voice of the supply chain leader -- supply chain insights research results (may 2012)

Voice of the Supply Chain Leader

Quantitative Survey of 61 Supply Chain

Leaders from 40 Companies

5/28/2012

By Lora Cecere Founder and CEO

Supply Chain Insights LLC

Copyright © 2012 Supply Chain Insights LLC Page 1

Contents Research. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Research Methodology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2

Executive Overview.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

Supply Chain Leaders Speak . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Supply Chain Leaders Speak about Technology. . . . . . . . . . . . . . . . . . . . . . . 6

Supply Chain Insights Perspective: Future of Supply Chain Technologies. . . . . . . . . 10

The Definition of Supply Chain Excellence. . . . . . . . . . . . . . . . . . . . . . . . . 14

Recommendations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Conclusion. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

Appendix. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

About Supply Chain Insights LLC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22

About Lora Cecere. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22


Research This independent research was 100% funded by Supply Chain Insights and is published using

the principle of open research.

The Voice of Supply Chain Leaders Report will be published annually. It is intended for you to

read, share and use to improve your supply chain decisions. The goal is to share year-over-year

insights with the industry.

All we ask for in return is attribution. We publish under the Creative Commons License

Attribution-Noncommercial-Share Alike 3.0 United States.

Your trust is important to us. As such, we are open and transparent about our financial

relationships and our research process.

Research Methodology This research was conducted during the period of March through April 2012 via an online

quantitative study of 61 supply chain leaders. We protect our sources. Results are reported in

aggregate and are not available for review by individual company. Companies participating in

the survey include:

For additional demographic data on the respondents, please reference the appendix section of

this report.

http://www.supplychaininsights.com/

http://creativecommons.org/licenses/by-nc-sa/3.0/us/


Executive Overview The practices of supply chain management are now three decades old. Demand volatility is

increasing, growth is flattening and commodity costs are escalating. As a result, there is a shift

from vertical to horizontal processes, and from inside-out (from within the organization) to

outside-in (from the market back) practices. Most progress has been made within the

enterprise. Connecting the extended supply chain from the customer’s customer to the

supplier’s supplier remains an aspirational goal.

This report shares insights from a quantitative survey of sixty-one supply chain leaders. The

results have three themes:

• Today, the technology gaps for the supply chain leader are large, the largest within the

last decade. Current technology definitions are not sufficient. We are on the verge of a

revolution in supply chain technology.

• Supply chain technology platforms are tangled and confusing with a multiplicity of

systems and low usage. While this is frustrating to supply chain leaders, they need to

go forward by realizing that continued investment in legacy applications has minimal

returns.

• While organizations have invested in supply chain teams and centers of excellence, it is

not sufficient. Over 85% of companies are confused on supply chain strategy. This is

hindering the development of horizontal processes and the connection of the extended

value network.

As a result, today there are few “best practices.” Instead, we have practices in flux. Some

processes have matured, some are changing, but most are being redesigned. For most, the

change will be a revolution, not an evolution. Big data, mobility, and cloud computing are

drivers for change. Real-time data are improving supply chain sensing, and new forms of

business analytics are driving learning systems. This report gives insights on these trends and

recommendations for business leaders.


Supply Chain Leaders Speak Supply chains are complex systems with complex business processes and increasing

complexity. In the research for this report, we can clearly see the impact of growing business

complexity, and the increasing gap in the ability of existing technologies to meet these needs.

However, we also see an even larger gap in leadership. This is twofold: executive leadership’s

understanding and consulting expertise on how to craft the path forward.

Solving the problems is not easy. The processes are steeped in traditional paradigms. For

leaders, supply chain is business; but for many organizations, the term “supply chain” is

politically charged. Instead of a holistic business process that effectively connects the business

process from the customer’s customer to the supplier’s supplier, for the laggard it is about

supply, logistics, or distribution. The greatest tension on the definition of the process term is in

Europe.

