Lower costs, better quality top manufacturers' agendas

What do business executives have on their minds these days? According to the results of a survey conducted earlier this year by IDC Manufacturing Insights, cost reductions and product quality are at the top of their agendas.

In February, the research firm canvassed 415 U.S. manufacturers about their most important business and supply chain issues. Respondents performed various functions for their organizations, including procurement, supply chain management, manufacturing, and information technology.

When asked to name their top supply chain priorities over the next 12 months, 49 percent of respondents—not surprisingly—cited reducing costs for procurement, manufacturing, transportation, and logistics. One-third named improving forecasting capability and forecast accuracy as top priorities. Another 27 percent said that becoming more responsive to demand changes in the marketplace was very important, while 25 percent said they would seek to establish deeper collaboration with suppliers, enhance supplier management, or focus on purchasing spend analytics. (Multiple responses were allowed.)

Respondents' most important supply chain initiative in the coming year was in a completely different area: improving product quality. The report's authors, Supply Chain Practice Director Simon Ellis and Practice Director, Emerging Strategies Kimberly Knickle, attributed that response to the growing number of recalls in categories such as automotive, toys, and grocery as well as the increasing pressure on wellknown brands from retailers' private labels. "Product quality will continue to be an important initiative in the wake of significant recalls to strengthen consumer trust and loyalty in the market," Knickle wrote. Respondents also cited streamlining new product introductions, product development, and manufacturing as major supply chain initiatives for the coming year.

Supply chain information technology (IT) investments were another concern for respondents. When asked about their IT plans for the next 12 months, respondents most often targeted sales and operations planning (S&OP) for investment; 27 percent said that S&OP was a top priority. According to the authors, a desire for better coordination with customer-facing departments was driving strong interest in S&OP. Another 25 percent of survey takers cited strategic sourcing and procurement spend management applications as a high priority. The reason for that emphasis, the authors said, is that many manufacturers plan to use this type of software as a means of controlling costs.

[Source: Overview of Supply Chain Survey—Manufacturing (March 2010), IDC Manufacturing Insights]