper8seto

pursueimprovementprojects

Customersdonotcareandprice

pressure

Supplierresistance

Internalresistance

Nomeasurablereturns


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29 SCM World 2011

41.9%

35.5%

55.9%

72.7%

11.7%

12.5%

0.0% 20.0%40.0%60.0%0.0%

Nowarning.Immediate

ac8ontaSenas

Warningfirst,followed

byMonetaryfines

Reducedbusiness

Immediatetermina8onof

businessrela8onship

7.6%

21.5%

31.6%

43.6%

47.7%

66.3%

0.0% 10.0%20.0%30.0%40.0%50.0%60.0%70.0%

Pricepremiums

\eertermsandcondi8ons

Publicrecogni8on(similarto"Qupplierof

theYear")

YouinAestintrainingandeduca8on

Increasedbusinessengagements

Preferredsupplier(priorityforfuture

business)

figure 23 revels how compnies hve lso used vriety o incentives to serves crrots or sustinility improvements. Stronger usiness reltionships

in the orm o preerred supplier sttus or incresed usiness enggementsre the positive incentives tht most compnies seem to use (66% nd 48%respectively). Other positive incentives include: supporting suppliers withinvestment in trining nd eduction (44%); pulic recognition (similr to Supplier o the Yer awrd- 32%); nd improved terms nd conditions (21.5%),while very ew use price premiums s n incentive (8%). It is interesting thtcompanies neither like to use direct monetary nes nor monetary rewards forsticks nd crrots.

SUSTaINabILITY

Figure 22: If suppliers arefound to have breaches insustainability standards, whatare the penalties?

Figure 23: What incentives do you put in place to support sustainability improvements of your suppliers?

The most eective mens is still to pressure suppliers throughusiness volumes or termintion o the usiness reltionship


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30 SCM World 2011

.4%

5.9%

12.2%

7.7%

1.3%

23.9%

2.6%

35.2%

23.1%

26.1%

34.2%

36.1%

29.9%

34.4%

20.3%

1.3%

17.3%

13.%

19.2%

13.5%

15.2%

12.0%

.9%

15.6%

21.%

0.0% 5.0% 10.0%15.0%20.0%25.0%30.0%35.0%40.0%

ZeworimproAesalesopportuni8es

Qupplierrela8ons


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SUSTaINabILITY

Figure 25: What is the future outlook on sustainability efforts? (1=signicantly reduce efforts, 3=no change,5=signicantly increase efforts


Sixty ve per cent of respondents characterise pressure from seniormngement nd the ord s the sources o sustinility eorts

a mere 19-30% hve visiility over immedite suppliers regrding

potentil violtions o environmentl stndrds, governmentlregultions or lour complinces

Most compnies use reduced usiness s penlty or supplier recheso stndrds, with 73% sserting they would reduce usiness ter wrning nd 56% doing so without wrning

as mens o incentivising suppliers, 66% o respondents oerpreerred supplier sttus s usiness reltionship while 48% oerthe prospect o incresed usiness enggements

16.0%

11.%

11.0%

1.%

16.1%

34.7%

3.9%

40.6%

37.5%

46.%

40.0%

39.7%

41.0%

36.1%

31.9%

6.7%

7.%

6.2%

5.2%

3.4%

2.6%

1.%

1.2%

2.4%

1.%

0.0% 5.0%10.0%15.0%20.0%25.0%30.0%35.0%40.0%45.0%50.0%

Customers

Extenesupplynetwork

Immeiatesuppliers

Internalprouctesign

Internalopera8ons

1

2

3

4

5


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TaLENT MaNaGEMENTaND SKILLSDEVELOPMENT


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Much discussion has centred on the topic of supply chain talent of late; how to ndit, develop it nd retin it. Underlying much o the tlk is n implicit ssumption

tht todys supply chin proessionl needs r more generl usiness cumenthn the mterils mngement technicin o old. To understnd how rel thisprolem is, nd where meningul chnge might e possile, respondents weresked series o questions out wht types o skills re vlued, how they reidentied and managed and whether there are any consistent weak points in thesystem o people development tht eeds our proession. The net tkewys retht institutionl skill development is severely lcking not only on the jo utlso prior to ny hiring decisions, while prolems re most cute t the middlemngement level.

