Building a Resilient Supply Chain

G00216075

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Summary

This collection of research addresses the new realities of today's supply network to help position supply chain executives for success in 2011 and beyond. Use it to drive resiliency, sustainability, agility and innovation in the supply chain to achieve higher returns on assets and revenue growth.

Analysis

In the face of recent economic turmoil, executives have looked to their supply chain organizations to apply solid fundamentals to guide them through the downturn, thereby enabling them to salvage margins through efficiency and cost cutting. Leading companies went even further by investing in capabilities that lay the foundation for their next phase of growth. In these turbulent times, leading companies need sustainable, resilient supply chains that can support and drive profitability and industry leadership in the face of growing complexity and risk. Transforming their traditional, reactive supply chains into demand-driven value networks (DDVNs) requires a supply chain strategy, transformation plan and enabling technologies that will support customers in the volatile, growing economic recovery. Supply chain executives and leaders can use the following collection of research to move closer toward their goal of supply chain excellence.

Supply Chain Strategy

Two characteristics that distinguish companies on the Gartner Supply Chain Top 25 are an emphasis on supply chain strategy and a mind-set that strives for continuous improvement. Gartner's survey on supply chain organization and talent shows a 36% gap between these leaders and the remaining respondents, where strategy and change management are priorities. Aligning supply chain strategy with business strategy is the shift organizations need to transform a traditional, reactive supply chain into an agile, responsive organization that supports profitable growth.

The following collection of research will help supply chain officers and senior operations executives understand these tasks to better achieve these goals. It will prepare their organizations for the new fundamentals that will drive supply chain success. This research will help practitioners manage uncertainty and complexity, providing insight into best practices in value chain transformation, segmentation, talent and demand-driven global manufacturing operations.

"Supply Chain Strategy for Manufacturing Leaders: The Handbook for Becoming Demand Driven" provides companies with an updated set of cross-industry concepts, frameworks and strategies. Apply the advice in this research to implement the principles and realize the benefits of a DDVN.

"The Gartner Supply Chain Top 25 for 2011" identifies the leaders in supply chain management (SCM). Adopt the best practices in this research to achieve supply chain resilience, integrate the value chain, and execute a vision to achieve sustainable SCM.

"Demand-Driven Value Networks: Supply Chain Capabilities Road Map for Growth, Agility and Competitive Advantage" details the specific capabilities of demand-driven excellence, provides key enablers for each capability and links them to existing research. Use this research to support the journey to higher levels of supply chain maturity.

"The Four Imperatives of Value Chain Transformation" are: (1) a burning platform; (2) a compelling vision; (3) a documented business case; and (4) the capability to change. Follow the guidelines in this research to address these imperatives to improve the probability of success of a transformation road map.

"The Seven Steps of the Supply Chain Segmentation Journey" presents findings from interviews with companies that have segmented supply responses to various customer demands. Use the seven steps and design frameworks in this research as guidance when segmenting supply responses into a portfolio of supply chains.

Supply Chain Planning

In our 2010 study on SCM, managing demand variability and improving forecast accuracy topped the list of obstacles to achieving supply chain goals. Leaders view supply chain planning as a strategic differentiator that can help them better sense and manage demand, and orchestrate a profitable supply chain response. This pursuit of planning excellence spans process design, planning organizations, developing best-fit talent and planning technologies.

The following collection of research will help supply chain planning executives understand these tasks and achieve these goals. It will also help them understand the needs and challenges of next-generation planning with best practices, insights and case studies for demand planning, supply planning, and the required alignment with commercial organizations across product life cycles. In addition, the research will address sales and operations planning (S&OP) challenges, and explain how organizations can achieve advanced maturity stages of S&OP.

"Sales and Operations Planning Maturity: What Does It Take to Get and Stay There?" highlights findings that companies in Stage 3 or Stage 4 of Gartner's four-stage S&OP maturity model go well beyond the traditional S&OP methodologies found in Stage 2, which are used to balance demand and supply. Follow the guidance in this research to change the process and technology, but more importantly, to address ownership, culture, core beliefs and even the name of the process to mature S&OP and drive revenue.

"Next-Generation Supply Chain Predictive Analytics: A Cornerstone to Demand-Driven Value Networks" explains how predictive analytics enable DDVNs through segmentation, demand sensing and shaping, and profitable demand response. Use this research to help transform the SCM model that was based on aggregate information, averages and generalized models into a tailored response based on the unique characteristics of customers, products or suppliers.

"Overcoming the Top Five Challenges Facing Supply Chain Planning Organizations" provides best practice advice on how to determine the optimal level of centralized leadership, how to find and cultivate capable planning talent, and how to achieve ROI in technology solutions. Apply the lessons learned in this research to set the level of planners' internal and external collaboration, and align the planning process with the needs of unique supply chain segments.

"Top Practices When Modeling Supply Chain Networks" presents how different companies are adopting a more focused and organized approach to supply chain network modeling and optimization. Adopt the practices discussed in this research to understand how to best apply such an approach in a particular organization.

