EMEA 2008 Supply Chain Top 10 Predictions

Transcription

1 EMEA 2008 Supply Chain Top 10 Predictions February 19, 2008 Pier Manenti EMEA Research Director IDC Manufacturing Insights

2 About Manufacturing Insights Leading provider of fact-based market research, custom research and strategic advisory services Focus on the strategic business application of information technologies for manufacturing companies Provide unique insights on how to improve business processes through the use of technology Cross the gap between IT and business 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 2

3 Today s Webcast is based on.. European Supply Chain strategies Recent and forthcoming papers: Collaboration and Fast Decision-Making Processes Key to Survival in the Manufacturing Industry European Supply Chain Innovation: responsiveness through collaboration Involving the Supply Chain in NPDI Changes Innovation from a Process to a Strategy Supply Chain Management Applications: Vendor Assessment and Review Industry Short Lists MES Manufacturing Execution Inventory Optimization Low-cost manufacturing strategies 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 3

4 Why Predictions? Goal: Identify major trends that impact manufacturing enterprises supply chain processes and technologies. Preview the MI research agenda. Bias: We focus on the transformation of major supply chain processes and how IT enables that transformation. Process: Drawn from IDC and Manufacturing Insights studies, survey results, end-user interviews, and our own industry experience. Time frame: Predictions are focused on 2008, but will have a long range impact Manufacturing Insights, an IDC company. All rights reserved. Slide 4

5 Situation Overview As we enter 2008, several factors threaten business expectations Globalization has led to an extreme shift in European corporate strategies Globalization of economies has favored the opening of new emerging markets bringing on a new kind of competition from low cost countries focused on price cuts The rising of global demand Emerging markets over low-cost countries Emerging markets contribution: heightening global demand due to economic growth and an emerging middle-class Primary business objective Manufactures must find a way of differentiating from the competition by improving levels of customer service and product quality Balance supply chain efficiencies with responsiveness Supply Chain IT investments Back to basics: more execution than planning Key technologies: SRM, Supply Chain executions, Analytics and visibility 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 5

6 #1 Real Time Manufacturing Execution Comes First Inevitable Link Between Levels of Supply Chain Agility and Realtime Manufacturing Agile manufacturing process Gain visibility into manufacturing execution Ability to quickly change the production schedule according to signs of changing demand Both in-house and outsourced operation Real-Time Manufacturing Requires a Rejuvenation Process Investments in plant equipment and technologies Process improvement initiatives: lean, six sigma, SCOR MES Technologies Are Back on Top IDC Manufacturing Insights anticipates a strong and steady demand of MES replacement 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 6

7 #2 Agility: Getting More Responsive Through Collaboration European manufacturers have relegated the notion of being demand-driven, preferring instead to be agile Supply Chain visibility Responsiveness through collaboration Agility helps companies fulfil the ultimate aim of improving customer satisfaction Being agile comes out on top over being demanddriven In a 2007 survey, more than 50% of respondent ranked being demand-driven lower that third place in terms of impact on supply chain performance Supplier relationship management is topping IT investments priority Technology investments priorities support increased collaboration with suppliers 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 7

8 #3 Demand Variability Calls for Broader Visibility and Inventory Optimization Increasingly fluctuating demand variability is an inherent feature of today s global economy: companies can grow more profitable by better sensing demand Sense and shape demand goes hand in hand with supply chain agility Demand forecast - European companies will continue to forecast their market demand Demand visibility To develop optimal products, pricing and promotional strategies Not only true for consumer industries but also for non-consumer goods firms and suppliers Investments in demand management and analytics solutions will continue in 2008 Effective Fulfilment of Demand Will Rely on Advanced Inventory Level Optimization 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 8

9 #4 Manufacturing Off shoring Will Continue, But With Lower Growth A new balance between off shoring, near shoring and local or inhouse manufacturing is needed The growing cost of low-cost manufacturing More complex supply chains with long lead times Communicating challenges: different time zones, languages, cultural norms Significant increase in labour and transportation costs The rise of the Supply Chain Risk Officer International or local events Product quality and safety issues Non-ethical trading practices and lack of compliance Companies will develop supply chain network strategies that attempt to balance resilience and agility 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 9

10 #5 Manufacturers Enhance Capabilities as Providers of Aftermarket Services Continued shift in manufacturers strategies that transform enterprises from being a traditional product manufacturer towards being a product and service provider Moving towards becoming service provider Spare parts production and servicing, MRO, financial and leasing services, and reverse logistics processes Caution - Managing Services-based Processes Requires a Different Approach The value of the service exceeds the spare value Low volume and intermittent demand Topping the supply chain process improvement agenda Put in place new organizational structures Misalignment between supply chain strategy and related IT investments 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 10