Supply Chain Talent Gap

The rst question asked whether talent acquisition and development is trulya problem and, if so, how serious. Figure 26 clearly conrms that there is aprolem, with over 90% o respondents clling it t lest n importntchllenge. Interestingly, the portion who descried tlent cquisition nddevelopment one o their top chllenges ws our times the percentge syingthat it was not a problem. Considering how many re drills the typical supplychain professional faces on a daily basis, it seems signicant that over a thirdof those surveyed classied stafng as such an important challenge. This datasuggests we hve n issue here which, while unlikely to e s urgent s thetypicl plnt or shipping emergency, is nonetheless perceived to e o gretimportnce.

TaLENT MaNaGEMENT aND SKILLS DEVELOPMENT

Figure 26: The acquisition and development of supply chain talent in your organisation is

8.6%

34.9%

56.5%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Notachallenge

Oneofyourtopchallenges

Animportantchallenge


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To the question o whether this prolem is worsening, the dt indictes cler, leit not overwhelming, trend to the negtive. figure 27 not

only shows tht 22% o respondents elieve the issue to hve ecomemore o chllenge over the pst three yers ginst 14% who syit hs ecome esier, ut tht the mjority (63%) descrie it s perennil prolem. It is likely tht depressed economic conditions since2008 hve sotened the jo mrket or supply chin proessionls sthey hve elsewhere, which my eplin the portion o compniesciting esier tlent cquisition recently. With this cvet in mind, itseems signicant that more nd hiring to have actually worsened thanesed. as the economy reignites, one wonders whether this gp willegin to relly hurt.

Digging into the liecycle o tlent mngement oers some clues s to wherewe hve our iggest chllenges. finding tlent up-ront is cler pin point,

with 17% o respondents rting this tsk s most chllenging. Things pperto e less prolemtic with those lredy on ord where, developing tlentnd mesuring nd dierentiting skills is incresingly esy. Where the liecycleo tlent gin poses mngement prolems is with creer progression.Respondents fairly decisively dened offering talented staff a compelling careerprogression s their iggest overll chllenge. following this pressure point,mny lso ound retining tlent to e n issue. One impliction o this dt istht personnel development procedures in supply chin orgnistions my stille tuned to ringing on ord nd mnging technicl skills rther thn roderusiness skills. This hypothesis might eplin the reltive ese o mesurementnd sic development, s trditionl skills dominte the erly prt o typiclsupply chin creer, ut then rek down s responsiilities roden to includeusiness decision mking.

Figure 27: The acquisition and development of supply chain talent has

personneldevelopment

procedures in supplychin orgnistions

my still e tuned to

ringing on ord nd

mnging technicl

skills rther thn

roder usiness

skills


14.8%

22.1%

63.1%

0.0% 10.0% 20.0%30.0% 40.0% 50.0% 60.0%70.0%

Becomeeasiernowthanthreeyears

ago

Becomemoredifficultinthepastthree

years

Alwaysbeenachallenge


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This hypothesis is urther supported y dt rom nother question whichsked where in the reporting hierrchy o orgnistions the chllenge o tlentmngement is most prolemtic. as figure 28 highlights, 39% o respondentsselected mid mngement s the point t which tlent mngement is mostdifcult. Only 17% said the issue was worst at senior management level and a

mere 7% elt the prolem ws worst t entry level. It is thereore evident thtrespondents encounter n impsse chieving creer progression t tht pointwhere sic skills re no longer enough ut senior uthority hs not yet eengined. Not only is the oering o compelling creer progression prolem,but general management of talent at this crucial juncture is also difcult. Thesepeople re o course the most ctive in intercting with outsiders, includingcustomers nd suppliers, s well s cting s mentors nd cretkers or these o the orgnistion.

an interesting ngle lso involves the sophistiction o supply chin proessionlsoutside the orgnistion with whom proessionls need to collorte, whetherthey e suppliers, service prtners or customers. ater ll, much o wht supplychin wrestles with is inter-enterprise collortion. The dt indictes moretroule with customers nd mterils suppliers thn with service providers. Itis hrdly surprising tht service providers re reltively well in this ssessments so mny strive to oer solutions to their customers, ut the gp is, inything, smller thn one might epect. also surprising is the virtul tie in

the dt etween mterils suppliers nd customers. Customers, one couldssume, might epect more o the urden or collortive prolem-solving toll on suppliers. The dt, however, shows little dierence. It is possile thtsuppliers still see themselves more nrrowly thn their own mrketing pitchestypiclly clim.

