Firms use 'rule of thumb' to plan supply chains

7 December 2016

European manufacturers are failing to make the most of data and analytics tools to plan and segment their supply chains, according to a new report.

JDA Software Group and Warwick Manufacturing Group's (WMG) report the Supply Chain Segmentation: A Window of Opportunity for European Manufacturing found that only 18% of respondents took into account historic, present and future data in the supply chain planning process.

The report surveyed 100 manufacturing organisations across Europe to benchmark their supply chain segmentation practices.

Only 39% of respondents’ segmentation models were data-driven and 23% of organisations stated they prefer the use of “rules of thumb” to any kind of data-driven methodology.

“The survey highlights that the majority of organisations are not using dynamic or data-driven models,” said Hans-Georg Kaltenbrunner, vice president manufacturing industry strategy, EMEA at JDA.

“Indeed, more organisations are driving their supply chains forward by looking in the rear-view mirror, rather than looking at the road ahead.”

Kaltenbrunner said that as well as an over reliance on historic data, research suggests that some organisations may not have the capability to accurately navigate their supply chain along the business roadmap.

“A lack of analytics capabilities is widespread, along with a consistent end-to-end analytics approach,” he said.

This meant first movers would quickly gain a competitive advantage.

Twenty nine per cent of respondents said they implemented supply chain segmentation practices, in a top down manner – which the report said indicated that the strategic nature of segmentation is not being recognised in practice.

Departmental and functional approaches continue to dominate instead of bringing together core supply chain processes under one umbrella and using them to seamlessly connect customers and suppliers.

Only 8% of European manufacturers said they had reached level three segmentation (out of a maximum of four). No firms demonstrated level four capability.

And only 17% reported a business process orientation was part of their operational design.

“This indicates that there remains significant room for improvement for manufacturers when it comes to keeping their supply chain management, new product development and customer relationship management aligned,” the report said.

“Ultimately this lack of conformance is hindering overall business performance.”

Janet Godsell from WMG, University of Warwick, said: “In theory, segmentation is a key business process and capability, to ensure business goals are realised in the hurly-burly of operation.

“So it is surprising to find that only 17% of respondents had business process orientation as part of their operational design.”

One third of organisations are utilising just a single criteria to model segmentation, while 51% are only employing two.

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