CSCMP's Supply Chain Quarterly
October 16, 2018
Forward Thinking

Small and mid-sized manufacturers are behind on supply chain management, according to Grant Thornton

A recent survey finds that more than a third of respondents have only informal supply chain processes.

When it comes to supply chain management, U.S.-based small and mid-sized manufacturers are far from the cutting edge, according to a survey conducted by by Grant Thornton LLP for the National Association of Manufacturers. Only 10 percent of the 120 respondents said they had "a fully implemented supply chain strategy," the advisory firm reported in "Creating a framework for innovation in your supply chain."

Another 42 percent of the respondents said they were working toward full implementation, while 12 percent had created a strategy but were struggling with implementation. More than a third (36 percent) admitted they only had informal supply chain processes, with a limited amount of measurement.

"Companies do have action plans around the supply chain, but either have trouble formulating a strategy or trouble implementing a strategy," Jeff French, Grant Thornton's consumer and industrial products national managing partner, said in a statement. "I think companies tend to focus their energies on other areas like developing a good sales structure, marketing, or improving customer service."

Indeed for those companies that do have a supply chain strategy, customer satisfaction is a major driver. Almost half (48 percent) of respondents said customer demand drove their supply chain strategy. Another 26 percent said their strategy was driven by competitive pressure, followed by 16 percent who said it was focused on increasing shareholder value.

While many larger, more innovative companies have begun looking to their supply chains to increase revenue, small and mid-sized manufacturers' efforts are still focused on cutting costs. Almost 78 percent of survey respondents said they were focused on managing direct costs, such as labor, overhead, materials, and inventory, while 17 percent said their supply chain improvement efforts were directed on managing indirect costs such as waste, rework, warranty, on-time delivery, or bad debt.

"It's understandable how a small- or mid-cap company would focus on direct costs," said Ward Melhuish, principal for advisory services at Grant Thornton, in a statement. "They don't have the people or systems of a GM or a GE, for example, to analyze the indirect costs. But looking at those indirect costs is an opportunity for these companies."

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