"Toolkit: How Mature Is Your Retail S&OP Process?" analyzes how many organizations attempt to match consumer demand and supply with disorganized, functional metrics, but lack the ability to make conscious, profitable trade-off decisions, thereby thwarting retailers' ability to improve their S&OP maturity. Use the guidelines in this Toolkit to assess the organization's S&OP maturity and understand the steps to improve it.

Sourcing and Procurement

Supplier management is more strategic than ever as companies seek deeper relationships with their partners. In a recent Gartner study, a closer collaborative relationship was the top and most successful method organizations used to shorten new product time to market, and to mitigate supplier failure. We expect suppliers to become more ingrained in helping their customers deliver product innovation. Supply risk will remain top of mind, highlighted by the recent earthquake in Japan that shut down supply lines across the high-tech and automotive value chains.

The following collection of research will help supply chain sourcing and procurement executives execute these tasks and achieve these goals. It will help them master the new sourcing realities and complexities of today's global supply network. The research will look at sustainable sourcing, identifying and managing service providers, manufacturing outsourcing trends, predictive analytics in supplier performance and risk management, sourcing's role in new product introduction, and low-cost country sourcing strategies.

"Procurement Transformation Must Align With the C-Suite's Expectations to Substantially Impact the Business" defines a maturity continuum to assess the procurement organization's capabilities. Consult this research to help develop and refine a three- to five-year plan to increase the organization's capabilities.

"Supply Chains Require Technology That Provides Multitier Visibility" explains how multitier supply chain visibility (MTSCV) can reduce risk and inventory, and improve delivery and the relationships between buyers and suppliers. Use this research to better understand MTSCV and how it can help resolve supply chain problems quickly, and to know the right questions to ask a technology provider when developing MTSCV.

"Nine Supply Chain Sustainability Trends for 2011" discusses trends around operational, resource and energy efficiency; changes in climate legislation; environmental and social accountability; recycling, waste and resource management; clean technology and smart cities. Apply this understanding to help refine and kick-start innovative sustainability initiatives.

"Customer Value Analytics for Supply Chain Segmentation" provides a methodology to model demand clusters within the trade-offs between service (cycle times, quality, bundled offerings, service levels and customization) and cost. Use this research to help design a portfolio of supply chain capabilities that are aligned to those clusters.

"The Implications of Cloud and SaaS on Supply Chain Consulting, System Integration and BPO" explores how supply chain executives are increasingly pursuing alternative delivery models. Follow the advice in this research to engage the IT organization, and work together to ensure that the supply chain services' sourcing strategy supports business demands, while accommodating reasonable IT security and integration requirements.

Manufacturing and Product Supply

Companies are leveraging global manufacturing resources to bring new products and services to market. The expectations of manufacturing are for flexibility, agility and reliability. Companies must balance first-time production across increasingly complex and regulated product supply networks and value chains. Companies also must deal with new technology paradigms and identify supporting talent models to deal with the explosion of information and product flows, which, if not harnessed, represent massive opportunities for misaligned goals, higher-cost inventory levels, safety issues, and quality escapes and failures.

The following collection of research will help manufacturing leaders and supply chain executives achieve these goals. It highlights the importance of aligning manufacturing, supply chain and business performance by tearing down the information silos inside factories and across the manufacturing network to make fact-based decisions between supply and demand.

"A New Demand-Driven Maturity Model for Outsourcing in the Manufacturing Network" introduces the demand-driven outsourced manufacturing maturity model and reveals its four stages. It also reviews the ways to advance along the maturity curve, and defines the steps to guarantee success.

"Aligning Manufacturing and Supply Chain Performance, Part 2: The Hierarchy of Manufacturing Metrics" helps to connect manufacturing's performance with the supply chain. Use this research to better understand the interdependencies and/or trade-offs between delivering a perfect order out of the plants and keeping costs in line. This will help integrate manufacturing performance measurements to increase the responsiveness, quality and efficiency of manufacturing operations.

"Manufacturing 2.0: A Fresh Approach to Integrating Manufacturing Operations With DDVN" offers a new approach to integrating manufacturing operations to support the agility goals of a DDVN. Apply this approach to rethink business process flows, application architectures, delivery and support models, as well as the required performance measurements so that manufacturing can keep pace with the complexity of a DDVN.

"Asset Management in DDVN, Part 1: Building a Best-Practice Foundation" looks at a renewed interest in asset management by demand-driven organizations as they strive to become more responsive and agile. However, recognition of the importance of excellence in asset management doesn't automatically translate into improved performance.

"Hype Cycle for Manufacturing Product Life Cycle and Operations Management, 2011" explores how the demands facing manufacturers are influencing product life cycle management and manufacturing operations software trends. Gain insight from this Hype Cycle to help prioritize technology investments that enable and support the ability to conceive, design and predictably produce quality products anywhere.