Organizational IT landscapes are complex, supply chain networks are ever-changing and

organizational structures are tangled. Eighty-five percent of companies lack a clear definition of

supply chain excellence. In the void, companies have implemented systems with a project-by-

project approach managing them in isolated functional silos. As a result, most companies are

now struggling with multiple systems and organizational fiefdoms working in isolation.

In the words of one supply chain leader, “We have made a lot of supply chain investments, and

all the project teams report outstanding progress, but the overall progress in supply chain

excellence for my organization is stalled. I am to blame. We have outsourced the responsibility

for crafting our supply chain vision to ill-prepared consultants and wrongly believed that we

would deliver supply chain excellence through an extended ERP project. Yes, we can now

better see and record transactions, but we have not improved our ability to sense and adapt to

market changes. The ends of our supply chain are fragile. The fault lies with me and my lack of

vision for the organization. We will not make progress through this traditional piecemeal

approach.” In short, while supply chains can be outsourced, and talent can be obtained through

new ways of deployment, a lack of supply chain leadership and vision is the largest barrier to

progress.


Figure 1: Current Supply Chain Pain Points

Many companies are digesting multiple acquisitions and projects. As a result, dirty data and

product proliferation were listed as top supply chain pain points. Supply chain talent is also

becoming more critical. As the first generations of supply chain pioneers retire, and the talent

needs in emerging economies grow, there just are not enough supply chain leaders to satisfy

organizational requirements. In the words of one manager from South Africa, “I looked at the

situation. Yes, the gaps in my team were large. One option was to just terminate them all.

There was sufficient cause, but I had a problem. The issue was that the available candidates in

the market were no better than what I had on my team. As a result, I sucked it up and took

responsibility to train the supply chain team.”

While the initial investments in the first three decades of supply chain management were

primarily in supply to reduce costs (with the definition of demand to improve replenishment), the

new focus is to better use the demand signal horizontally (network design, risk mitigation

strategies and commodity hedging). As a result, even companies that have never valued

demand systems are starting to rethink the value proposition. So while there is increasing pain

in supply (rising costs and product proliferation), 2012 is about demand.


Supply Chain Leaders Speak about Technology Dirty data. Multiple systems. Rising complexity. These are all common themes. Yet, they are

symptoms of the fragmented project-based approach. Today, companies are awash in

technologies, but usage remains low. Resolution of the problem is anything but simple. Like a

snake swallowing and absorbing its supper, companies are struggling to digest the many and

diverse systems that they have inherited through many projects and the race for Y2K readiness.

Despite the promise of packaged applications of a common system for global operations, as

seen in figure 2, most companies have multiple systems, and struggle to rationalize the many

technologies within the organization. For most, there are more systems than they use. IT

standardization remains an unfilled promise; and, in the face of the revolutionary change in

supply chain processes and technologies on the horizon, it is not one worth pursuing.

Figure 2: Complexity of Current Supply Chain Systems

Most supply chain leaders see the multiplicity of technologies as a mess. There is no perfect

solution. Companies will go forward by going forward. It will be the management of

compromise. In the short-term, tensions will not dissipate. Within the organization, there

continues to be a struggle with the lack of depth and industry-specific functionality within


Enterprise Resource Planning (ERP) systems. While deeper industry-specific best-of-breed

solutions of Advanced Planning Systems (APS) have better decision-support functionality, they

generally lack the required IT rigor of role-based security, business intelligence extensibility and

data visualization. In moving forward, companies will just have to accept that there is no

panacea.

The gaps in current systems are large. Today, they are the largest in the history of supply chain

solutions. As shown in figure 3, the greatest gaps are in demand management, production

scheduling, and Product Lifecycle Management (PLM). The highest satisfaction rates are in the

systems of logistics and warehousing. Supply Chain Execution (SCE) solutions have a higher

acceptance rate than ERP or APS.

Figure 3: Importance and Satisfaction of Current Supply Chain Systems

For APS, the usability and depth of solutions remains an issue. In a review of the data in a

webinar, we found that only 8% of companies hearing the survey results feel that they have the

“what-if” capabilities that they need to manage the demand and supply variability of today’s

supply chain in S&OP. The focus on “tight system integration” and the lack of recognition of the

need for “what-if capabilities” has hampered the supply chain groups’ ability to do planning.