Figure 28: Talent management is

Respondents encounter n impsse t the point where sic skills

re no longer enough ut senior uthority hs not yet een gined


7.4%

17.4%

36.2%

39.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

Moreofaproblematentrylevelposi8ons

Moreofaproblematseniorleadership

posi8ons

Similaracrossalllevels

Moreofaproblematmidlevelfunc8onal

posi8ons


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Filling the Gap Sources of Talent

One remedy to the problem of nding talent might be to look for externalmrkers o skill tht could relily e used to screen wider pools o recruitment.four ctegories o such eternl mrkers were put orwrd to respondents:

Professional Associations providing certication such as APICS, ISM orSupply Chin Council

Universities, grdute or undergrdute

Previous professional experience, specically in industry

Previous professional experience, specically in consulting

The ggregte dt shows strong preerence or proessionl eperience withinindustry. an overwhelming 54% descried this s the most useul eternlmrker or tlent (see figure 29). The gp etween industry eperience ndthe second most vlued mrker, university degree, ws huge. It is cler thtsupply chin orgnistions would rther uild their tems with rw mteriltken rom competitors thn try to uild it rom scrtch with generl supplychin skills. University pedigree nd consulting ckground scored resonlywell cross the reserch smple, with slight edge to university trining s second screen ter industry eperience.

Figure 29: Please rate the following external markers of talent (1=least valuable and 5=most valuable


13.3%

54.1%

12.4%

6.6%

35.%

3.1%

45.3%

25.1%

34.0%

5.9%

32.5%

41.4%

12.0%

1.5%

7.%

19.1%

4.%

0.4%

1.9%

7.7%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%

Professionalexperience,consul8ng

Professionalexperience,industry

Universitydegrees

[ssocia8oncer8ca8onB[PLCS,LSM,

SCCetc)

1

2

3

4

5


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The most surprising nd telling inormtion comes rom the dt or ssocitioncertications. These entities, many of which have been established for decadesand which generally have thousands of paying members, are specicallychrtered to dvnce proessionl skills. They re, in ct, ment to solvethe tlent mngement prolem or oth the employer nd the employed yproviding training, testing and certication against a raft of traditional technicalsupply chin mngement skills. Despite this, respondents decisively rtedassociation certication at the bottom of the stack. The explanation for this poorshowing may lie in the governance of most of these bodies. Many are non-protorgnistions run y ords with smll numer o proessionl dministrtorsor permnent st. Their decision mking process is thus somewht politiclnd cn e slow. It is possile tht chnges ecting the proession re onlygrdully working their wy into the mission nd curricul o these orgnistions.Whtever the cuse, it is pprent tht ssocitions which should e prticulrlyuseul or mid-creer proessionls re missing the mrk.

We lso wnted to get some ide o which ssocitions, universities nd consultingrms provided the best hunting ground for talent. Respondents were asked tonme the top three o ech, in order o preerence, nd lthough the dt is yno means scientic, it does offer some idea as to the leading institutions. Figure30 revels tht t the top o the list re two universities with estlished supplychin progrmmes s well s top tier usiness schools: Stnord nd MIT, otho which lso hve strong engineering schools nd estlished supply chinreserch progrmmes. Michign Stte University lso scores very well with21 total mentions by respondents, including 10 as a rst preference. Harvard,which lcks the engineering se common to most o the schools on the list,scores well, perhps ecuse o its strong nd lrge Mba progrmme, while

Craneld, Penn State and Arizona State all appear frequently in the research,presumly ecuse o their dedicted supply chin unctionl depth. Roundingout the 10 etured here re Cmridge University, INSEaD nd Michign, noneo which cn e sid to e specilists in supply chin ut ll o which hvedeep, estlished progrmmes with strength in some comintion o usiness,economics nd engineering.


