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Contents 03
February 2010
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‘‘ On-time
delivery at
best-in-class
companies
was 15
percentage
points higher
than the
laggards.
The hidden
£110bn prize
Managing supply chain costs will be every bit as important
in 2010 as it was in 2009, and two new pieces of research
have highlighted just how much cash is at stake and why
industry leaders are doing better than the laggards.
Consultancy Booz and Company has calculated that there is £110
billion excess working capital sloshing around in British companies
– and the key to making use of it is more efficient supply chain
management. Booz looked at 202 publicly traded companies with
combined annual sales of more than £1.2 trillion, and analysed three
components of working capital: receivables, payables, and inventory across 31 industry
sectors. It points out that the figure of £110bn is more than five times the economic
stimulus of £20bn announced by the government in 2008.
It reckons that there are four levers that companies can use to improve their working
capital performance: 1) rebalance supply and demand requirements through S&OP,
supply policies and commercial levers to enable companies to move excess
inventories and avoid over-building; 2) optimise end-to-end supply chain structure,
which involves looking again at traditional supply chain trade-offs, especially for
extended global supply chains; 3) align incentive structures to reward cash
management; 4) think radically about architecture or operating philosophy – for
example pull versus push, or agreements on financing with third parties.
There are parallels between the Booz research and work done by the Aberdeen
Group. Aberdeen looked at more than 200 leading global players in order to
distinguish the characteristics of the best versus the worst performers. Globalisation has
resulted in a dramatic increase in the amount of inventory in the pipeline and landed
costs. Factors such as competition, ongoing business transformation, increased lead
times and complexity have all played a role in this.
Aberdeen’s report, “Supply chain visibility excellence: reduce pipeline inventory and
landed cost”, found that complete and on-time delivery at best-in-class companies was
15 percentage points higher than the laggards. There was also a 13 percentage point
greater reduction in year-over-year unit landed costs.
In particular, it found that best-in-class companies were 1.5 times more likely to treat
in-transit inventory as available inventory for safety stock calculations. They were also
46 per cent more likely than all other companies to have online visibility into accrued
supply chain costs. In addition, they were almost three times as likely as the laggards to
use commercial business intelligence systems.
Clearly, there are big prizes available, but who will step up to the challenge?
www.supplychainstandard.com
Malory Davies FCILT, Editor
VIEWPOINT: 04
Peter Bartram: Looking to the east. Are we
ready for the shift in the balance of economic
power from the west to the east?
Penelope Ody: Online shopping is growing,
but when will home delivery services bring customer
satisfaction?
PROFILE:
Ramachandran Dinesh 07
Meet Ramachandran Dinesh of TVS – the man
behind the takeover of Multipart.
Thought leadership:
Tackling the critical issues 09
Supply chain professionals strive to improve
visibility, flexibility and collaboration but how do
you bring all the elements into alignment? The
Extended Supply Chain conference will focus on
these critical themes.
Multi-channel:
Mastering complexity 12
Cover Story
Complexity is
the greatest
challenge facing
retailers
competing for
consumer spend
in a burgeoning
multi-channel environment.
But for those that can master
it, opportunities abound.
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