Distribution and Logistics

Logistics costs represent more than 10% of product-centric company revenue, and while traditionally viewed as simply a cost of doing business, best-in-class firms now recognize the strategic importance of global logistics. While 26% of companies regrettably still see logistics as a cost of doing business, more than 30% now consider SCM as strategic and their primary source of competitive advantage. Furthermore, while reducing cost was historically the primary goal of practitioners, Gartner research now finds that combining improved efficiency and productivity, service, and overall profitability are critical objectives. Our research also found that 84% of companies see global SCM complexity growing, and managing risk has become a global logistics imperative. We are now seeing companies improving service levels, while also realizing 15% to 30% cost savings, by applying segmentation and network design techniques to their logistics operations.

The following collection of research will help distribution and logistics executives achieve these goals. It will help them understand supply chain user wants and needs, other market trends, emerging best practices, strategies and innovative approaches for managing advanced global logistics operations or third-party logistics providers. The research will also provide strategies for managing the global value chain and improving the resilience of the supply chain in the face of geopolitical risks.

"The Gartner Framework for Developing a Demand-Driven Global Logistics Strategy" introduces a set of concepts and frameworks that companies across all industries will find to be vital on their journeys toward aligning a global logistics strategy with demand-driven transformation. Use this analysis to better understand the differences in demand-driven logistics, align logistics to demand-driven strategies, and apply a framework and maturity model to align logistics with the demand-driven transformation.

"2011 Global Crisis Highlights the Need for Logistics-Focused Supply Chain Risk Management" discusses how geopolitical and environmental risks can threaten supply chains. Follow the advice in this research to start improving the response to supply chain instability to develop a more resilient supply chain.

"The Essential Role of IT in Logistics Outsourcing" addresses the role the IT organization must play in the evaluation, selection and support of prospective outsourcing partners. Apply the framework set out in this research to help select a best-fit third-party logistics provider.

"Global Trade Management Maturity Model Supports Value Chain Transformation" outlines the defining characteristics of companies in each of the four stages of maturity for global trade management (GTM). Become familiar with this model to understand what separates the leaders from the pack, and to gauge the sophistication of your GTM processes.

"Beyond the Perfect Order: Measuring the Customer Experience of Your Supply Chain" discusses what leading companies are doing to gain a cohesive, outside-in view of their customers' experience with their supply chains. Use this insight to jointly create value with customers.

Supply Chain IT

Managing a global end-to-end supply chain isn't possible without the technology to enable it. However, we continue to see supply chain technology projects implemented in silos that deliver less than optimal benefits to the broader value chain. Part of the challenge is the technology itself, but quite often, issues point back to organization and alignment to business goals. Addressing this task starts with defining an architecture that supports a DDVN, where the organization defines service levels by customer segments and the appropriate process and technology deployed.

The following collection of research will help supply chain IT leaders execute these tasks and achieve these goals. It will show how to leverage new technologies for integration, collaboration, transparency, traceability and sustainability in the global supply chain. The research will also drill deeper into topics such as transformation, IT and business organization, track-and-trace solutions, the convergence among digital content, IT and operational technology, the emergence of sustainable business systems, and operations intelligence.

"Technology's Role in Supporting Different Levels of S&OP Process Maturity" presents Gartner's S&OP maturity model. Apply this model to help the IT organization identify the challenges of the different stages, and to support its business partners in developing its S&OP process and technology road maps.

"Sustainable Business Systems, Part 3: Differentiating Sustainable Solutions by Functional Domain" provides a framework that classifies sustainability software applications into a series of functional domains. Use this research to understand the relationship between sustainability and increased business value, and the key role that IT enablement plays in maximizing business value. This insight can help drive business value through sustainability.

"Evolving the Supply Chain and IT Relationship" provides a road map for transforming the supply chain executives' relationship with the IT organization. Follow this road map to take this relationship from technology provider to service provider, and then from business process enabler to, ultimately, business process leader.

"User Survey Analysis: Understanding Supply Chain Management Software Buyers, North America, 2011" reports the results of Gartner's fourth annual supply chain survey, which indicates renewed optimism in acquiring and deploying supply chain software. Leverage this research to understand the key SCM business and technology issues affecting organizations.

"Applying Gartner's Pace Layers to Supply Chain Applications and Processes" introduces pace layering, how to classify supply chain applications to the right pace layer, and then how to apply pace layering to supply chain. Apply the guidelines in this research to deconstruct the body of applications in the infrastructure and develop a long-term, dynamic technology plan that fully leverages IT investments.

Looking Ahead

Global turbulence and uncertainty are realities that modern supply chains must be prepared to address. Building a resilient supply chain that responds profitably and reliably amid increased demand uncertainty will differentiate future leaders. Managing cost and driving efficiency will remain cornerstones to any supply chain operation. However, building a resilient supply chain requires breaking traditional paradigms as to what defines a supply chain. It requires a deeper linkage between demand, supply and product development, with executive-level governance that ensures that the right trade-off decisions are made. This not only requires process excellence, but also the right organization and talent to drive continuous improvement governed through appropriate performance measures. The research provided herein will help executives start to frame the path toward becoming a DDVN, and to support the resiliency required to address the volatility ahead.

© 2011 Gartner, Inc. and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication in any form without prior written permission is forbidden. The information contained herein has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although Gartners research may discuss legal issues related to the information technology business, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The opinions expressed herein are subject to change without notice.

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