2

4

2

5

8

2

4

0

5

3

2

1

3

4

8

4

7

11

7

7

4

5

3

2

5

7

7

10

10

17

0 2 4 6 8 10 12 14 16 18

INSEAD

Univ.ofMichigan

Cambridge

ArizonaState

PennState

CranfieldSchoolofManagement

Harvard

MichiganStateUniversity

MIT

Stanford

#1

#2

#3

Figure 30: Please indicate your top three University preferences


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0

0

3

20

18

16

2

1

3

27

18

35

5

9

9

14

15

87

0 20 40 60 80 100

CILT

CPSM

CIPS

ISM

SCC

APICS

#1

#2

#3

among the ssocitions, opinions were r more polrised with only three entitiesidentied by large numbers of respondents. As can be seen from Figure 31, by

far the most commonly cited number one preference for certication bodies wasAPICS. APICS is ofcially the Association for Operations Management, althoughthe cronym originlly stood or americn Production nd Inventory ControlSociety. bosting over 40,000 memers, this ody hs een in eistence or overfty years with a mission to educate supply chain professionals. It was cited asthe numer one choice 87 times, sustntilly more thn the second nd thirdmost common top choices; Institute or Supply Mngement (ISM) nd theSupply Chin Council (SCC). In ct ll other nmed ssocitions outside o thesethree ccounted or only 71 totl mentions s top choice. The concentrtion oopinion round these three held or second nd third preerred ssocitionsmong respondents. Wht is cler rom the dt is tht aPICS, s well s ISMnd SCC, re well known nd well regrded. Wht is prolemtic, however, is

the poor stte o stisction mong the very individuls these odies re mentto serve; tht is, mid-creer proessionls needing skill development.

Previous eperience with consulting orgnistions should indicte somemilirity with conceptul models o supply chin, technology enlementnd other importnt skills like chnge mngement, project mngement ndgovernnce. as such, consulting ckgrounds oer mrker or some skills thtare generally hard to nd elsewhere. Looking at Figure 32, Accenture featuresprominently, achieving the most mentions as rst, second or third preferenceconsultncy mong hiring supply chin orgnistions. following closely wereMcKinsey nd SaP.


Figure 31: Pleaseindicate your topthree Associationcertication

preferences


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The story of these top three consulting rms as markers of talent is reective ofthe wider challenge playing out in the supply chain talent discussion. SAP is rstnd oremost sotwre compny selling nd instlling ERP (Enterprise ResourcePlnning) systems to thousnds o compnies round the world. Consultntsrom SaP should ring deep knowledge o technology enlement, usinessprocess design nd project mngement; skills tht ssume sound usiness

strtegy eists eore process nd system design commences. McKinsey on theother hand is the quintessential strategy consulting rm with general businessepertise uilt on the ck o thousnds o Mbas round the world. Consultntsrom McKinsey work on the ssumption tht someone will ollow their strtegicdvice with pproprite technicl pluming. accenture tops this list perhpsin prt y virtue o its sheer size, ut lso ecuse it promises to ring othstrtegy nd technology in equl mesure to its clients. The wider supply chintlent chllenge is ll out uilding usiness vlue on technicl oundtion.This list of consulting pedigree preferences reects that aim. Looking at the otherrms receiving frequent mentions from our respondents, one sees the same mixo skills implicit in these well known nmes: IbM, Deloitte, aT Kerney, Orcle,bCG, KPMG nd PRTM.

Figure 32: Please indicate your top three sources of professional experience by consultancy


2

2

4

2

0

7

7

5

2

7

3

3

2

4

1

7

6

7

4

10

3

3

3

4

5

7

8

13

17

1

0 5 10 15 20

PTM

KPMG

BCG

Oracle

ATKearney

Rel9ie

IBM

SAP

McKinsey

Accenture

#1

#2

#3


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Essential Supply Chain Skills

When someone hers the term supply chin, some immeditely think logisticsnd trnsporttion, while others think sourcing nd procurement. aPICS, sdiscussed ove, csts the net more widely to encompss opertions, termtht is oth estlished yet vgue. Survey respondents were sked to identiyspecically which skills are essential, which are nice to have and which are not

prt o supply chin t ll. The model pplied to this eort ws theeleven sttion supply chin tlent model developed nd pulished yaMR Reserch severl yers go nd mintined with the help o group o prctitioners rom industry nd y tem o reserchers tGrtner. This model includes seven unctionl skills rnging rom theovious (pln, source, mke, deliver) to the emerging (new productdevelopment nd lunch, customer mngement, post-sles support)s well s our enling skill sets (governnce, chnge mngement,perormnce mngement nd technology enlement).