11 #6 Green supply chain initiatives will move from compliance to business value creation Green as a corporate priority: move beyond compliant as a costly necessity and consider opportunities to capitalize on green strategies Three ways to embrace green supply chain practices: Compliance initiatives Making standard business practices green Thinking out of the box The intangible value of green may be in the eye of the beholder, but financial ROI will become increasingly important Short term : cost reduction or business efficiency vs. Long term: more sustainable initiatives Holistic view in assessing green initiatives impact: from a tangible ROI perspective and an intangible ROI point of view along the supply chain 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 11

12 #7 Innovation Calls for Product Lifecycle and Supply Chain Management Convergence Increase product quality, extend product ranges and enhance product innovation are key factors for company growth New Product Design and Introduction (NPDI) process is a must have and not a nice to have Brings business benefits over competitors This requires a combination of product life-cycle processes and supply chain processes Cross-fertilization among different industries Engineering-oriented industries can start learning from brand-oriented manufacturers about combining NPDI creativity with Supply Chain An integrated approach to technology can help Despite NPDI importance, most companies do not have a clear process in place Fragmentation of IT technology supporting NPDI 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 12

13 #8 RFID will remain an Emerging Technology unless ROI is proved Despite the limited penetration within the European manufacturing industry, some positive signals are emerging from the noise RFID brings more agility through improved supply chain visibility The beauty of RFID lies in the real-time, automated and virtually error-free data acquisition In a manufacturing context RFID, can be used to support a variety of business processes Factory shop floor, supply chain, aftermarket service, compliance and sustainability Only ROI-focused applications for RFID are emerging Investments in RFID will be mainly driven as part of larger initiatives to drive business process optimization 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 13

14 #9 Skyrocketing fuel costs will drive more attention to logistics and transportation Logistics and transportation costs are rapidly becoming a significant part of total supply chain costs and are expected to grow further The fuel cost challenge provides a catalyst for innovation Adoption of supply chain best practices, extensive use of outsourced logistics services, and implementation of IT solutions Increasing emphasis on reducing CO2 emissions Calling companies to asses not only financial costs, but also other less tangible costs The emergence of Supply Chain Convergence The combination of outsourced logistics with other forms of outsourcing, such as IT and supply chain processes outsourcing 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 14

15 #10 Financial Supply Chain Initiatives Begin to Garner Interest Getting cash in is key for any manufacturing enterprise. Therefore, a supply chain is not truly optimized until cash flow is completed in sync with physical goods and information flow DSO (days sales outstanding) is 44 days average As supply chains become more complex a negative impact on DSO metrics is possible There is a disconnection between supply chain operations and overall financial performance Supply chain function that can be seen to be successfully contributing to overall business value creation, are likely benefit by raising their profile particularly in the eyes of CFO The market for supporting technologies and services is still young A small number of IT vendors and financial institutions have launched IT solutions and services around financial supply chain 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 15

16 Advice for manufacturing companies Increase visibility across your supply network as a way to become more agile Do not look at making supply chain performance improvements in isolation from real-time manufacturing and suppliers collaboration Sense and shape demand goes hand in hand with supply chain agility Integrating Supply Chain with Product Lifecycle processes to take the most out of NPDI Green as a corporate priority: move beyond compliant as a costly necessity and consider opportunities to capitalize on green strategies Find a new balance between off shoring, near shoring and local or inhouse manufacturing is needed 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 16

17 Advice for IT vendors and ISVs Consider there is an increasing demand for factory-related solutions in Europe. Supplier relationship management (SRM) applications are on top of IT investment agendas Do not oversell the demand-driven nirvana: European manufacturers have relegated this notion, preferring instead to be agile Extend your solution coverage and provide NPDI solutions, spanning the areas of SCM and PLM Large IT vendors should extend their traditional IT Outsourcing and BPO offering towards supply chain process outsourcing, possibly partnering with or acquiring 3PLs European IT vendors should consider stepping on the Euro s prevalence over the U.S. dollar to acquire smaller U.S. based IT vendors offering complementary technologies 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 17

18 Thank You! Questions? Pierfrancesco Manenti Research Director, Manufacturing Insights, IDC EMEA Manufacturing Insights provides the following research services in EMEA: European Supply Chain Strategies European Product LifeCycle Strategies European CIO Strategies European IT Opportunities Manufacturing 2008 Manufacturing Insights, an IDC company. All rights reserved. Slide 18