Organizations have confused the buying criteria for the “system of record” with system criteria

for “decision support.”


Most supply chain leaders are frustrated, some are angry and many have resigned themselves

to the fact that technology is not and will not be perfect. However, all know that the path forward

is not easy. Despite the promise of packaged applications to reduce costs, standardize IT,

simplify and infuse best practices, and reduce risks, today the supply chain leaders find

themselves with many failed expectations. The only promise that has been fulfilled is the

reduction of business risk with system continuity.

While leadership teams can moan and groan over the gaps, the reality is that we are where we

are. The past decade of packaged applications was too expensive, over-hyped and full of failed

promises. However, before we throw out the baby with the bath water, it is important to gain a

wider perspective. The reality is that without this era of technology evolution, companies would

never have been able to build global supply chains and embrace increasing business

complexity with product portfolios and changing customer requirements. Without today’s

systems, supply chains would never have been able to span the globe and the pace of today’s

business would not be possible. Yes, today’s supply chain leaders are faced with supply chain

technology gaps; and yes, there are multiple systems and stalled projects, but the answer does

not lie in doing more of the same. Instead, companies need to learn from the past and look

forward.

Short term, over the course of the next two years, the focus will be on the redefinition of demand

planning. As companies map this future state, it will force the organization into defining outside-

in processes and learning that the inclusion of channel data into supply chain systems requires

a re-implementation or a redeployment of existing systems. As companies start this definition,

they will ask themselves how to:

• Listen: The organization will want to include social listening data or unstructured

customer sentiment, but will quickly learn that these processes are still new and

evolving. This will push marketing to share digital data more widely organizationally.

While companies will try to use the unstructured social data more widely in demand

sensing, short-term they will reach a compromise. A compromise will be the use of

ratings and review data into new product launch forecasting as a causal factor. We are

at the beginning of the definition of technology systems for supply chain listening.


• Use Channel Data: They will also quickly learn that in the use of channel, or

downstream, data they must define the customer relationship to enable meaningful data

sharing. This will require the rethinking of many distributor relationships. While many

supply chains push product into the channel, it is hard to push a chain. The use of

channel data will require the definition of pull-based systems with supply chain

decoupling points.

After getting the channel data, companies will find that they need a persistence layer to

harmonize and cleanse the downstream data. This Demand Signal Repository (DSR)

strategy will grow along with the need to improve demand planning.

• Network Design. The advances in network design technologies are a welcome relief to

the supply chain leader. While the first generation technologies for network design had

limitations for complex modeling, advancements in these technologies in the past five

years are closing the gaps.


Supply Chain Insights’ Perspective: Future of Supply Chain Technologies It is our recommendation for supply chain leaders to accept today’s situation for what it is. While

the gaps are a problem, we need to go forward and not make the same mistakes in the

selection of the next evolution of technology. We feel that we are at a junction point in

technology evolution and that continued investments in traditional architectures is limiting. New

technologies based on social listening, mobility, cloud computing and big data are evolving. In

the next five years, this will result in a step change in technology. The path forward will be a

revolution not an evolution. The smallest change will happen in the applications of Supply

Chain Execution (SCE).

We predict that over the next five years, as companies focus on the deployment of cloud-based

services, improve supply chain sensing and visualization and embrace the world of big data

systems, that the supply chain systems that we know today will become obsolete. As a result,

companies should finish the implementation of ERP transactional systems for finance and

human resources. They should also finish the work for Business Intelligence (BI) for global

reporting, but reduce the investments for tightly coupled decision support systems for Customer

Relationship Management (CRM), PLM and APS to ERP. Instead, these systems need to be

focused on business requirements based on the company’s definition of supply chain

excellence. With rising volatility, there is a greater need for “what-if” capabilities than tight

integration.