at the ggregte level, the dt shows discipline in trnsition with lrgepercentges o responses citing s essentil the our core skills o supplychin: pln, source, mke nd deliver. figure 33 revels tht, mong these our,plnning cme top with 85% o respondents identiying this skill s essentil.This is no surprise s supply chin orgnistions, whether ll-encompssing withthousnds o direct reports or shred service overly with only hndul o st,must invrily provide the core demnd orecsting, inventory plnning ndproduction scheduling skills needed to coordinte orders cross the usiness.Only 1% o respondents went so r s to sy the plnning is not prt o supplychin. Plnning, it seems, is the nucleus round which the modern supply chinproessionl is uilt.

Plnning, itseems, is the nucleus

round which the

modern supply chin

proessionl is uilt


17.6%

2.1%

64.%

77.4%

52.4%

6.%

5.0%

47.7%

0.5%

76.4%

37.1%

60.5%

49.1%

27.6%

19.4%

3.2%

2.0%

13.%

47.9%

17.3%

20.%

52.2%

21.9%

22.%

7.6%

3.2%

9.3%

3.2%

1.2%

4.4%

2.2%

2.%

10.6%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 0.0% 90.0%

NPDL

Post-salessupport

Customermanagement

Deliver

Make

Source

Plan

Technologyenablement

Performancemanagement

Changemanagement

Governance

Notpartofsupplychai

Nicetohave

Vssen8al

Figure 33: Pleaseidentify the skills youconsider essential, niceto have or not part ofthe supply chain withinyour organisationstalent management


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adjcent core skills like delivery nd sourcing re generlly considered essentily the gret mjority, suggesting tht the most stripped down version o

modern supply chin proessionl is someone who cn pln mterils movementoth inound nd outound. Mke, term derived rom its igger rothermnucture, remins something tht supply chin still, occsionlly t lest,does not control. Over 9% o respondents went so r s to sy tht this is noteven prt o supply chin. Other reserch hs shown tht mnucturing isstedily moving under the swy o the wider supply chin nd our dt doesindeed sy tht over hl o respondents consider mnucturing n essentilskill, ut still orgnistionl structure seems to stnd in the wy o true end-to-end ow of materials from upstream source to ultimate customer delivery.

Customer mngement, in ct, my e one o the most importnt rekthroughsevident in the data, identied by almost 65% of respondents as essential.

The implictions o this very strong preerence or customer skills include notonly grdution o supply chin rom its heritge s pure cost centre, utlso n ppetite or understnding demnd s driver o the entire supplychin. In contrst, lesser weight ws ssigned to the two other unctionl skillstht round out complete nd closed loop supply chin: post-sles support;nd new product design (NPDL) nd lunch. Despite the ct tht customersatisfaction and retention certainly drive repeat buying and protability, only28% o respondents elt this skill ws essentil to supply chin. Worse still,NPDL, which llows ll unctions chnce to lern nd improve with itertivetrips through sourcing, rmping, delivering nd retiring genertions o product,ws regrded s not prt o supply chin more requently thn it ws clledessentil. Supply chin proessionls re epected to lern rom customers, ut

pprently not rom the ull liecycle o the products they mke nd deliver.

A key nding in the data points to the high value placed on enabling skills,especilly perormnce mngement nd chnge mngement. Tht theseskills are considered essential by four fths of respondents clearly indicates thatmost supply chin orgnistions see their plce in the compny s driver ostrtegy, not merely support or the usiness. Even technology enlement,a function with a clear owner in the ofce of the Chief Information Ofcer, isviewed s essentil y nerly hl o the popultion nd nice to hve y themajority of the rest. These skills are not easy to nd in technical training coursesand certication programmes, especially when combined with business strategynd process design.


