Containing Supply Chain Costs Won't Help Customer Service

Business needs to align strategic goals with supply chain priorities.

It’s all about the customer: 71 percent of business operators said their top business objective is increased loyalty and customer satisfaction, according to a recent Manufacturing Insights survey of 800 companies. But their number-one supply chain objective is to reduce manufacturing and logistics costs. “That’s a big disconnect,” says Kim Knickle, program director and lead analyst at Manufacturing Insights.

If businesses don’t align their strategic objectives with supply chain priorities, IT investments in supply chain will not be effective, Knickle says. One of the reasons for the misalignment of goals could be that CIOs are focused on more day-to-day issues, she says. IT may need to be more proactive about showing the business ways that its supply chain can improve customer strategy goals.

Best Practices

1. Show the board that the supply chain effort can do more than reduce costs. Detail the business value of any supply chain innovation you pitch.

2. Keep the customers in the front of your mind. Emphasize supply chain changes that could improve the customer experience.

3. Create a strategic framework for IT decision making. In times of cost pressure, this gives you boundaries for choosing among business requests.

“CIOs aren’t always invited to conversations,” Knickle says. “IT needs to talk to the business to ensure IT investments align with corporate objectives.” The survey showed that business operators want more collaborative processes within the organization, says Knickle.

Historically, strategy development within each business function was a siloed process, says Simon Ellis, research program director at Manufacturing Insights: “But as technology is increasingly outsourced, collaboration becomes more important.”

This is especially true when business constituents don’t understand that the IT budget is already limited. Ellis says most IT budgets haven’t increased during the past five years. “IT is under greater pressure to stretch their dollars,” he says, noting that the supply chain can’t be a center of innovation without the proper budget.

“The business must be willing to see IT from more than a service and cost-saving angle,” Knickle says.

What’s Your Supply Chain Focus?

What’s your top supply chain priority?

Forty-eight percent of businesses say reducing material, manufacturing and logistics costs. But where’s customer service?

What IT investments will be most important to your global supply chain performance in the next two years?

1. Advanced supply network planning or manufacturing scheduling

2. Advanced inventory management or optimization

3. Supply chain execution, logistics control and management SOURCE: Manufacturing Insights

Copyright © 2007 IDG Communications, Inc.

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