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Voice of the Supply Chain Supply Chain Leaders Speak on Supply Chain Technology 1/6/2013 By Lora Cecere Founder and CEO Supply Chain Insights LLC
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Voice of the Supply Chain - Leaders Speak on Technology - 6 JAN 2013

May 20, 2015

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Lora Cecere

This report is based on a quantitative survey among 40 supply chain professionals from 35 companies. The data was collected in the fall of 2012. The results are contrasted with data from the first wave of the study which was collected in the spring of 2012 among 58 individuals from 35 companies. In the future, it is our goal to run this study twice a year on an ongoing basis. We want to help leaders understand how supply chain teams’ attitudes on supply chain technologies are changing.

This is not your father’s old-fashioned supply chain. Today, we are at an inflection point. Supply chains have grown in importance; new technologies are evolving, and supply chain leaders are looking for new solutions.
Today’s supply chain leader is struggling to assemble/develop the right talent, get to meaningful data and drive actionable analytics. While planned spending on technology is increasing, frustration with existing systems is also increasing. The unfiltered voice of the supply chain leader is shown in figure 1 with unedited open-ended responses.
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Page 1: Voice of the Supply Chain - Leaders Speak on Technology - 6 JAN 2013

Voice of the Supply Chain

Supply Chain Leaders Speak on Supply Chain Technology

1/6/2013

By Lora Cecere Founder and CEO

Supply Chain Insights LLC

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Copyright © 2013 Supply Chain Insights LLC Page 1

Contents Research 2

Disclosure 2

Research Methodology 2

Executive Overview 3

The Voice of the Supply Chain Leader 5

Spending is Increasing. Confusion Reigns. 6

Global Drives New Opportunities 9

The Rise of Third Generation of Applications 10

Why It Matters 12

Recommendations 13

Appendix 14

Methodology and Survey Demographics 14

About Supply Chain Insights LLC 17

About Lora Cecere 17

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Research This independent research is published using the principle of Open Content research. The

views are our own.

It is intended for you to read, share, and use to improve your decisions in planning and selecting

technology for supply chain projects. When you use the data, all we ask for in return is

attribution. We publish under the Attribution-Noncommercial-Share Alike 3.0 United States

Creative Commons License and our citation policy can be found on the Supply Chain Insights

website.

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

relationships and our research processes. We keep all individual respondent answers

confidential. Complete details on the research methodology are in the appendix of this report.

Research Methodology This report is based on a quantitative survey among 40 supply chain professionals from 35

companies. The data was collected in the fall of 2012. The results are contrasted with data from

the first wave of the study which was collected in the spring of 2012 among 58 individuals from

35 companies. In the future, it is our goal to run this study twice a year on an ongoing basis. We

want to help leaders understand how supply chain teams’ attitudes on supply chain technologies

are changing.

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Executive Overview This is not your father’s old-fashioned supply chain. Today, we are at an inflection point. Supply

chains have grown in importance; new technologies are evolving, and supply chain leaders are

looking for new solutions.

Today’s supply chain leader is struggling to assemble/develop the right talent, get to meaningful

data and drive actionable analytics. While planned spending on technology is increasing,

frustration with existing systems is also increasing. The unfiltered voice of the supply chain

leader is shown in figure 1 with unedited open-ended responses.

Figure 1. Open-ended Challenges and Goals Described by Supply Chain Leaders

2013 is all about demand and predictive analytics. There is a shift in focus from supply to

demand. The largest gaps are in demand systems, and the fewest answers on how to redefine

and improve processes are in the area of demand management. What seems clear is that the

path that we have walked is not the path of the future.

As shown in figure 2, the focus is on sensing (demand and supply), visualization and new forms

of analytics. While most companies do not know what “big data” means, they are attempting to

figure it out. They are drowning in data and short on insights.

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Figure 2. Future Focus: Trends that Leaders are Excited About

In this report, we share insights of supply chain leaders on the current state of technology, the

gaps in current performance, and their insights on future requirements.

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The Voice of the Supply Chain Leader 2013 marks the beginning of a fourth decade of supply chain management. The technologies

are mature and the business problem has become more complex.

Frustration abounds. As shown in figure 3, the supply chain leadership team is struggling with

two primary issues: understanding among the executive teams of supply chain management,

and the availability of useable and actionable analytics. The old systems that used only

transactional data with a strong focus on reporting are giving way to new forms of predictive

analytics that use both structured and unstructured data to gain faster and more meaningful

insights.

Figure 3. The Struggle of the Supply Chain Leader

Companies want new answers and deeper solutions for supply chain visibility and demand

management. There is growing recognition that the processes need to change in order to

improve agility and absorb volatility. In figure 4, we show the pain points of the supply chain

organization. This is a shift from the more traditional views of technology that were more

transactional and supply-centric. In 2013, the focus will be on analytics.