That these skills are considered essential by four fths ofrespondents indictes clerly tht most supply chin orgnistions see

their plce in the compny s driver o strtegy, not merely support

or the usiness


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Managing the Talent You Have

Reclling tht mesuring nd dierentiting tlent ws the lest chllengingphse o the tlent liecycle, dt on pproches to metrics shows degree osophistiction tht is encourging. almost two thirds o respondents sy they useoth qulittive nd quntittive mesures to mnge their people. Consideringthe importnce plced on skills sometimes regrded s sot like chngemngement, it is no surprise tht qulittive mesures mtter. O course,trditionl core skills like plnning nd delivery lend themselves to quntittivemetrics like orecst ccurcy or on-time, in-ull delivery. I nything, the isin vour o qulittive mesurement in the results suggests supply chin tlentmngement is resistnt to the tempttion to reduce perormnce to the purelynumericl stndrds so esy to come y in much o the dily work o supplychin.

beyond mesuring tlent, lrge mjority is willing to invest in trining nd othereduction to try to uild it. figure 34 illustrtes tht only 2% o respondentsdmitted to spending no money while 16% sy they spend over 5% o the ullyloded cost o personnel on trining. The overll verge spend on triningappears to be at least 3% of personnel expenses which is signicantly morethn the cost o n occsionl online course or group workshop. Mngementppers prepred to put their money where their mouth is on this mtter ndlrgely on ith.

Figure 34: How much, as a percentage of fully loaded cost, do you spend on training / skills development / externaleducation?


16.0%

42.1%

39.9%

2.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0% 45.0%

5%+

2-5%

0-2%

Zero


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as figure 35 highlights, the percentge o respondents who trck perormnceimprovement ollowing trining s n ROI mesure (22%) is dwred y the

portion tht doesnt mesure ROI t ll (60%). Tlent development, it seems,is worth pying or.

Coming ull circle on the tlent liecycle lso clls or look t wht hppens whentlent is lost. We sked our respondents to rnk, in order o severity, the prolemsthey face when talent walks out the door. The ndings point to an increasingrole or supply chin s source o strtegic vlue to the competitiveness ocompnies. Lest worrying y wide mrgin ws lost production, something thtshould rise to the top in low skill domin where replcement st re redilyville ut work stoppges hurt. More concerning ws lost product intellectulproperty, suggesting tht supply chin personnel re prt o mking the producta success and able to inict some damage if they walk away with that skill. Stillhigher rnking s concern ws the cost o trnsition to replcement. Skillspprently re not so esily cptured in mnul nd hnded rom person to

person. The top concern, however, sys it ll: lost process intellectul property.Coupling this nding with data on preferred markers of talent for new hires(industry eperience domintes) nd the strong willingness to invest in triningclerly shows tht top supply chin tlent is prt o the mke-up tht mkes compny successul.

Tlent mngement is priority or supply chin proessionls ecuse the gmeis chnging rom sic set o technicl tsks to n integrted we o usinessand engineering trade-offs. Senior executives nd it difcult to locate theseskills in the mrketplce nd hrder still to hold tem together s knowledgeuilds over the course o creer. Where once there were jos, we now hve proession.

Figure 35: How do you measure ROI on training expenditures?


21.0%

22.0%

57.0%

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 0.0%

Wetrackcomp6e8onu86isa8onrates

Wetrackperformanceimprovementsof

trainedstaff

Wedon't


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Tlent cquisition nd development truly is prolem, with over 90%

o respondents sserting tht it is t lest n importnt chllenge

Twenty two per cent o respondents clim tht tlent mngement hsecome more o chllenge over the pst three yers ginst mere14% who elieve it hs ecome esier

Tlent development ppers to ecome n issue t middle mngementlevel, suggesting a challenge when basic skills are no longer sufcientut senior uthority hs not yet een gined

With n overwhelming 54%, the dt illustrtes strong preerenceor proessionl eperience within the industry s n eternl mrkero tlent



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In his introductory remrks to this report, Pier Luigi Sigismondi reers to theundouted chnging role o supply chin mngement, continuing its journeyas a fully-edged driver of business value. Indeed a crisis like that witnessed inJpn this yer only serves to put this urther into perspective. So with this inmind, it hs proved intriguing to nlyse some o the results grnered during

the course o this study.

Gaining Competitive Advantage through a Value-Driving Supply Chain

Indeed, the discussion surrounding supply chins s driver o vlue ws key part of this years research. Such a notion was given signicantly furthercredence, with 83% of survey respondents rmly believing that supply chainecellence cretes vlue through customer service, leding to customer loylty,while 70% also afrmed New Product Introduction (NPI) as a crucial means ofdelivering tht vlue. With this, we cn sely conclude tht viewing supply chins oundtion o vlue cretion is no longer limited to those more innovtivecompnies nd tht, i your compny still only perceives the supply chin s

mens o reducing operting costs, then you re likely to ll ehind yourcompetitors.

