Strong supply chains increase revenue and profit

Gurjit Degun
16 April 2014

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16 April 2014 | Gurjit Degun

Companies with strong supply chains generate more revenue and higher profits.

That’s the finding of a survey by Deloitte of 421 business leaders in more than 10 countries. It said that 79 per cent of “supply chain leaders” reported revenue growth “significantly” above the industry average. This is compared with just 8 per cent of companies with weaker supply chain performance that reported higher than average revenue growth.

In terms of earnings before interest and taxes (EBIT), 69 per cent of supply chain leaders have an EBIT margin that is well above the industry average, the Supply Chain Leaders report found.

Deloitte defines supply chain leaders as businesses rated by their executives as “significantly above average” on inventory turnover and by the percentage of deliveries that are on time and in full compared with other companies. They comprised 12 per cent of the total survey sample.

The consultancy said the best performing companies have the ability to innovate, putting new ideas at the top of their agenda and are “early adopters of disruptive technologies” such as 3D printing.

Leadership, collaboration and effective strategies for new talent were also noted as “crucial competitive advantages” for supply chain leaders. The study found 56 per cent of leading firms have a senior executive heading their supply chain function.

Kelly Marchese, principal at Deloitte Consulting and a leader in Deloitte's supply chain practice, said: "It's crucial for leaders to keep a close eye on emerging technologies and have a bold strategy for weaving these into their operations.

“Furthermore, while many innovation efforts focus on new products, those innovations tend to be the easiest to imitate, so business model innovations focused on improving networks, processes, services or channels can have a much greater and more sustainable impact.

“Many executives are daunted by innovation or feel that it's an overhyped buzzword. It's true that many innovation efforts do fail, but the good news is that there are specific systems and disciplines that, when applied effectively, can greatly improve innovation success rates.”

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