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Figure 4. Top Supply Chain Concerns of the Supply Chain Organization

Spending is Increasing. Confusion Reigns. The good news for technology providers is that supply chain leaders are increasing the

spending on supply chain technologies in 2013 (see fig. 5). The bad news is that confusion on

what to buy abounds. There are no clear answers on the winning solutions to purchase and

frustration with current solutions is high.

While there was once a belief in an extended solution built on an Enterprise Resource Planning

(ERP) platform, there is a growing backlash to spend more on multiyear Enterprise Resource

Planning (ERP). Users are looking to purchase easier-to-use, less expensive Software-as-a-

Service solutions (SaaS). They want software evolution to be easier and they are questioning

the old ways of buying supply chain applications.

Supply chain management requires deep expertise. It is not an area where an application can

be slapped into the cloud: instead it requires skilled consulting to configure and adapt the

specialized solutions for the application. For this reason, some technology providers are starting

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to talk about “solution as a service” where new forms of predictive analytics are supplied via the

cloud with online help and hosted services to make the SaaS deployment successful.

Figure 5. Plans for 2013 Technology Spending

Figure 6. Number of IT Solutions by Application Category Operating within the Supply Chain

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The supply chain management technology market is mature with 98% of companies having

technologies in all the application categories listed in figure 6. The average company has over

150 distinctly different technologies with no technology category listed being dominated by a

single vendor. Despite the aggressive marketing by technology vendors that companies are

consolidating on a common platform, the reality is quite different. Companies have different

applications in various regions of the world; and the unfortunate reality, for the CIO, is that there

is a need to support the multiple solutions shown in figure 6.

The focus for the future, as seen in figure 7, is on demand planning, saving money and

shortening cycles. The good news is that advances in supply chain network design offer great

opportunities to improve supply chain design to reduce costs. While there are small shifts in

responses from the spring to fall surveys, the general trends are similar.

Figure 7. Focus Points over the Next Two Years

Over 60% of companies have a supply chain center of excellence. As shown in figure 8, this

group is starting to play a more prominent role in the selection and deployment of new forms of

technology.

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Figure 8. Roles of the Supply Chain Center of Excellence

Global Drives New Opportunities While companies speak of the global supply chain and assume that it has a common definition,

it does not. The term global has very different definitions by industry and supply chain maturity.

While line-of-business leaders talk about “global deployments,” what most vendors are seeing,

as shown in figure 9, are multinational deployments.

As companies expand their product portfolios to different geographies and build supply chain

teams in those geographies, it offers opportunities for the supply chain technology vendor. In

this survey, 80% of companies had some level of global deployment of supply chain software.

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Figure 9. Definition of Global Solutions

The Rise of Third Generation of Applications The supply chain management market is slowly moving into the third generation of applications.

The first was a best-of-breed market dominated by small industry-specific vendors. The second

phase focused on the extended Enterprise Resource Planning (ERP) platform and the building

of a tightly integrated solution. The third is a phase of new forms of predictive analytics that are

focused in three areas:

• Evolution and support of horizontal processes like Sales and Operations Planning

(S&OP), revenue management and demand/supply visibility

• Inter-enterprise applications to manage third-party operations and multiparty shipments

• New forms of predictive analytics for faster and deeper answers in traditional application

areas

The gaps in current technology deployments are large. It is a case where there are large gaps in

the most important technology deployments. The first and second generation of technology

solutions did not quite hit the mark and the business problem has changed.

To understand the issue, let’s start with an understanding of current satisfaction among

companies with supply chain management technologies. As shown in figure 10, they are the

most satisfied with supply chain execution systems of transportation and warehouse

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management and the least satisfied with supply chain planning systems. The differences are

noteworthy.

Figure 10. Current Satisfaction with Supply Chain Technology Deployments

Figure 11. Performance versus Importance of Current Technologies in Supply Chain Deployments

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The most important solutions are ERP, order management and demand planning. The largest

gaps in importance versus satisfaction are in the areas of ERP, order management and demand

planning, as shown in figure 11. The first and second generation of solutions missed the mark.

The largest gaps are in the areas of the greatest importance. There is a need to redefine

platforms and reimplement these technologies.

Why It Matters The promise of supply chain management solutions was to reduce costs, improve inventory

carrying costs and reduce supply chain cycles. When we look at balance sheet results over the

last decade, despite year-over-year investments, we have not met these stated goals. Operating

margin has increased 1% on average and inventory positions have grown 2%-3%. Only the

high-technology manufacturers have been able to use planning technologies to reduce days of

inventory. For the rest of the industries, despite project after project that was committed to

reducing inventories, this has not been the reality.