Figure 4: Technology Trends that Companies are Excited About Today

As government compliance increases, growth flattens, margins tighten and costs soar, the

traditional systems of CRM, PLM, ERP, APS and SCE will not be sufficient. Solving these

problems will require the use of new forms of data that have increased variety, volume and

velocity. This will usher in the world of big data supply chains. New platforms will evolve to

enable business management (operational decision making based on flexible IT enabled

business rules) and to better manage trading relationships. We predict that these will become

encapsulated into future architectures and will look more like those depicted in figure 5.


Figure 5: A Future State of Supply Chain Applications

This will be a shift from enterprise to value-network solutions and from an industry approach to

value-based outcomes powered through trading networks. Processes will be mapped outside-in.

The emphasis will be on horizontal processes. Revenue management and systems of

commerce will evolve and mature. It will not happen overnight. Instead, organizations will find

themselves pulled in the direction and evolution of a new definition of supply chain architectures

(reference figure 5). These will be radically different from the traditional systems deployed today

in eight areas:

• Analytics to Improve. New forms of pattern recognition, predictive analytics and

learning systems will surround today’s transactional systems. This will be for both

structured and unstructured data. It will include text mining, rules-based ontologies and

more advanced optimization. These new forms of analytics will power deeper analytics

on wider data sets with less latency.

• Enterprise Collaboration. These applications will include a collaborative layer (e.g., an

enterprise social application) that will enable a new form of partner collaboration. We

can see the beginning evolution of this type of functionality in SAP StreamWork and the

new releases by INFOR. The inclusion of social technologies in enterprise applications

of ERP and APS will outpace the use of enterprise social technologies like Yammer,


Socialcast and Salesforce Chatter or social community technologies like Jive or

Lithium. Enterprise collaboration will become a requirement in enterprise solutions.

• Inter-enterprise Adaptors. Today’s supply chains respond. They do not sense. The

response is not based on market shifts. Instead, it is based on a historic rote response

based on the history of the enterprise. As companies build systems to sense demand

and supply shifts, demand signal and supply signal repositories (DSR and SSR) will

evolve to enable the harmonization and normalization of information about products and

calendars for category management, and also terms and conditions for contract

management. The traditional applications of Customer Relationship Management (CRM)

and Sourcing Relationship Management (SRM) will slowly become legacy applications

as companies realize that they are not the right adaptors for the definition of inter-

enterprise relationships.

• Evolution of Inter-enterprise Systems of Record. Today, business rules change daily

through posts to portals. The tracking of these changes is difficult because there is no

inter-enterprise system of record to capture and record compliance requirements at the

time of the transaction (e.g., order capture, order shipment, payment systems, etc.). As

companies build safe and secure supply chains, and work to reduce costs, an inter-

enterprise system of record will evolve.

• Cloud-based Services. Companies currently operating inter-enterprise data models

will start to include services for real-time benchmarking, content management and event

monitoring. While the excitement about cloud-based computing will start an effort to find

a better way to solve a business problem (e.g., supply or demand visibility), or improve

inter-enterprise analytics, the power will come from new forms of services.

• Will Win on Analytics. Slowly companies will evolve to embrace the fact that analytics

means more than rows and columns. The evolution of systems for visualization,

learning and decision support will spawn a new generation of best-of-breed solutions.


• Master Data Management Redefined. Text mining and search technologies in the

evolution of big data systems will transform the traditional thinking about master data

management. Increasingly, companies will realize that they do not have “dirty data.”

Instead, there will be an awakening that they have “different” and “changing” data that

needs to be normalized, harmonized and interpreted. A semantic layer within the

predictive analytics technologies will make the conventional views of hard coding master

data obsolete. For most, this cannot happen fast enough.

• Ease of Use. While the current technologies were based on the assumption that “tight

integration” drives supply chain excellence, these systems will be built based on a new

standard of data visualization, “what-if analysis,” and simulation.