Setting-Up Supply Chains for Growth across Emerging Economies

Evidence of further changing trends in supply chain relates to the ndings onglolistion. Trditionlly, emerging mrkets hve een seen s the menso delivering low cost country sourcing. The emerging economies were wheremnucturers would source rom in order to sell to mture mrkets. However,the dt rom this yers study revels tht this long-estlished picture is nolonger ccurte, with vst mjority o respondents seeing glolistion ndemerging economies s two-wy street: mrkets where you source rom nd,

importntly, sell to s well. Indeed, over 80% o supply chin proessionlsreported selling nd shipping to emerging mrkets, while pproimtely 38% inct sserted tht their glol supply chin strtegy is primrily oriented roundselling nd delivering to these regions.

Enhancing the Corporate Brand through Sustainability

furthermore, when it comes to sustinility, it is widely ccepted now thtsustinility nd Corporte Socil Responsiility (CSR) hve ecome key reo competitiveness nd tht, in turn, the supply chin hs ssumed positionto enhance the corporate brand and deliver further value. The ndings duringthis study highlight the now cemented perception tht sustinility is corevlue driver, with 65% nd 46% identiying senior mngement nd customersrespectively s the vitl source o sustinility eorts. Wht ws n eercisein ticking oes under strict pressure rom regultors nd governments is nown inititive led y senior mngement nd the ord, recognising the positiveimge it cretes or customers nd the susequent vlue this cn generte.

CONCLUSION aND RECOMMENDaTIONS


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Developing Supply Chain Talent into Future Business Leaders

finlly, s the supply chin unction trnsorms rom n opertionl tool toa bona de competitive weapon, the need for a revised skill set across the

supply chin workorce ecomes ever-more criticl. bord-level responsiilities,strtegic decision-mking nd new internl reltionships with other usinessunits symolise the role o the net-genertion supply chin leder nd theemerging crop o tlent must e properly equipped with these necessrycompetencies nd responsiilities. It is thereore unsurprising to oserve tht90% o supply chin eecutives see tlent cquisition nd development s tlest n importnt chllenge. Perhps dding urther weight to the clim liesin the ct tht just under 40% o respondents elieve tlent mngement to emore o prolem t mid-mngement level, suggesting compnies strugglewhen basic skills are no longer sufcient, with more General Manager typeskills now required.

a recurring theme during the study hs een chnge. Tht is, chnge in the roleo supply chin; how it delivers vlue, how it serves new mrkets nd how theskill set is now evolving. Supply chin is now t the oreront o the usiness,serving customers nd delivering top line growth. I your supply chin is notredy to meet these new dynmics, then it is most prole tht your usinesswill ll short in the competitive gme.

CONCLUSION aND RECOMMENDaTIONS


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About SCM World

About E2open

SCM World, RptureWorld compny, is the ledingglol institute or supply chin eecutives. Hosting dynmic nd interctive nnul progrmme o end-usernd cdemic-led weinrs & events or its memers,SCM World is st ecoming the de-cto enchmrk ororwrd-thinking supply chin leders nd their gloltems to sty current through cutting edge content.

Orgnistions rom cross multiple industry verticlsuse SCM World to urther enhnce supply chin lerningnd development, including the likes o HP, Nestle, Tyco,RIM, xero, Nike, GloSmithKline, bter Helthcre,Emerson, Motorol, Levis, The Dow Chemicl Co, baSf,applied Mterils nd mny more.

E2open is leding provider o cloud-sed supplychin mngement solutions. The compny providessotwre nd services tht enle visiility, collor-tion nd control cross lrge trding prtner networks.brnd owners nd glol mnucturers with complesupply chins use the compnys b2b integrtion ser-vices nd supply chin usiness process mngement

solutions to mintin optiml lignment o supply nddemnd or lower costs nd etter service.

E2open customers include The boeing Compny, Celes-tic, Cisco, Dell, Hitchi, IbM, LSI Corportion, Motoro-l, Pnsonic, Reserch In Motion, Segte Technologynd Vodone.

chief supply chain officer r

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