Waste has grown between the links of the supply chain. Instead of collaboration, where

companies come together to reduce waste and improve opportunities in the supply chain, what

has happened is the shifting of costs backwards in the supply chain.

However, it is not all doom and gloom. The implementation of technologies has improved

productivity. The average company has been able to improve revenue/employee by 26%. The

technologies have also been used to increase account payables which have decreased supply

chain cycle times, but decreased supply chain resiliency.i

Today’s supply chains are rigid and inflexible. They are brittle at the joints. Waste and cost

opportunities exist in each of the connections, but most companies are still focused on

functional silo excellence. They lack a focus on leadership for the end-to-end value network.

As a result, the supply chains respond, but they do not sense; and the technologies do not meet

the business requirements for demand translation and demand and supply visibility. Despite the

outsourcing of manufacturing and logistics, we have made very few inroads in the automation of

the end-to-end supply chain. As companies tackle opportunities with new product launches,

expansion into new geographies, and improving corporate social responsibility, this is increasing

in importance.

The evolution of the third generation of supply chain technologies is an opportunity to “right the

ship,” but only if we are able to understand the gaps of today’s technologies and the business

drivers for tomorrow’s technologies. As long as today’s technology vendors are “yelling” their

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message about their solutions, they are unable to hear how to close the gaps in the current

solutions to utilize the in-memory capabilities, the potential of cloud-based computing, and new

advances in learning systems and visualization. It is time to rethink supply chain planning. Now

is the opportunity to bring new solutions for visualization and predictive analytics to market.

Recommendations 2013 is the year for best-of-breed and new forms of predictive analytics. Maximize the usage of

current technologies and stabilize the investments in current Advanced Planning Solutions

(APS) and Enterprise Resource Planning (ERP). Form a cross-functional group to evaluate the

potential impact of using new forms of predictive analytics on the end-to-end supply chain. Plot

the opportunity for these new solutions outside-in and build a three-year road map.

The traditional consultant has made large sums of money on global ERP deployments. As these

funds are drying up they are looking for the next opportunity. Many are attempting to help clients

with “big data,” “supply chain excellence,” or “new forms of analytics.” Proceed with caution. We

find that the level of understanding of supply chain excellence has gone down in traditional

consulting partners, not up. We also find that they are largely out of touch with the evolution of

third generation supply chain technologies.

Explore new solutions. Pilot them and test the fit. Work in co-development with new forms of

predicative analytics with new best-of-breed vendors. Move slowly. Help these new vendors to

mature their solutions. The good news is that there are starting to be some great advances in

the use of new technologies to solve supply chain problems. With the rising costs of

commodities, and the shortage of talent, all companies should pay attention to these easier-to-

use, cloud-based solutions.

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Appendix

Methodology and Survey Demographics When we start a survey, we begin with a research hypothesis and a set of objectives. These,

along with a high-level demographic overview, are listed below. We protect the anonymity of the

individual respondents. Each respondent was offered a one-hour discussion of the data when

completed. There was no exchange of funds or gifts as an incentive for respondents’ answers.

A similar survey was completed in the spring of 2012. The details of this first study are available in the Supply Chain Insights Community here. In the current report, we contrast the results of the two studies.

The study respondents are detailed by job type and experience in figure A. In general, the respondents of this study were clustered in large process-based companies.

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Figure A. Company Overview of Respondents

Supply chains have grown in importance. The respondents of this survey were mainly directors and above. The average respondent had twenty years of supply chain experience.

Figure B. Reporting Relationships

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The respondents of the survey were from mature organizations with 93% having a supply chain organization. The reporting relationship within the organization is rising in importance. In this survey, as shown in figure C, 65% of these respondents say their supply chain organization reports to senior leadership (the Chief Operating Officer, Chief Executive Officer or the corporate President of the company).

Figure C. Definition of Supply Chain for the Respondents

Companies tend to define supply chain organizations very differently. It is for this reason that we determine these reporting relationships in each study that we do.

Nearly two-thirds of respondents report having a supply chain center of excellence, 62% with six supply chain functions with direct reporting relationships. The most common direct reporting relationships are supply chain planning (supply and demand), inventory management, transportation and distribution. There is a lower occurrence of customer service, sourcing or manufacturing having a direct reporting relationship.

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

analyst model to make research more available and actionable. The services of the company

are designed to help supply chain teams improve value-based outcomes. The company offers

research-based Advisory Services, a dedicated Supply Chain Community and Training on

Supply Chain Excellence. 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 Chain

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

Bricks Matter, published on December 26th, 2012.

With over nine years as a research analyst with AMR Research, Altimeter Group, and Gartner Group and now as 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.

i Supply Chain Metrics that Matter: Driving Reliability in Margins, Supply Chain Insights LLC Report