CSCMP's Supply Chain Quarterly
October 19, 2018
Forward Thinking

Demand-driven planning both a focus and a challenge for large companies

Respondents to a survey of manufacturers say they struggle with aligning operations with real-time customer demand.

Larger companies are starting to place more emphasis on demand-driven planning while smaller companies are focusing on centralized procurement. Yet gaining the necessary visibility for demand-driven business remains a challenge for many of them, according to the 2013 Global Manufacturing Outlook: Competitive Advantage report by the consulting firm KPMG International. The report surveyed 335 senior executives worldwide from five industries: aerospace and defense, automotive, conglomerates, engineered and industrial products, and metals.

Regardless of company size, the number one supply chain strategy cited by respondents was improving operations. Fifty-six percent of executives from large companies (defined as more than $5 billion in revenue) said their top strategy was operational improvement, while 58 percent of small companies (revenue under $5 billion) said the same. More than half of all respondents (57 percent) said that optimizing inventory, transportation, logistics, and other operational costs is central to achieving operational priorities.

But the two categories diverged when it came to their second most important strategy: 41 percent of large companies said it was demand-driven planning, while 46 percent of small companies cited centralized procurement.

The number three strategy priority also differed between large and small companies. Large companies ranked integrated business planning (36 percent) third, and smaller businesses named supplier management (39 percent).

The survey also found that end-to-end visibility remains a concern for manufacturers. Forty-seven percent of respondents said a top challenge was aligning operations to real-time fluctuations in consumer demand. The second most-often cited challenge was supplier performance in terms of risk, cited by 45 percent. Nearly half of the companies of all sizes said they lack visibility beyond their Tier 1 partners. Only 9 percent said they have "complete visibility" beyond Tier 2 suppliers.

Fifty-eight percent of respondents said they would regionalize/ localize supply chains to improve the management of their supply chain risk. Moreover, 55 percent said they would diversify their manufacturing locations, and half said they would diversify their supply bases.

Companies also are increasingly considering the supply chain as crucial to their innovation strategies. About half of respondents said they see their suppliers as a source of not just production and logistics, but also of ideas.

The complete report can be downloaded from KPMG's website.

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