The Definition of Supply Chain Excellence

While companies are confused and disappointed in technology, they continue to make

organizational commitments to building supply chain excellence. In the survey, 64% of

companies had a center of excellence. As seen in figure 6, the organizational charters of the

centers are very similar. The centers have a common agenda to focus on defining best

practices, metrics, planning, inventory and the development of horizontal processes. The focus

is primarily on the center of the supply chain (manufacturing, logistics and distribution). Sales

policies and procurement decisions are still operated in functional silos. The ends of the supply

chain are more fragile than the center.

The organization is eight times more likely to have a center of excellence than six years ago;

however, the progress is slow. Most organizations are struggling with how to drive progress.

We wanted to know more, so we asked “Why?”


Figure 6: Current state of Supply Chain Centers of Excellence

In discussions of the data with supply chain leaders, we find that the centers of excellence are

currently experiencing a backlash. While companies have established “global” teams, the

definition of “global” is different by industry and within an organization. The lack of definitive

governance policies and clear definitions of supply chain excellence is a limitation for these

supply chain centers of excellence to move forward.

Across organizations, global is not global. In the survey, 43% of companies are operating as

multinational organizations with the regions having most of the power. In organizational design,

there is no one “right answer,” but it does need to be consciously defined. In working with

organizations, we find that they state that they are global, but fail to adequately define the role of

global planning and regional execution or regional planning and global oversight. This lack of

definition drives organizational confusion. To move forward, companies need to consciously

define these relationships and the governance for supply chain processes.


Figure 7: Current Definition of Global Supply Chains

While companies began the journey believing that process was the starting point, they are

quickly finding that process in the absence of supply chain strategy results in confusion.

Confusion on supply chain strategy is the norm, not the exception. Over 85% of companies are

confused on their definition of supply chain excellence.

There are two primary issues: the lack of clear definition and the lack of metrics alignment.

While terms like “agility,” “responsiveness,” and “flexibility” are bandied about in annual plans, in

most organizations they lack sufficient definition to make them actionable. Instead, the supply

chain organization is largely measured on cost. While leaders understand that the supply chain

is a driver of value, not just cost arbitrage, in most organizations there is not this realization. In

these organizations, it is all about cost mitigation.

The building of the extended supply chain from the customer’s customer to the supplier’s

supplier is still a goal, but there has been little progress. The largest stumbling block lies in the

reward systems. While the sales organization is typically rewarded on volume, not value, and

marketing is rewarded on market-share, not profitable growth, and the interaction with the

customer is the most critical opportunity for the definition of opportunities for the extended


supply chain, the supply chain leader is struggling for a seat at the table. While the customer

wants to talk about value-based outcomes, supply chain leader to supply chain leader, only the

enlightened company realizes the opportunity. To maximize value, these outside-in process

definitions need to be defined relationship by relationship.

Slowly, bit by bit, companies are trying to turn the supply chain on its ear and invest in the

building of outside-in, horizontal processes. These are designed to enable both the global and

the extended supply chain. However, as shown in figure 8, companies are more satisfied with

the evolution of “vertical” processes within the centers of excellence (traditional functions of

deliver, make and source) than the horizontal processes of S&OP, revenue management and

supplier development. In interviews, the gap is largely one of leadership. Horizontal process

excellence is dependent on a clear definition of supply chain excellence.

Figure 8: Gaps in Importance Versus Performance of Focused Efforts by the Centers of Excellence.


Recommendations The supply chain leader is frustrated. Progress is slow, tough and often thankless. The gaps in

technology are a handicap. The process evolution is a journey. We move forward by moving

forward:

• Clearly Define Supply Chain Excellence. The most effective supply chain may not be

the most efficient supply chain. Analyze how many supply chains you have and define

the supply chain response. There is no “easy button.”

The definition of supply chain strategy needs to precede process. It is a critical link to

connect business strategy to supply chain process definition. Without a clear definition

of strategy, supply chain teams do not know how to make the trade-offs in planning and

supply chain execution. So instead of aimlessly looking for supply chain best-practices,

focus on how to define the supply chain strategy that drives supply chain excellence for

your organization. In figure 9, we share a framework that has helped many customers.

