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2014

If it's news, it's generally bad news. Even when it comes to supply chain matters, the reasons we make the headlines are rarely positive. But we are doing lots of thinks right in the supply chain space as we'll see here. Our recent survey focuses on the current state of the food industry supply chain. Although we've got some preliminary results which I'll discuss here- the survey is still open and if you're a participant in that space, you can take it through this link.

 

One of the most interesting questions in the survey to me focused on how people would describe their current supply chain versus their "ideal" in 2015. And I'm happy to say, while there is (and always will be) room for improvement, we're not that far away. See below for a neat way to summarize the responses.

 

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Current descriptors are charted on the y axis and the ideal on the x axis. This creates a neat quadrant orientation with higher importance and lower performance variables in the bottom right. That is what we should be highly focused on improving to move our current closer to our ideal. The upper right corner on the other hand shows variables with high levels of current and ideal performance. Most respondents believe we are doing relatively well on being "aligned," "agile," "controlled" and "proactive."

 

Perhaps most importantly, this sort of graphic representation enables us to see what doesn't really matter- those quadrants on the left side represent the lower importance variables. Most respondents classified adjectives such as "risk-taking," "strategic" and "outside-in" as the lowest performing and least important qualities of their supply chain today and in 2015. This is surprising as these are some of the most popular adjectives I hear when discussing the future of supply chains. However, my guess is that we are not there yet in practice even if the research and advisory firms are ready.

 

Of course, the ideal supply chain should be both strategic and outside-in but most respondents are still worried about creating a modern and fast supply chain first. The loftier goals are still important, but not to the same degree as more basic requirements such as "modern" and "well working."

 

Do these results surprise you? What would you choose as high importance and low performance on your ideal scale? It seems to me that should be our focus in order to keep supply chain out of those negative news headlines. What do you think?

The newest supply chain survey in development at Supply Chain Insights is focused on understanding the state of supply chain risk management, especially compared to what it was 5 years ago or might be 5 years from now. As we work to develop the questions and imagine the possible answers, I am stumped. A critical question we would like to understand is what are the events in the past five years that have significantly impacted your supply chain's ability to function properly. We are focused on unexpected and one-off events as opposed to large shifts in the business model, for example. Here is what we have at the moment:

 

Q: Over the past five years (since 2009), how much did each of the following events impact your company’s supply chain?Please rate the following events on a scale of 1 (no impact) to 7 (severe impact).

 

What other events have we omitted in the past 5 years? What do you think? Any other larger trends (such as cyberattacks or computer hacking- last on the list) that you think deserve a mention? Let me know and I'll be sure to let you know when the survey is completed and ready for your input. Thanks!


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Less than 40% of the 18 companies profiled in our recent Supply Chain Metrics That Matter report had improved their operating margin performance in 2012 compared to their performance in 2000. Operating margins vary widely across companies and also across industry lines, but the overwhelming conclusion is that we are stuck. Here are some tidbits from the full report:

 

* Some industries including chemical, automotive, contract manufacturing and 3PLs struggle with an industry structure that creates very low single digit operating margins below 0.10. In these industries, supply chain excellence matters even more. There is no room for error.

 

*On the other end of the spectrum are industries such as pharmaceutical or medical device manufacturers which have historically enjoyed very high operating margins, above 0.20. These industries have not had the need to optimize their supply chain operations, but times are changing. Significant changes are occurring in the healthcare industries both domestically and abroad and margins are shrinking. Companies in these industries should look to their peers who have long operated with tighter margins and resolve to improve supply chain operations.

 

* It's not only operating margin as a stand alone metric that companies should be measuring. One of the most insightful pairs of metrics we have studied is the intersection of operating margin and inventory turns.The best companies (and they are rare) have successfully improved both operating margin and inventory turn performance over a span of several consecutive years. It is difficult to do this for two consecutive years and the percentages get significantly lower for three or four consecutive year spans.

 

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*Operating margin goals should not be established in a vacuum. By aligning supply chain metrics with supply chain strategy and larger business strategy and corporate goals, the odds of success can be magnified. Make sure that what you are measuring makes sense within the larger goals of the organization. For most companies that will likely include operating margin, but for others it may not.

 

For more analysis on operating margin and our take on five separate case studies, be sure to check out the full report available here