SUPPLY CHAIN STANDARD NOVEMBER 2008
www.supplychainstandard.com
INNOVATION
Time to involve
the customers?
Innovation has long been thought of as critical for sustaining business growth.
Well, recognition of this long held belief has now been confirmed by a new
global study undertaken by management consultants, Capgemini, entitled
Collaborating for Innovation.
The report states that participants across all industries unanimously agreed
that innovation initiatives are vital to the growth and sustainability of their
businesses. In particular, the survey emphasises the importance of innovative
means of improving internal and external collaboration in delivering long-term
competitive advantage.
When it comes to launching new products there appears to be greater
executive level support for innovation. However, over half of respondents focus
on the improvement of existing products compared with only 24 per cent that
focus on developing innovative new products. It would seem then that senior
management is keen to support innovation, perhaps more so than we think.
Measuring innovation processes is something that most organisations are
fairly limited at. Whereas the majority of companies have the ability to track
innovation efforts through sales, few measure other process-based performance
such as the time it takes to develop new products and services.
The report highlights the need for companies to involve customers in the
innovation process, revealing a strong link between companies’ abilities to
generate new product and service ideas and the strength of their customer
collaboration initiatives. However, the report’s finding that, “failure to meet
customer needs is the single biggest cause of new product launch failure” can
hardly be thought of as a revelation.
Clearly, innovation is the life-blood of any dynamic organisation that intends to
remain commercially competitive. Finding ways to encourage innovation and
track its success is the difficult bit – determining what’s a good idea and what isn’t
is even harder. But one particular valuable insight that this Capgemini report offers
is the apparent level of executive support for innovative new product launches.
OUTSOURCING
Survey reveals barriers to collaboration
Collaboration is still the big stumbling block to
getting the most out of the supply chain. Despite
the significant cost savings, shorter order cycles,
better customer service and overall improved
business efficiency that can be brought about
through better collaboration between companies
and their third party logistics providers, issues still
prevail to prevent closer co-operation and true
integration of the chain.
This was one of the key findings from a major
survey into the current state of logistics outsourcing
involving 1,644 logistics executives from North
America, Europe, Asia Pacific and Latin America,
conducted by Capgemini in co-operation with the
Georgia Institute of Technology, Oracle and DHL.
The central themes highlighted by the survey
revolved around green supply chain initiatives,
security concerns and the integration of systems
and services.
Whereas companies were almost unanimous in
their belief that green supply chain initiatives are
important, there is widespread uncertainty about
how to move forward with sustainable supply chain
operations. The report points to the increasing
impact the “greening” of supply chains will have on
network design, transport modes, business processes
and ultimately, the balance sheet. Yet only 46 per
cent of respondents said that the effect of supply
chain operations on the environment was a factor
considered when selecting a logistics service partner.
The report says that collaboration is key here, as
it’s only when the source and impact of emissions
can be accurately assessed that third party logistics
providers and their customers will become
accountable. This could be quite an obstacle to
creating environmentally friendly supply chains.
Security in the supply chain was another concern,
with companies becoming increasingly concerned
PROCUREMENT
Ethical dimension
Sustainable procurement is seen as the next greatest challenge for
purchasing managers. This was a key finding of new research from the
Chartered Institute of Purchasing and Supply (CIPS), with 15 per cent of
purchasers globally citing sustainable procurement as their top concern.
Ethics also figured highly on the procurement practitioner’s agenda, with
more than three quarters of respondents rating ethics as “extremely
important” to shaping their procurement strategy.
Such findings underline the significant challenges procurement
practitioners face with lengthening supply chains, soaring energy prices,
ethical sourcing issues and the rising adoption of “green” policies. And yet the
report seems to reflect a wider perception in business that procurement is
seen as “operational” and that many in business lack an understanding of
procurement. Simon Sperryn, CEO of CIPS, comments on the report that, “the
profession still has a long way to go to communicate the value of strategic
procurement”.
It’s true that much has still to be done to raise the profile of procurement
in business. Sperryn highlights the fact that, “many organisations still
withhold large parts of their external spend from the procurement
professionals”. However, he points out that, “survival through the current
downturn will depend on protecting margins, so wise CEOs are investing in
better procurement”.
Considering the core concerns that face global organisations sourcing
from distant locations, such as supply chain risk, carbon usage, ethical
trading issues, and fuel costs, surely the value of strategic procurement must
be becoming more evident. Perhaps, as executive decision makers ponder
over how to remain competitive in tougher trading conditions while
remaining true to their policies on ethical trading and the environment, they
will come to understand the complex nature of procurement and the central
role supply management plays in ensuring the profitability of the business.
As Sperryn says, “Supply management is not just about saving costs. It is
integral to defining the business, anticipating trends, and creating the
external relationships on which future success depends.”
SCS:NEWS ANALYSIS 05
about the costs of meeting compliance mandates
designed to reduce terrorist threats. Here too,
collaboration is seen as the answer, where setting in
place the right processes can offer benefits that help
recoup costs and improve efficiencies.
On the point of integration, the report once
again points to the benefits of supply chain
collaboration, which can only be achieved by
putting aside fears over loss of control, internal
competency and of being too dependent on a third
party service provider.
Interestingly, although the survey shows that
third party logistics operators and their users
believe the associated costs of creating a more
secure, integrated and environmentally friendly
supply chain should be split, there is continued
resistance to collaboration and the unspoken
assumption is that costs will ultimately be carried by
the customer.
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