The seminal McKinsey Quarterly provides the results of its recent supply chain global survey. (Registration required.)
The survey, which was conducted in June of this year with responses from 273 CEOs worldwide, opens with:
A McKinsey Quarterly survey finds that supply chain risk is rising sharply. However, supply chain management isn’t keeping pace: most respondents say that their companies aren’t meeting strategic goals for it, and relatively few have acted on the global trends with the most influence over supply chains.
We learn from the survey initially that a significant majority assign increased risk to their supply chains - this risk trending up in the last five years.
Further, the number one factor that - in the minds of these CEOs - exemplifies this increased risk is termed increasing complexity of products and services, followed closely by rising energy prices. It is no surprise that rising energy prices should make that list, but what is increasing complexity of products and services? While the report tells us that this complexity factor represents a longer continuum - seven out of ten executives who chose this factor said it was also important five years ago as well - it doesn't explain what makes up this complexity factor. We are of the view that we have captured an on the ground view of the market trends that make up this factor in our Market Dynamics whitepaper. SKU explosion? That's part of it.
The CEOs also say that their companies have effected little action on these most important of issues but say that their key strategic objectives are 1) to reduce suppply chain costs, 2) improve customer service, 3) Get products/services to market faster, 4) improving reliability of the supply chain, and 5) improving product quality.
There are a number of other global factors that are evaluated by the report.
Once again we find - from those who lead some of the most significant companies in the world - how important supply chain management is - and, simultaneously, that they recognize that their companies are not effective at meeting their objectives. While this might frustrate supply chain managers, it should be seen as a significant opportunity to finally make a dent in these long held objectives.
How do you reduce supply chain costs? In the distribution context, in simplest terms, it is done with inventory accuracy, reduction of labor costs, and increased space utilization. Supply chain managers face - with a calling from their CEOs - the task of achieving reduced supply chain costs by improving operations primarily in these three areas.
There is no time like the present.