Figure 9: A Framework to Define Supply Chain Excellence.


• Define the Terms to Make the Strategy Actionable. Make the supply chain strategy

actionable. Focus on the definition of commonly-used terms that do not have an

industry-standard definition. This includes terms like agility, demand-driven, global,

efficiency, outside-in, resilience, and responsive.

• Focus Horizontally and Outside-in. As you prepare for the next generation of

applications, plan for the next generation of solutions that will be horizontal and outside-

in. Define how social/mobile and digital technology convergence can enable new

capabilities through the reduction of data latency. Challenge your teams to think about

the impact of using new forms of data analytics.

• Let the Past Go. Focus forward. Learn from the past. Yesterday’s technology

investments are history. Look forward. We can do it better next time. The gaps in

current technology platforms are real. Companies scrambled to respond to global

market pressures and Y2K. What we have today does not represent emerging best

practices. We are entering into a time of redefinition where the existing definitions of

ERP and APS will become obsolete. As a result, if you are in the middle of a multi-year

ERP roll-out, consider scaling it back to ensure that the organization is well prepared to

absorb this next technology wave.

• Embrace New Technology. In 69% of companies, the center of excellence is

evaluating new technologies. Focus this effort on the use of technology to drive a

process step change. Ask yourself five questions:

o How could we use mobility? When we do, how will we embrace real-time data

(versus being handicapped with near real-time data)?

o How will big data change our supply chains? What types of data can we use now

that were not available before? How could this change our process?

o As new forms of predictive analytics evolve, how will we take advantage of this

new and valuable form of technology?

o Cloud computing offers the promise to connect the extended supply chain. How

will we take advantage of not only the software capabilities, but also the content

and benchmarking that will evolve with these systems? How will we use these

new forms of technology to build effective business networks?


o How do we use new forms of data to sense? To listen? To test and learn?

Today’s supply chains respond; they do not sense. The promise of new

technologies to improve sensing and drive a test-and-learn response is

promising, but can only be actualized if we change traditional supply chain

thinking.

• Don’t Confuse the Systems of Record with the Systems of Business Support. As

companies purchase technologies, they often will apply the rigid requirements of

“systems of record” to technologies that are designed to improve decision support.

Recognize the difference and purchase for ease of use, data model validity and “what-if”

capabilities.

Conclusion As we close the first three decades of supply chain management, the future lies before us. New

technologies will drive new capabilities for those that can learn from the past and move forward

to the future. Leaders will realize that the practices of the past—often referred to as “best

practices”—are no longer sufficient and they will work within their companies to define new

practices based on new technologies. It is time to be bold. It is a revolution, not an evolution, of

processes and technologies.


Appendix Report demographics of survey participants:

Supply chain organizations do not have a common definition. For the purposes of this study, the

respondents defined their supply chains as:


About Supply Chain Insights LLC Supply Chain Insights LLC (SCI) is a research and advisory firm focused on reinventing the

analyst model. The services of the company are designed to help supply chain teams improve

value-based outcomes through research-based Advisory Services, a Dedicated Supply Chain

Community and Web-based Training. Formed in February 2012, the company is focused on

helping technology providers and users of technologies improve value in their supply chain

practices.

About Lora Cecere Lora Cecere (twitter ID @lcecere) is the Founder of Supply Chain Insights

LLC and the author of popular enterprise software blog Supply Shain

Shaman currently read by 4500 supply chain professionals. Her book,

Bricks Matter, publishes in the fall of 2012.

With over eight years as a research analyst with AMR Research, Altimeter Group, Gartner Group and now as a Founder of Supply Chain

Insights, Lora understands supply chain. She has worked with over 600

companies on their supply chain strategy and speaks at over 50

conferences a year on the evolution of supply chain processes and technologies. Her research

is designed for the early adopter seeking first mover advantage.

http://www.twitter.com/lcecere



http://www.supplychainshaman.com/

http://www.supplychainshaman.com/