Advertisement

Blog

Increasing Costs, Complexity Afflict High-Tech Supply Chain

As the demands of managing a supply-chain network become more complex, a new study indicates that the intricacies of order management systems, shifts in consumer behavior, and rising costs associated with order fulfillment operations are all factors that constrain high-tech supply-chain executives in their efforts to design an efficient and effective supply network.

The report, entitled “From Customer Orders through Fulfillment: Challenges in Manufacturing, High Tech, and Retail,” was published earlier this month and relies on interviews with 580 supply-chain executives representing manufacturing, high-tech, and retail businesses located in North America, the Asia-Pacific region, and Latin America. The poll was conducted by Peerless Research Group on behalf of Supply Chain Management Review and Logistics Management magazines for Oracle Corp. and Capgemini.

Navigating complexity

The top challenges for executives are maintaining customer satisfaction,  followed closely by inaccurate order promise date, according to a survey.

The top challenges for executives are maintaining customer satisfaction,
followed closely by inaccurate order promise date, according to a survey.

Customer satisfaction
The research, which highlights the challenges executives encounter in meeting order fulfillment requirements, reveals that high-tech companies, retail businesses, and manufacturers face similar challenges. Of the 101 high-tech executives participating in the survey, 48 percent said maintaining customer satisfaction was the No. 1 challenge they faced during the last year. Inaccurate order promise dates was the second choice at 42 percent, followed by escalating supply-chain and IT costs around order fulfillment.

When asked to rank the biggest challenges related to customer satisfaction with an order, high-tech executives cited their inability to accurately promise dates based on fulfillment planning lead times or estimates as their top challenge. Responding to changing customer order delivery expectations placed second and respondents cited the task of managing different rules and order management processes for each customer as their third most difficult challenge.

Supply chain becomes more complex
As the need to keep customers satisfied intensifies, the study found that order management systems and fulfillment processes have become more multifaceted and complex. Twenty-nine percent of participants said they had at least two order capture systems such as e-commerce sites, call centers, and other internal systems. Nineteen percent of respondents counted three fulfillment systems such as stores, warehouse management systems (WMS), enterprise resource planning (ERP), and order management systems.

Executives in the high-tech sector also reported a number of trends impacting their ability to plan ahead. Sixty percent of respondents said they completely agree that customer-required order response times are accelerating. Forty-two percent completely agree that the complexity of managing their order management systems and processes are increasing, and 36 percent said they completely agree that internal costs to meet customer orders are rising.

Another important point is that high-tech executives said they are particularly facing difficulties in meeting delivery timelines, flexibility in handling orders, and dealing with each customer's unique set of order requirements.

Supply chain-related costs are rising
Concerns about the rising costs associated with running an effective supply chain are prevalent throughout the study. Seventy-six percent of survey participants in the high-tech sector said over the last three years fulfillment costs related to transportation have increased, 70 percent said raw material costs have soared, 65 percent cite labor-related costs, and 41 percent said warehousing costs have increased.

Executives are also facing the challenge of meeting allocation obligations as well as shipment commitments. According to the report:

The high-tech companies surveyed certainly could improve meeting their allocation scheduling commitments. While slightly more than one out of two (57%) said that they meet their promised timeline all or most of the time, the remainder do not! In addition, almost one-half further contend that shipments are often delayed by a day or longer. These failures are likely attributed to using inaccurate or dated forecasting and planning information.

To address the challenges high-tech companies face, survey participants said they will focus on upgrading supply network integration, visibility, and collaboration. In the months ahead, more than one half of respondents said they will concentrate on improving margins, enhancing customer service, making order fulfillment more efficient, and improving the accuracy of order promising.

Nearly 70 percent of survey participants said they are looking to increase margins and profitability per order, and the hope is that these efforts will drive margin or profitability-based promising and order exception management into their business processes.

6 comments on “Increasing Costs, Complexity Afflict High-Tech Supply Chain

  1. Houngbo_Hospice
    March 29, 2013

    @Rich, Does rise in drinking in the enterprise mean that employers are under pressure to meet deadlines and other order promisings? Or it is a way to show satisfaction about the work they are doing ? BTW, there is no surprise about rise in drinking in Russia.

  2. FLYINGSCOT
    March 29, 2013

    Maybe in your next post you could share some ideas with us on how these execs plan to make the improvements they mentioned.   The results of the survey make sense I suppose but it is the action plan that is required now.

  3. The Source
    March 30, 2013

    FLYINGSCOT,

    The action plan is the key here, but there are so many moving parts, whether it is the cost of raw materials or the changing behavior of consumers. These days the challenges of managing supply chain complexity are becoming much more difficult.

  4. Ashu001
    March 30, 2013

    Rich,

    Too Good!!!

    Could'nt stop Laughing!

    But Yes you are right.

    In the case of Russia when one knows their population is declining sharply;there is no way they would increase alcohol consumption by so much.

    It makes no sense.

  5. Ashu001
    March 30, 2013

    The Source,

    Yes its true that Complexity has increased dramatically.

    But for that I feel that Executives have themselves to blame more than anyone else.

    They don't work on Effective Redundancies and Backups untill its too late;They want to NIckel and Dime Savings by offshoring simply on the Basis of Wage Variations.

    Obviously they deserve to see and suffer the Consequences of Complexity themselves!!!

  6. Ashu001
    March 31, 2013

    Rich,

    I am not very familiar with Alcohol Supply-Chains but given that the Industry is currently undergoing Massive Consolidation;I have a feeling the Supply-Chain is ripe for Consolidation too!

    Plus we have incidents like this which tell you can still wring tremendous efficency out of ther Existing Supply-Chains!

    http://www.bbc.co.uk/news/uk-scotland-glasgow-west-21614304

     

    Sounds nuts right?

    So much High Quality Alcohol literally went down the Drain!

     

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.